Do I have to price my product low to gain sales?
| Answer: You're essentially asking a fundamental question in marketing. The short answer is that it depends. First, it depends on whether or not your customers are price sensitive. If they deeply care about a low price then you need to price low. But it is important to note that while some customers care deeply about low price, this is certainly not true of the broad market. This is because customers make tradeoffs. Tradeoffs mean that they'll tradeoff one benefit (like a low price) for some other benefit that they care about as well (say, convenience). For this reason, customers are typically willing to pay more if they get something they really care about in return. This is confusing for many people since they see that people like a good "deal" or something that is given away. But don't confuse the fact that people like a good deal (just about everyone likes that) and the more fundamental idea that people are willing to make tradeoffs. |
More resources related to Pricing
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As one of the 4 Ps of marketing, pricing is the most direct way of communicating value to customers. It has the most direct impact on bottom-line performance. At the same time, price as a marketing instrument is tricky. Here's the basics of pricing from both a strategic and tactical angle.
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In the past year, the most fundamental of the 4 Ps of marketing (price) has rapidly risen to prominence. In a way, that is an inevitable outcome of the recent media focus on macro factors that determine the economics of demand and supply—inflation, employment, and income, to name a few. Not surprisingly, as the consumer price index flutters up and down, all eyes focus on commodity prices. So how much impact do commodity prices have on retail prices? And on pricing strategy?
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Pricing is more than cost plus margin or lowering your prices just a tad below competitors'. Think like a buyer to zero in on profitable pricing strategies tailor-made for you, with the added benefit of setting you apart from the competition.
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Most companies are missing a significant opportunity to maximize revenue and profits due to dysfunctional pricing strategies.
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Take 10: A Crash Course in Pricing Strategies
Video TutorialIn just 10 minutes, you'll get a thorough overview of pricing strategies and options you'll want to consider before establishing a price for your products.
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You'll learn how to optimally display products or services on your pricing page, get your customers to choose the product you suggest, and use incentives and bonuses to increase conversion.
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All of us face a low-cost or low-price competitor at one time or another. The solution isn't to lower your prices and engage in a price war; that just means low profitability for everyone. So what can you do to compete?
