Higher prices – guidelines for when they may be charged
Producers these days face a difficult task if they are trying to maximise profits. Why? Because in the online environment it is very easy for consumers to undertake price comparisons. For example, in a recent shopping check for Adobe Acrobat Pro I found online prices varying by over £200. From cars to insurance policies, list price these days means very little. So how can companies charge prices which deliver a profit?
As we have said before on A Brand Day Out, pricing is all about value. What value does your product range offer and is it worth the money you are charging? Companies can charge for – and people are willing to pay for – products or services which include some or all of the following:
- The product is unique or bespoke (or is sold in a market with limited (or even no) competition – quality always shines through; for these customers such a purchase is about personal reward and impressing friends and colleagues. Companies such as Morgan Cars have traded for years on this quality; at one time having waiting lists of 11 years! Norton motorcycles adopt a similar approach.
- The product is well made – a key here is conveying the quality through effective copywriting. Robust, durable products are increasingly sought after by customers tired of substandard workmanship. Companies such as Sheffield-based Clico make woodworking Clifton planes of superior quality and can charge prices well in excess of those charged by competitors Stanley and Record.
- The product contains value beyond that which is immediately obvious. A product with multiple uses is one which will convince a customer that a price is well worth paying. Even if, in some cases, that extra value is rarely or never employed (think here of expensive Swiss watches designed to withstand water pressure at 1000 feet)
- The product is one which changes frequently in response to external events. Publishers have followed this method for many years with high-tech online services with frequent updates to ensure that customers are never wrong-footed by events
- Products don’t clear the shelves as well as you would like. This sounds like a recipe for reducing prices but no – if a product doesn’t shift it means fewer people want it. The implication is that it has a higher value to those (smaller) numbers of your customers who want it.
- Seasonality/emergency purchases – perhaps a cynical approach but nonetheless relevant. Ski clothes, for example, may be more valued in winter than in summer; umbrellas when it’s raining; soft drinks on a hot day.
- Your company produces products which may be unrelated to each other (i.e. not part of a series or cluster of products). In such an environment, the customer may have no reference points within your range so there is a greater freedom to charge higher prices (provided value is inherent).
- A product forms part of a service deliverable. For example, you might offer a range of products to be offered in conjunction with training courses, conferences or even adjunct products offered as part of an installation (e.g. an online information service).
In applying higher prices you must always consider legitimacy. Some of the techniques listed above (e.g. uniqueness of product) will always appear to customers to be legitimate for reasons of both logic and status.
Others, such as seasonality, are a little more questionable. We have spoken before about the pricing practices of the supermarket giants (latest Tesco deal seen yesterday – and reported on by one of our subscribers: one pack of bacon £2.19 or two packs for £5.00 – yes, really) and here we take the view that customers should not be abused.
In life, a win-win situation is the ultimate goal for all. If high prices can be justified psychologically by the consumer, you are on the right road. If high prices are just high for the sake of it, you have lost your moral compass.