|
|
|
|
|
|
|
Perceived Value Is In The Eye Of The Beholder
Q: My partner and I are having a hard time coming up with what we feel is the perfect price for our new product. We know what competing products sell for, but we don't know if it's better to price our product cheaper than theirs or charge more based on what we think is a superior product. What is the best way to determine the perfect price and what is the rule of thumb for raising prices later on? -- Jennifer L.
A: Like the perfect man, the perfect plan, and the perfect murder (not sure what those three have in common, but there is a link there somewhere), there is no such thing as the perfect price. There is that mythical price that gives the customer excellent bang for his buck and the company excellent profits for its efforts, but even that price point can't be considered the perfect price. That's called compromise, not perfection.
Pricing is an important aspect of every business because price is used to create financial projections, establish a break even point, and calculate profit and loss.
It's also important to establish a good price point from the beginning because it is much easier to lower prices than to raise them. If you introduce a product at $100 and make no sales, you can easily lower the price to $75 without attracting much attention. However, if you introduce the product at $75 and it proves popular and you raise the price to $100, you may face irate customers and even be accused of price gouging. So it's better to start high and adjust down, if need be.
There really is no rule of thumb when it comes to raising prices. Price is never set in stone and consumers expect prices to change with the times. You might raise prices to cover an increase in the cost of manufacturing and other production costs, or in response to market demand (the greater the demand, the higher the price).
You can also justify a price increase when you improve a product's quality, features and benefits. The buying public is generally price conscious, but if you can show that the value of your product has increased by the addition of new features and benefits, then the public will usually not balk at an increase in price. Keep in mind that price increases should be done in small increments over time, not by significant amounts over night.
Though price may be determined by any number of factors, basically there are three ways to establish the price for your product.
The first way to determine price is to perform a comparative analysis on similar products sold by competitors. Are the features and benefits similar to your product's? If so, use the price of the competing product as a possible price point for your product. If your product is superior in quality, features and benefits, then you might be able to justify a higher price and still be competitive. If your product is inferior, then your price point will be less.
The second way to establish pricing is to calculate the total cost to produce and deliver your product, then figure in an acceptable margin of profit to calculate the final price.
The third way to establish a price it to use what I call "The David Copperfield Method." Named after the famous magician who made the Statue of Liberty disappear on national TV, this method of pricing simply means that you pull the price out of thin air. Believe it or not, this is the method that many companies use to establish pricing. It's also the reason many companies disappear.
It's easier to understand the allure of the Copperfield Method when you realize that more often than not, product pricing comes down to one thing: perception.
Perception, or as it is more commonly referred to in business, perceived value, is one factor that most entrepreneurs use to determine product pricing. As entrepreneurs, our products are our children. We create them, we nurture them, we grow them and we love them. And often we perceive their value to be much greater than the market perceives it to be.
It's all about the perception of value. What makes a $10,000 Rolex watch more valuable than a $10 Timex? Functionally both are watches and both perform the exact same function: they tell time. Why then does one sell for a thousand times more than the other? Perceived value, nothing more.
An expensive wristwatch can not make you better looking, smarter, healthier, or more popular with the opposite sex. But the perception is that if you have a Rolex on your arm you must have something going for you that the wearer of a $10 Timex does not.
By the way, does anybody have the time? My Timex seems to have stopped...
Here's to your success!
Tim Knox
Small Business Q&A is written by veteran entrepreneur and syndicated columnist, Tim Knox. Tim serves as the president and CEO of three successful technology companies and is the founder of DropshipWholesale.net, an online organization dedicated to the success of online and eBay entrepreneurs.
Related Links:
http://www.prosperityandprofits.com
http://www.smallbusinessqa.com
http://www.dropshipwholesale.net
Advertisement: Honest Riches - Click Here!
Advertisement: Lost AdWords - Click Here!
Advertisement: Get $1 Million A Month In Google Pay-Per-Click Ads Free! - Click Here!
