Strategic Pricing, Setting the Price that is Just Right
Setting the right price for your products and services is a very important process. The price shouldn’t be too cheap, nor should it be too steep. The delicate pricing of a product or service is an important factor in fighting off competitors. Some companies use high pricing to represent their products scarcity and quality. Other use low pricing to directly compete with their competitors to obtain the highest market share.
If you are a company that only caters to the rich then price really isn’t much of an issue. In fact you should set the price higher than your competitors to show that your products and services are of the highest quality. Through price manipulation, one can manipulate the psychological response of his/her target market; luring the consumers to buy from you.
A company that caters to the average people needs to be more delicate in their price since that is a major factor for most people. Most people want the best bargain. If you’re selling high quality products, strategically pricing it a little higher than most of the competitor’s products is a good signal to send to your consumers that your quality is better than the rest (and it needs to be). Price the product too high and most of the consumers will be turned off.
In the end, pricing is a psychological game. Pricing is a game that shows how consumers will react through the pricing structure of your goods and services. By doing research on all your competitors’ pricing structure on their goods and services; strategically price your products to obtain the highest return on investment (ROI). Through research, calculation, and psychological behavior, it is possible to obtain the highest ROI.
It’s critical to know exactly what your competition is doing, especially for retailers. The big chains have a list of items where they MUST have the lowest price. They shop their competitors daily. For example, a 100 watt standard “A” light bulb retails for about 25 cents at every discount store and home center. But, specialty bulbs are priced much higher. The chain makes little or no profit on the leader but makes substantial margin on the others.
It’s all about being PERCEIVED as having the lowest price on every item. The facts are much different.
Psychological Effect of 99-Cent
Pricing is a powerful marketing strategy in increasing purchases if priced right. You can take it up to the next level and increase the success rate by adding an additional 99-cent to the pricing. Have you ever wondered why so many businesses use that dreaded 99-cent in their pricing strategy? Consumers perceive 99-cent as cheap; $14.99 looks much cheaper than $15 even if it’s off by 1 cent.
The psychological effect of adding 99-cent to the dollar value works wonder for prices like $99.99, $89.99, $79.99, $69.99 and etc. The consumers analyze and conclude that the product hasn’t reached the next bracket [100, 90, 80, 70,] and think it is a steal. Manipulating the price to make it look like a bargain is a powerful psychological strategy used in marketing for the best ROI.
The 99-cent pricing strategy is dying out as consumers are becoming more immune to it from overuse. As consumers get smarter and more immune to the psychological effect of 99-cent, it is best to do psychological research and find the next best number. Will 49-cents be the next great number? Is a hypothetical guess, but I believe it will do well since it is less than 2 quarters which can have a very powerful psychological effect for consumers. Finding the next perfect psychological number takes research and experimentation.
Marketing using Scarcity
Scarcity is a major selling point for products and services. Scarcity itself drives us to buy because there is a shortage. It triggers the human’s impulse of buying even if they don’t need it. The illusion of shortage is a powerful marketing tool. By marketing what you sell as a limited release, you are guaranteed to make some sales.
Scarcity is a psychological influence to the human mind. It makes us want something even more if there isn’t enough to go around. The demand of a certain product or service will skyrocket through scarcity. Some make a comfortable living just reselling items that are scarce.
Scarcity is so powerful that people are willing to spend a lot just to get it. The reason is that not many can have access to them. Scarcity itself is a price manipulation, and taking advantage of it will make your business wealthy. By creating demands with limited quantities, you determine the price of your products and services.
Many companies had used scarcity to raise the price of their products and services. Mostly, they are famous companies that produce products that are the most luxurious and of the highest qualities. You can do it too if you use scarcity to your advantage. You will be able to determine the pricing of your products and services.
