Have you ever made an incorrect assumption about a product based upon its price?
I sure did a few years ago as I prepared for a trip visit Victoria Falls in Zambia. This was my first adventure backpacking and staying in hostels, and I wasn’t quite sure what to expect. While hostel life was definitely going to be a departure from the nice hotels I was used to staying in, I was willing to give it a try. As I began my search, my requirements were simple: safe, clean, private room, and hot water for the shower. Private bath and internet access were bonuses.
While scoping out options, I touched based with a friend I was going to be meeting there who told me about this place for $7 a night. I immediately thought, heck no! I know I was working on my ability to be able to go with the flow and rough it, but I just didn’t think I was prepared to rough it that much. In my mind I imagined the hostel to be a total dump where I would leave feeling dirtier than when I came. So off I went in search of some other options.
I ended up booking a hostel that was $40 a night. The place was looking good to me, as it came with a private room and bath, internet access, and breakfast included. I assumed because the premium priced to the $7 place,that I would be in good hands. Unfortunately, my assumption was totally wrong.
The hostel did not live up to expectations the price and the amenities implied. The hot water didn’t work the first day, the shower didn’t drain properly, internet service was down the entire time, and breakfast left much to be desired. Ugh.
My last night in the city, I ended up at a different hostel that was $25 a night. I had a private room and bath, internet access, hot water, was in a great location, and the place was super clean. It was heads and toes above the other expensive place, and I would have no problems going back or even recommending it to someone else.
Does your price tell the truth about your product?
Like it or not, your price communicates a great deal about what it is that you are offering your customers. And in many instances, your price tells a story about you to your customers without you even needing to be there to contribute to the validity of the story.
As a result, making sure that the price of your product tells a story that is in keeping with the reputation you want to have for it is critical. And when customers actually do experience your product, it is just as important for you to ensure that the story your price told was true. A customer feeling like they paid too much for your product is never a good thing, and its even worse if they feel like elements in your marketing strategy mislead them.
For me, I wrongly assumed that the higher priced hostel would automatically be a much nicer option than anything else in the town. In actuality, that hostel in no way lived up to my expectations of what something priced at such a premium should have been. I paid way too much, and have no desire to ever go back.
What does this have to do with your business?
Setting the right price for your product takes a lot of careful thought and planning. The price does a lot to communicate the value the product offers your customers. And for customers to be able to believe the value-based price that you claim exists for your product, other aspects of your marketing mix need to be working together to support that message. This includes the product itself, how and where customers are able to get it, how its promoted, and of course the positioning, or the reputation your product has.
And once a price is set and established in the market, its not always the easiest thing to change. That’s why it is especially important to do your homework in advance to ensure that your price helps you get the customers you want to have for your business.
Check out chapter eight of Delight Inside for more information on pricing strategies for your product. Included in the chapter you’ll find details on:
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