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January 20, 2008

Pricing (again)

Pricing, for the fiftieth time!!!

Okay, so, a simple post this month - why are products priced at $19.94 or $99.95 or $299.95??? Even cars and trucks are priced at $49,995.

Why?

The other day, was speaking with a client about setting up pricing on her new products that she was going to put on the web.  She stated that she would sell them for $30, $35, and $40.

I corrected her and said sell them for $29.95, $34.95, and $39.95.

She asked me why?

All I could say was "When you were a kid, when you saw a toy, and it said $.95 or $9.95, what happened? You went up to a parent and said, can I have a dollar or ten dollars? Or, if that didn't happen, what about now, when you go into a store, and you see your favorite shampoo - instead of it saying "$10", it starts - because we read left to right - with "$9", right? Doesn't that make it easier on our mind and wallet to pull out the money?" 

Now, some of you will say, but, if it was sold at the round number ($1.00 or $10.00), you would still ask.  And you are right.  But, did any of you either a) go and give the change back to your parent, or b) you KNEW about taxes and needed that extra couple of cents so you could make the purchase.

So, back to my client.  It is easier for a consumer to "think" that they are saving money by knocking off the price by a nickel.  It is back to my mantra (and the name of my book) - PERCEPTION IS REALITY.

Posted by blaine at 07:05 PM | | Comments (0) | TrackBacks (0)

January 03, 2008

Pricing and Perception

Pricing affects perception also

Was meeting with a client the other day and we were discussing the building of a brand around a two new products that they wanted to introduce.  They are a small company with sales around $2M a year and a product breadth of eight different consumer products.

During the discussion of building the brand, we went down the path of "what price is the consumer willing to spend and will it help or hurt the brand?"  I discovered that the products were totally disparate in price - one was under $10 and the other was over $30 (cost). The cheaper item was sold for double the price of the more expensive item (retail). 

I told them that the profit margin was great, but, why continue to sell the more expensive product and, more importantly, why try and build a brand around it? The volume of the cheap product made up about 40% of their product line and the more expensive item had yet to be more then 5%.

In our discussions, I discovered that they thought the more expensive item would "allow" them (my client) to be perceived as a more quality conscience company.

Let me help you more understand the dilemma I was in - the products, at Retail were $129 and $99 (with the more expensive retail being the cheaper cost of the two products). Again, if the market will pay, good for them in charging over 100% margin. 

But, would it be worth it to build a brand name around the $99 item, when, obviously, it can be easily perceived as a quality product, but, is extremely niche, does not sell well, and could and should remain where it is, a small niche product that has a nice profit - i.e. remain the same.

More importantly to me, should BOTH products be linked? The same brand name. 

I can't go further on this right now, but, I think you can understand where I am going. Of course I will advise them on building the brand on both products, but, do they really want to? Where do they see the brands in five years? And, just as important, what do they want that brand to convey? 

Posted by blaine at 12:26 PM | | Comments (0) | TrackBacks (0)