Advertisement: Who Loves Money? - Click Here!
Advertisement: SEO Elite, the GrandDaddy of SEO Software - Click Here!
CNNMoney.com - 13 hours ago
Ace Marketing & Promotions Inc. (OTCBB: AMKT) announces that IMAX Theaters is piloting Proximity Marketing at its Palisades theater location in NY, ...
Bizjournals.com, NC - 9 hours ago
Database marketing firm Merkle Inc. has signed up the Limited as a new client in a three-year contract. The Columbia firm will analyze customer data to help ...
Merkle Selected by The Limited to Support Integrated Customer ... MarketWatch (press release)
all 17 news articles
Boston Globe
Bizjournals.com, NC - 14 hours ago
United Parcel Service Inc. rival FedEx Corp. will cut its marketing budget by more than 25 percent for 2009, the company recently disclosed on its blog. ...
FedEx cuts marketing spend by more than 25 percent Reuters
FedEx to reduce marketing budgets by 25% Brand Republic
all 84 news articles
Bizjournals.com, NC - 14 hours ago
Downtown Greensboro marketing firm Bouvier Kelly has won three awards from the Carolina Healthcare Public Relations and Marketing Society for its work with ...
CNNMoney.com - 4 hours ago
TMI's marketing plan includes a program where LTC facilities can lease the equipment necessary to perform skin assessments and store the necessary data ...
Wellstar/TMI Announces Estimated Three-Year Revenue Projections MSNBC
all 9 news articles
CNNMoney.com - 14 hours ago
Proton will start by marketing a variety of enhanced water products that provide health benefits for people and the planet as well as the commercial product ...
Bizjournals.com, NC - Jan 7, 2009
But the HTA will wait until at least late January to spend another $607000 on marketing to South Korea, as well as spending an additional $238000 for ...
Tourism agency holds back funds for Korea marketing Honolulu Star-Bulletin
all 9 news articles
Indianapolis Star, United States - 11 hours ago
With a team of 25 brokers and additional market research, marketing, and client support staff, Summit Realty Group specializes in office, industrial, ...
MSNBC - 1 hour ago
The initial stages of marketing the properties for sale have already begun, and the Company will expand those efforts now that the properties are completely ...
Reuters - Jan 7, 2009
O) plans to establish more marketing relationships with entertainment producers and retailers such as Best Buy Co Inc (BBY.N) in the current quarter and ...
Ten Effective Ways to Capture Market
1.Evaluation of Existing Products / Therapies2.Assessment of New Products3.Market assessment of products for the defined markets ofBF- RoW with the objective of providing insight and directionfor short... Read More
Embracing The Future - Marketing Yourself, Your Business And Your
IntroductionMany businesses and organisations have a perception that marketing means promotions and advertising. They think being good at marketing is producing a glossy brochure and having an... Read More
Keeping Pace with Business Marketing
Today's business marketing rules are different than they were in years past. Those rules that once focused predominantly on local and regional business marketing have now gone... Read More
Creative Marketing: Just Your Style
You've enlisted some of the traditional marketing methods to sell your services: you received some publicity in your local paper; your website is up and running; and... Read More
Is A Marketing Plan The Same Thing As A Communications Plan?
How does a marketing plan relate to an organization's communications plan? What are the differences? Is the marketing plan just one aspect of the communications plan? Should... Read More
Do You Know Where Your Email Address is Today?
Having people go to your website is not always easy: remind them with a special business card.Whether you understand it nor not, the web is likely here... Read More
Marketing To Women
Recent studies concerning the "new world of women" have been released. Some of the major findings may be surprising to you (less so if you are a... Read More
Your Plan For Marketing Success
The most important, yet overlooked aspect of marketing is an actual written marketing plan A business simply cannot succeed without marketing. Whether you are a one person... Read More
A Look at Brochure Printing Services
A brochure can be a wonderful promotional tool for a wide range of professionals, but getting them set up can be daunting. There are many brochure-printing services... Read More
Make Your Prospects Say Yes!
