The Price Is Right
Picking the right price point for your products and services is critical for your success, but it’s a challenge that is often easier said than done. Other than trial and error, how can you know when the price is right?
Most popular financial gurus say that the ideal price for products and services is one that covers costs, maximises profit, and is at a rate that is still attractive to clients and prospects. While this is good advice to follow when you are first developing your pricing strategy, it doesn’t take into account intangibles, such as consumer behavior. Consumer behaviour is often motivated by emotions and feelings as well as logical step-by-step analysis.
In general, shoppers tend to make a purchase when they feel that they are buying something of value or getting a bargain for their money. Regardless of the motivation behind the purchase, many consumers rely on an inner sense of what they feel things should cost when they are shopping. They then make the decision to purchase based on whether or not the price feels right to them. Understanding your target customer’s feelings about when a price is right is the key to setting the perfect price point.
How do you get your customers to feel a specific price is right? Often what might seem like the right price to you, the business owner, isn’t a price that feels right to the consumer. One simple solution is deciding whether or not to round up the cents on your prices.
According to an article in The Sunday Morning Herald, recent research shows that shoppers who have a practical reason motivating their purchase are more likely to feel that the price is right when the cents are included in the price point. When emotions are the primary motivation behind the purchase, consumers tend to feel that the price is right when it’s been rounded up to whole dollars.
You can take advantage of this research into consumer behaviour by first identifying why your customers shop with you, before you set your prices. You can learn more about your customers’ motivations for shopping with you by answering the following two questions:
- Do your products and services fulfill a practical or emotional need?
- How can you tailor your marketing strategy to appeal to customers with both practical and emotional motivations for shopping?
Once you understand what motivates shoppers to buy your products or services, you can then set your price point, as well as customise your advertising content, and have some confidence that you are getting both right because your customer will feel right about both. Isn’t the customer always right?