Business Marketing: How Price Affects Consumer Mind-Set
Pricing is about more than profit; it’s part of how you brand your goods and services.
Priceline.com. The 99 cent store. Budget car rentals. America’s Best Value Inn. Lots of businesses base their entire identity on pricing. But as the best business schools will tell you, pricing impacts the identity of every business, not just the ones that are trying to be the price leader in their category. In fact, the price you place on your goods or services is one of the primary drivers of how consumers perceive you. Which means that to project the image you want, you need to understand the different ways pricing can influence the mind-set of consumers. Read on for a few key insights.
Consumers’ Sense of Fair Pricing Is Elastic
When it comes to the pricing of individual products and services, consumers aren’t as price-aware as you might think. Research of shoppers has found that almost half of consumers can’t guess the price of an item (within 5% of its actual price) just seconds after selecting it from a shelf.* This indicates that many consumers aren’t fixated on—or even particularly attentive to—exact prices. Instead, consumers judge pricing on how the price feels. Does it feel too high, too low, or about right? A lot can influence this perception, from consumer income level to packaging attractiveness to previous experiences with similar products. The better you understand your primary consumers and what pricing structures feel right to them, the better you can price your product or service.
Comparative Pricing Is Not Always An Effective Marketing Strategy
Just because many consumers like to compare prices doesn’t mean it’s a good idea to ask them to compare your price to that of a competitor’s. Why? Well, research has shown that asking consumers to compare prices between your product and other products can lead consumers to feel heightened risk.† As such, they don’t compare just price but do a holistic comparison focused on the relative disadvantages of each product. This kind of comparison can lead them to decide that your product is inherently inferior, or it can lead them to simply walk away and buy nothing, thus avoiding the risks altogether. If you’re going to explicitly or even implicitly ask consumers to compare your price to a competitor’s, you need to be very aware of the ways such a tactic can backfire.
Your Market Position Should Drive Whether You Use Everyday Low Pricing or Promotional Pricing
Do you have a competitor that consistently beats you on prices for the same goods or services? If you can’t compete by convincing consumers you’re worth the extra cost, you may want to turn to the world of department stores and supermarkets for tips on how to proceed. When it comes to price competition, there are two main strategies: Hold down your everyday prices so they are competitive with the price leader or feature periodic promotions on specific items to attract attention and traffic that could lead to sales of other items. While the issue is complex, research suggests one strategy may be measurably better than the other. For the median store that’s not known as the price leader in its category, promotional pricing yields $6.2 million a year more in revenue than does everyday pricing.‡
Nothing Is More Powerful Than the Number Nine
We all know that 99 cents is for all intents and purposes $1 and that $79 might as well be $80. But that doesn’t mean we don’t still gravitate to the number nine. In fact, numerous studies have found that goods and services priced with a nine at the end regularly outsell the same goods or services rounded up. One study even found that women’s apparel priced at $39 outsold the same apparel priced at $44 and at $34.§ That’s some real power.
You Can Learn More About the Impact of Pricing With an MS in Marketing
Mastering pricing can help you improve your business. But pricing is just one aspect of managing consumer perceptions. If you want to improve how consumers see your or any other business, consider earning a master’s in marking. This advanced marketing degree can give you the in-depth business marketing knowledge you need to successfully brand your business and attract the right consumers.
Thanks to online learning, you can even earn your master’s degree while continuing to run your business full time. Rather than attending classes at a specific location and time, an online marketing degree program lets you complete the majority of your coursework for your MS degree at home and on a schedule that works with your full-time job. This convenient delivery method makes earning a graduate degree more possible than ever before.
A lot goes into good business marketing. With an MS in Marketing online, you can master it all.
Walden University is an accredited institution offering an online MS in Marketing degree program. Expand your career options and earn your degree using a convenient, flexible learning platform that fits your busy life.
*University of Southern California, Pricing, on the internet at www.consumerpsychologist.com/intro_Pricing.html.
†A. LaPlante, “Asking Consumers to Compare May Have Unintended Results,” Insights by Stanford Business, on the internet at www.gsb.stanford.edu/insights/asking-consumers-compare-may-have-unintended-results.
‡M. Rigoglioso, “Everyday Low Pricing May Not Be the Best Strategy for Supermarkets,” Insights by Stanford Business, on the internet at www.gsb.stanford.edu/insights/everyday-low-pricing-may-not-be-best-strategy-supermarkets.
§E. Anderson et. al., “Effects of $9 Price Endings on Retail Sales: Evidence From Field Experiments,” Quantitative Marketing and Economics, on the internet at http://link.springer.com/article/10.1023%2FA%3A1023581927405.
Walden University is accredited by The Higher Learning Commission, www.hlcommission.org.