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What Price Communicates

You would be amazed at how much information you communicate to a consumer with your price. Let's explore what a consumer (or business buyer) hears...
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Pricing is like a megaphone that communicates many things to your customers.
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Now, so we got to keep in mind: What is it communicating? a lot of times it’s communicating brand, quality, availability, demand, uniqueness. It’s saying a lot of things about your product or service. There’s a perception out there and that’s what I want to talk about is customers perception as it relates to price. Customers have a perception and you and I both have the same perception that if it’s higher price, it has to be better quality.
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Now, by the way, this is not always true, but when you start looking at your product or service, you’ll start to find out ways that you can make it higher quality and charge a higher price and captured that you should be getting for your product or service and that’s why you see things in prices starting to creep up, right? On different products and services out there. Let me give you an example of two grocery stores in my local neighborhood literally these grocery stores are half a mile away, one is Safeway which many of you might know.
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It’s kind of your mass market grocery store and the other one is called Mollie Stone’s, Mollie Stone’s is a local kind of 5 or 6 stores in the San Francisco Bay Area and they’re very high-end, very high-end, it gets crazy. What I find interesting about this example is that Molly Stone’s sells about 80% of the same products, exact same products that Safeway sells, except they sell it for anywhere between 10 20 or 30 percent on the same exact products. And then in addition, they also had a great experience. They had a lot of things that Safeway doesn’t has. So, when you walk into the store you have a Salad bar, you had a wonderful prepared food section.
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They have great produce great fruits and vegetables. They have specialty cheese, the best fresh baked bread and a great bakery. Now, they have all of that, that’s about the 20% but the actual core of the storm is the same as if I go in Safeway, right? But I’m going to pay a lot more for that. Why do people do that? Because it’s perception. It’s all about that customer perception the Molly Stone’s brand when I walk in I’m getting convenient. I’m getting high quality. I’m getting prestige and status by shopping at Molly Stone’s. That sounds crazy, I know but people in this neighborhood that means something to.
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They see their friends there, they’re buying great products there, but they’re willing to pay more for all that. And that store by the way is packed all the time. It kind of drives me crazy a little bit when I go in there and see all the high prices but people will pay for it and they’re able to make a successful business out of it. As I said before customers infer higher value when the price is higher. We give an example a pricey pair of shoes. It’s just assumed that the price of those expensive shoes is there more well-made or they’re more fashion-forward, right?
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You’re going to pay extra for either one of those things instead of buying perfume over the counter if it’s actually packaged up in a pretty box on it all of a sudden. It’s more expensive. Also, we love paying extra for convenience as well, anything that’s convenient will typically pay more. As an example, a beer at a ball game or a concert is going to cost a lot more than at your local grocery store because it’s the convenience factor that I can get a beer, right there may be delivered to my seat while I’m watching the ball game, right? Bundled products, when I put products together.
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There’s an inferred value that they’re going to be more valuable when they’re together than when they’re apart. Just the fact that you’re assembling the products that you’ve curated it and put it together in some way infers that there’s more value. Example for that would be like Tie Bars for Men and other companies that actually put outfits together for men as an example and they’ll sell them all is an outfit. So, I don’t even have to think about if there’s a short note with the pants and the belt and all of that they do it all for me. There’s a higher value there and they charge for it as well. So, also pay more for status.
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So, for instance special access to a concert where you`re getting a backstage pass, you’re getting a chance to meet your favorite artist. You’ll pay more for that also just feels good when you’re up close to the stage you pay more for better seats as an example as well. All of this kind of is inferred in how you build your pricing model. I give another example on United Airlines I’m a freaking flyer, a very frequent flyer. So, I have high status and for that it makes it really hard for me to fly anybody else by United Airlines because they treat me well, but also, it’s that connection to status that I have and everything gets taken care of for me, right?
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People will pay more for high margin high value add-on products that are added onto the core product and create even more value there, right? So, things like gift sets or it’s when your packaging them together gift sets really work well or let’s say that when you’re buying a bike and you’re buying a safety bike well that safety bike is super high-margin that goes along with the bike but people are willing to pay for it because they’re already in the store, it’s convenient, and it’s recommended by the shop owner that says you really need this, right? Now about car add-ons. This is a great tool that the automotive industry uses to actually get more value out of the base car.
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So, they sell you the base car, but then what they do is that add on these baring packages like the convenience package or the Sports Package. So, let’s say that I wanted a rear camera on my car. In fact, I have to buy the safety package which Includes that I may or may not want but that price of that safety packages is like $3,500 or $4,000 and that’s where the car companies actually making all their money. So, as you can see when you actually put all these things together all these different examples together as you start to look at the customers perception for what they’re getting you can start to mold your pricing strategy to that customer perception.
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That’s one of the keys we’re going to take a look at going forward.

You would be amazed at how much information you communicate to a consumer with your price. Let’s explore what a consumer (or business buyer) hears when they see your price.

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How to Create a Profitable Pricing Strategy

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