Question: Is a product the same product by any other price?
If you believe most pricing theories, the answer is no.
Exactly how much a product costs affects our perceptions about its qualities and value – perceptions that aren’t necessarily rational.
Wine is an obvious example, with many commentators pointing out that the uneducated amongst us, with nothing else to use as a guide, will base our value estimations solely on price.
In other words, consumers will make a range of assumptions about products by comparing their price to the prices of competing products.
Thinking about price
This means that the consumer you’ll get is the consumer who your price is set to appeal to – something to considering when setting prices.
Of course, lower is usually better. But – if you have a product that’s better than your competitors – you should also consider that price is an important communicator of this fact.
That doesn’t mean you should automatically price higher than your competitors, but it does mean that you’ll need to work harder to communicate the better value your product offers if you peg it at the same level or lower than its challengers.
Business to business
An obvious question is do consumer pricing theories play out in business to business transactions?
I think the answer is that if they do, they do a lot less. That’s because business purchasing decisions are more considered and much less affected by psychology. Value is closely analysed, better questioned, and more intensely sought.
What do you think? What’s been your experience setting prices and what strategies would you recommend?
Robin Marchant is National Marketing Manager, Brennan IT