Pricing and Customer Expectations: Why Your Prices Need to Change
While Wal-Mart might offer low prices and pull people into their hundreds of stores every second of every single day, it seems, does this mean it’s a strategy you want to employ too? Though it might seem like making your products less pricey is the best way to succeed, the truth is that your price is intertwined with the products real and perceived value. People, your customers, still believe that you get what you pay for, so if they’re not paying enough, they might think they’re not getting anything special in return.
The Question of Value
All things being the same, when you go out to buy something, you look at price when it comes to making your purchases. If all of the details are the same and the prices are different, you look at those numbers to begin to see what you should buy. Sometimes you might buy the item with the lowest price, but most of the time, you will buy the product with the price that seems appropriate, though still in your price range. Why? Because you are equating price with value. Price becomes the final detail in determining whether something has value or not. Though there will always be people who will buy things on price alone, when value is important, the price becomes less so. A person is willing to pay money for something they perceive to have the greater value.
Why Low Prices Don’t Work
You might think that having the lowest prices in your market will help you draw in customers, and it’s true. This will draw people in – at first. But as you continue to gain attention, you will find that fewer people are interested in what you have to share with them. The initial rush of finding the lowest price will be less than exciting to them. Why? The customer, who sees a really low price, especially when your competition is pricing things higher, is going to think there’s something wrong or substandard about what you are selling. They’re going to look at your product and think to themselves, “What’s wrong with this?” And that’s not the way you want your customers to feel and that’s certainly not the reputation you want to cultivate in your company.
Different Price Points for Different Customers
True, you might not have to price your items as high as others due to the way you’ve arranged your business. Instead of sticking to the lowest price strategy, however, it is helpful to adopt a tiered system of pricing. This will allow you to have different levels of value for your customers, and then they can make the decision which price point is best for their needs. For example, you might offer a product at a low price point, which would not have any additional features. The product with some additional features would be the next tier and the ‘deluxe’ model would be the top tier. From there, the customer would see that for just a few dollars more, they could get more value, and for just a few more dollars than that, they could get even more value.
Your customers expect to pay for an item that is valuable and that is worth their time, effort, and income. When you begin to realize that value is connection to price, you will see that you’re selling yourself short, but you don’t have to reduce your value anymore.