6 Secrets to Stellar Sales PresentationsEvery sale is won or lost in the presentation. Regardless of product, industry, or market every sale has the same basic components:... Read More
6 Simple Ways to Determine Which Marketing Ideas Are Best for Your Business
Did something catch your eye in a direct mailing this past week? Have you recently gone to a website and encountered something entirely new that caught your... Read More
How to Set (and Get) the Right Prices
Which product feature of yours is every buyer keen to know about? Which sales tool closes prospects instantly? Your price. Yet, despite the far-reaching consequences of a... Read More
The Marshall Plan -- Or, Customer Aftercare: How To Spend Less & Sell More
My wife likes to shop at the local Safeway. Is it because of the competitive prices? Yes, that's part of it. Is it because of the convenient... Read More
Promotional Bags: Your Company Details on Parade
The trick to a good promotion is to attach your company details to something useful. Now, there is "private useful" like the promotional toothbrush you use in... Read More
Secret of Strategy - Part 2
How to Create Strategies That Work In Today's Markets. Of course you've heard that when you do what you've always done, you'll likely get what you've always... Read More
The Seven Vital Steps You Must Know To Ensure Direct Mail Success
1. Your Most Valuable AssetA mailing list of valued customers is the single most important asset you have. Loyal customers will spend an average of five times... Read More
Free Marketing Tips
Dumb Excuse #1"I'm not sure I want to invest any money in my internet business right now."Yes, it's sad to say but I hear this one from... Read More
Top Five Tips For Designing Marketing Strategies That Get Results
"But this won't work" said Steve. "I've tried it in the past and had no response." Does this sound familiar? My newer clients often resist implementing certain... Read More
Writing A Marketing Strategy
It is my belief that if anyone is to suceed in any type of business then the business needs to be marketed to it's target consumers in... Read More
The Secrets of?
A lot of advertising and mailings promise to reveal the secrets of something. Most of this kind of mailings deal with search engine optimization. They promise to... Read More
Increase Sales With Travel Incentives
Today's business environment has changed dramatically over the past 10 years, it can be a tough task to make a sale. Just being aggressive doesn't cut it... Read More
Top 7 Tips for New Businesses
The marketing decisions you make for your new business are the most important part of making your business a success. Marketing is about building a strong presence,... Read More
Successful Marketing Through Seminars
One of the best ways for potential clients to find out about you and your company is through public speaking. Free seminars attract potential clients. It is... Read More
Promotions That Build Profit
Promotions are everything you do to let your customers know you exist. Good marketing techniques can help eliminate the "I didn't knows" from your clients and would-be... Read More
Direct Marketing: Overlooked, Underappreciated, and Unstoppable
Every business needs customers, but more importantly every business needs to maintain those customers while constantly retaining new ones. The only successful way of doing this is... Read More
3 Simple Selling Tactics
The following 3 simple selling tactics produce sales by responding to the way customers normally think and behave. They work for any business - regardless of what... Read More
Perceived Value Is In The Eye Of The Beholder
Q: My partner and I are having a hard time coming up with what we feel is the perfect price for our new product. We know what... Read More
Trade Show Promotions That Are Memorable
If you have been to expos and trade shows as an attendee like me you would be familiar with the exciting prospect of carrying home a heavy... Read More
Marketing Smarter To Earn More
An accountant once told me that he never met anyone who didn't want to make 30% more money. Whether you want a better lifestyle or to take... Read More
Know Thy Competition
BREAK FROM HO-HUM MARKETING ? IT'S TOO BORING! Once you break from ho-hum marketing, and learn to put your deeper beliefs and values into your promotion, a... Read More
How To Create Urgency So People Buy Now
..products or services now. They may not revisit your web site or see your ad again.How do you do this? You must use a limited time offer.... Read More
How to Run a Successful News Release Program
