OK, well to be honest, it isn’t that I learned it when I was in kindergarten. But my son taught it to me when he was in kindergarten. He’s 16 now and wants to major in business in college, but he knew a lot about business when he was five. I will always like the way he explained it: “The gooder it is, the spendier it is.” You can figure out what he was saying, in his Yogi-esque way. Better stuff just costs more. Period.
Now we could spend a lot of time and spill a lot of pixels over economic theories that say that marketers can charge more for products that have more demand, but that’s not what I want to talk about. I want to talk about how price is used as a signal of a product’s value. My five-year-old got the message.
For all the talk about how marketing is comprised of the 4 P’s, one of which is price, I don’t find that marketers hold their resolve over price. I am constantly seeing price used as an attention-getter: “10% off until Friday” or “Buy one, get one free.” But that is not the only way to use price–maybe not even the best way.
Are those $95 jeans really better than the $40 ones? How about that $50 bottle of perfume? What about that expensive new restaurant–worth it? You might say, “No, none of them are worth it. There are better options that cost less.”
But their prices are signals of their value. It is a shorthand for what they are worth. The assumption is that they couldn’t get away with charging that much if they weren’t worth it. That’s pricing as a signal.
Do you, as a marketer, use pricing as a signal? I find that most of my clients could probably charge more. Their customers need them and like them. So why don’t they charge more?
Because it takes bravery. It’s easier to charge less. No one dislikes you. No one complains. No one stops buying.
But if you raise your prices, all of those things happen to you. It’s uncomfortable.
Do you have the guts to be uncomfortable? It might make the difference between a dominating product and an also-ran. If your product is good–really good–shouldn’t you be charging a premium price?