Establish Value with your Prices

Want a quick and easy way to make an impression?

Raise your prices.

Oh, sure, you'll get a reaction. If your regular customers notice that their favorite items are costing them a few cents or bucks more, it will be noticed.

So, give your regular customers a break if you want and give them a discount card that they can use for the next 6 to 12 months, that locks in their prices to what they paid before you raised them 10%.

But with new customers, make them pay. Here's more on the subject:

You Cost a Lot, So You're Precious

Let's face it: customers often equate price with quality. Many consumers think high prices mean high quality, while low prices signal lower quality. Sometimes they're right. But sometimes they're wrong—for instance, when a seller offers a discounted price to move inventory. So why do buyers still use price as their qualifier? Perhaps marketers are just talking too much.

A recent set of studies shows that consumers rely on price as an indicator of quality when they're exposed to a lot of product information. The sheer volume of info can make it difficult for customers to accurately assess product quality based on the information given—so they focus on price as a quality cue.

Researchers claim this behavior is spurred by the natural desire most of us have for closure. When presented with a large amount of information, customers focus on the quality element, and fill in the blanks themselves. Since price is one of the most apparent qualifiers, they repeatedly turn to it.

And, since consumers are willing to purchase more expensive brands when they perceive a high price-quality correlation, these variables can influence quite a lot of purchase decisions.

So what's the lesson for marketers here? Unless you want to risk charging a high price to appeal to the price-quality crowd, it pays to keep your marketing messages short and sweet.

The Po!nt: Highlight your product's appeal in clear and simple language. Remember, consumers use price as a signal of quality when the product information exceeds their capacity to process it.

Source: "Selective Hypothesis Testing Perspective on Price-Quality Inference and Inference-Based Choice" by Maria L. Cronley, Steven S. Posavac, Tracy Meyer, Frank R. Kardes, and James J. Kellaris. Vol. 15 Issue 2. Journal of Consumer Psychology.

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