Saturday, March 24, 2007

Pricing as Marketing Strategy, Part II

I want to finish writing notes about Lisa Wagner's article from the Marketing Money Map from which I just quoted.

I want "simply" to note the most salient and thought-provoking points I thought Lisa made.
  • The biggest barrier to success that most entrepreneurs share when [they] first get into business is the fear of raising prices. . . .
  • [The point she was attempting to illustrate with the story of her grandmother, the day-old bread and the placemats] The PRICE a person is willing to pay depends on how much they VALUE what they are buying.
  • Price-shoppers always value the DEAL over the item they are actually buying. They will glow about the "price" they got, and not the "thing" they acquired. With this focus, quality and service are afterthoughts, and there is no loyalty. The lowest price will always get the price-shopper.
  • Quality-shoppers value the QUALITY of the selling experience and the item, and price is not part of the conversation. . . . Not that they want to waste their money; they just place a higher value on the delivery of quality in the goods and the services.
  • Some people like the "status" of purchasing certain services and products from certain providers. There's something nice about going into an exclusive restaurant and being treated as royalty, or getting those floor seats at the Laker's game. And in special occasions, you will splurge to have those experices because price isn't what's important, the experience is. [On a small scale, Starbucks is a great "price of spending" example. . . . If the outlets were packaged differently and at lower prices, it would not have the level of success that it has. The price point is part of the attraction.]
  • Remember the coffee commercial where an instant coffee was "secretly" replaced for their usual coffee in a 5-star restaurant and they interviewed the customers who said it tasted great? --They used the commercial to say that their coffee was good enough to be served in an exclusive restaurant. What they failed to say was that these customers EXPECTED to taste great coffee.
    When you go to a 5-star restaurant, you expect great food, and great service, and, of course, great coffee. Clients come in with a complete set of expectations for having a great experience, which, unless something out of the ordinary happens, they will have.
    The same coffee served at McDonald's would have had a different set of expectations, and people would have been more particular about deciding whether they really liked it or not. They might have said it was okay or good, but not 5-star "great."
  • If the price you are charging for what you do is too low compared to your market, then you will attract price-shoppers who do not value what you do and are just trying to get an end result in as cheap a way as they can.
  • [Your business] becomes a commodity only when you decide that you are going to price yourself so that you only work for price-shoppers.
  • Companies [that] advertise based [solely] on price [are] not a source of high-paying jobs and benefits for employees.
  • If everyone bought on price, specialty stores would simply not exist.
  • Customers want to feel appreciated and taken care of, and there is enormous value attached to that--one that needs to be reflected in your price as much as the technical quality of your work.
  • If you are the BEST in your business, in craftsmanship and service, then not charging a price that reflects that [quality] is a crime.
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