Pricing is all in the Mind

A few articles back I wrote about Pricing Strategies for Small Businesses.  To complement that article, I found this great article by Art Ilano which explained in simple terms how pricing can be a mind game as well. 

In his article entitled "The Price is Right (Maybe)", Art Ilano, explained that consumers perceive a product as expensive or not by comparing it with another similar product.  If a similar product does not exist, meaning that the product is a new innovation, developers can opt to price it with a high markup.  He wrote that consumers wouldn't know that it's expensive because there is nothing like it to compare it with.  He gave as example the introduction of the first ballpoint pen with a promise of quick drying ink.  Before that time, only expensive fountain pens were the available alternative.  As a result, the inventors of the first ballpoint pen were able to price it as high as the expensive fountain pens.  Consumers didn't mind buying the new pen because it wasn't considered expensive.  Furthermore, the quick drying ink feature of the pen was a plus factor.

He added, however, that the danger with overpricing your new product is that a price challenger is bound to show up.  

In the same article, Art Ilano also explained how to price high the correct way.  In pricing high, one must introduce sensory cues that project your product as superior.  The product's quality, features, and packaging becomes very important.  

He discouraged pricing your product too low to be competitive.  More often than not, people perceive low priced products as inferior or lacking in quality.  Especially for what he called as "me" products, products that you buy for yourself, pricing them high can actually increase sales.  It goes to show that people want the best for themselves.  For those who can afford, value comes first before price.

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