Marketing public relations gives you cost effective ways to reach your audience. The trade-off, however, is time. It takes time to develop and execute public relations programs.... Read More
Produce More Sales from your Email Promotions Five Ways - Part 1
Do sales come from your ezine regularly? How many well-written articles do you submit per week to opt-in online ezines? How often do you send thank you's... Read More
Generational Marketing
Having run a multi-state franchise company with multiple brands it became obvious to me early on that if one were to properly respond to the needs and... Read More
Why Most Marketing Videos Dont Work
Every now and then I will meet someone who has commissioned a marketing video that did not work for their company. It is a sad state of... Read More
The Mighty Marketing Brochure
"Brochure" is French, and it comes from brocher, meaning to stitch. According to The American Heritage Dictionary, a brochure is "a small booklet or pamphlet, often containing... Read More
Marketing Plans... A Simple Approach To Get Off The Marketing Roller Coaster
Are You Riding The Marketing Roller Coaster?If you're like many of the small business owners or independent professionals I meet, then running and marketing your business can... Read More
Mortgage Marketing - Viral-Email, Referral Marketing Strategy
This is a devastatingly powerful way to extend your marketing reach. For this to work right you need a website that promotes your business.It doesn't have to... Read More
Calling All Carbon-Based Lifeforms
Many businesses want to market to all carbon-based life forms. They won't take the time to really understand their audiences from geographic, demographic and psychographic perspectives.Marketers waste... Read More
Have You Sold Your Internal Customers?
You can make the sale. You know your core message. You know your target market inside out, right?But if you have even one employee than you've got... Read More
The Secret to 100% Success With Your Marketing
There's a secret to marketing, which is so simple, yet so effective once you learn it and apply it, you'll be amazed at the great results you... Read More
Maximum Marketing - Minimum Budget
Two years ago I started my small Virtual Assistant business with a non-existent marketing budget. I borrowed marketing books from the library, read countless articles on the... Read More
Focusing Your Marketing Efforts
One of my favorite quotes is often used to describe goal-setting -- but it applies equally well to your marketing efforts. We start with Alice lost in... Read More
Stop Your Marketing Leaks
Thirty percent of all the drinkable water that runs between the plant and your faucet is lost to leaky pipes. In marketing, thirty percent of our business... Read More
10 Tips For Packaging That Sells Products To Boomers
Boomers are a prime and growing target audience. Does your product speak to them? Does your product's packaging compel them to buy it? If not, you are... Read More
15 Ways to Promote eLearning Programs
Pre-note: In this article, teleclass is an example used to illustrate one type of eLearning market. The tips work the same for other eLearning programs, including, but... Read More
The Building Blocks to Effective Marketing
The Building Blocks to Successful MarketingIt's More than Sales and AdvertisingBy Julie ChanceWhether you're a Fortune 500 company or a one person shop, to be successful, you... Read More
Business In 2010: A New Face of Marketing
The term "internet marketing" was virtually non-existent a short 8 years ago, now it is a growing phenomenon that is raking millions every year. Because of this... Read More
How A Tiny 10 Year Old Girl Can Throw A 20 Stone Man - 3 Key Lessons In The Gentle Art Of Business
Half my immediate family trained in Judo and excelled in competition. I was always fascinated by the way in which my younger brother and sister (who were... Read More
Always Sell To New Eyes And New Ears
One of the hardest things for you to do as an advertiser to do is to step into your prospect's shoes and really understand what makes him... Read More
The Advantage to Buying Promotional Products Online
Buying your promotional products and corporate apparel online provides five major advantages: a greater selection, better pricing, convenience, customer service, and faster ordering time.Manufacturers often display their... Read More
How To Market Effectively Even If No One Understands What You Do
So how do you effectively market your product or service when one knows anything about them because you're in a new and emerging industry? How can you... Read More