The company’s pricing policy is the result of painstaking work and market analysis, and not a random number that came to mind at the moment of insight. In his book, Roman Tarasenko, in extremely understandable language, using real life examples, explains how to competently approach the issue of pricing a product and increase its value in the eyes of the client.
Life hack 1. Types of prices. Choose the one that suits you
We live in a world of crazy speeds, experimental economics and neuromarketing in action, which is why it is so important to constantly test not only your product, but also your pricing. When a new business enters the market, it is very difficult to determine the optimal cost of a product, even if the entrepreneur has decided on a segment – budget, luxury or premium. By trial and error, you can find the perfect price. But in order not to waste time, it is better to immediately find out about what types of prices exist and choose the best solution for yourself. The 5 most common are:
Base price is the price for a “standard” product. Very common at car dealerships. Shows the best price at which a product can be purchased.
Discounted Price – Discounted price for a standard product.
A motivating price is any price that the buyer might find attractive to buy right now.
Premium Price – High price for premium goods.
Reference price is the price with which consumers can compare products from the same segment. For example, oil costs 1 euro and is in high demand. When competitors have the exact same products on the market, most consumers will compare their price and quality with those of oil.
If you are an entrepreneur, then you are faced with a difficult task – choosing a fair price. Don’t put the cost too low if you’re promoting a product in the luxury or premium segment. Too low a price can scare away the buyer, make him doubt the quality of the product. Likewise, the cost should not be “inflated”. People feel when the price is too high and trust in the product is lost for a long time.
Life hack 2. Change the perception of price in the eyes of the client
There are often times when a high price is justified in terms of production costs, but causes rejection from customers. What to do in such situations? There are several ways you can help increase customer loyalty:
Maintain product value. After some time, most buyers forget for what price they bought a particular product. The lower the cost, and the less significant the product was for the buyer, the faster he will forget at what price he bought it. Therefore, it is very important for brands to work on consistently retaining product value in the eyes of the consumer. This is done through advertising on various resources, satisfied customer reviews, word of mouth and other tools. The feeling of value persists for a long time, then the buyer will not regret the money spent. And besides, he will most likely recommend your product to his friends.
Create contrast. If you often visit supermarkets, then you probably noticed that the display of goods obeys a certain pattern. Very often inexpensive goods are on the bottom shelf, expensive ones on the top, and what the store management wants to draw the attention of the buyer to is in the middle. Sometimes, to create contrast, one product (cheap) is placed on the left, the second (expensive) on the right, and the one that needs to be sold first is placed in the middle. One way or another, by creating a contrast effect, you turn off the client’s ability to think logically and push him to one or more purchases. Better not to set low prices at all. This is not an easy decision, especially in a highly competitive market. You not only need to work hard, but also determine the right motivation for employees so that they maintain customer loyalty and do not give discounts bypassing you. The first time will be difficult, but all efforts will pay off in the future.
Lifehack 3. Steel shield against dumping
Very often there are situations on the market when dishonest competitors deliberately greatly underestimate the cost of the product, in some cases, making it even lower than profitable. This not entirely honest technique is called dumping, i.e. artificial and long-term price reductions. How to resist those who are dumping? There are 4 ways you can beat a dumping competitor:
Dumping back. Make your product cost the same as your competitor. Often, this simple method quickly brings the opposing company to life, because there is no longer any benefit from dumping.
Ignore dumping. Price reduction is not always dumping. It is possible that your competitor is running a promotion or seasonal sale. Before declaring war on him, analyze whether this option is taking place.
Confrontation in the information field. After a competitor has applied dumping, you will most likely be asked questions such as: “Why is company K cheaper?” The author recommends paying attention of buyers to the fact that dumping is always bad for all market participants. And besides, to tell that due to the low price of the product, the quality of the product suffers greatly. Few people want to buy low-quality products, so your strategy will work.
Do the opposite. Has a competitor reduced prices to a minimum? Unscrew the price tag to the maximum. In this way, you will draw attention to your company and can change the market perception of your product.
One way or another, you should always have a plan in case competitors start to reduce the cost or a new player appears who wants to lure your customers at the expense of ultra-low prices. Dumping is a constant threat to business, and you should always be ready for it.
Life hack 4. Discounts: how to do it right and is it worth it?
So, we figured out what dumping is and how to resist it. Now let’s talk about discounts and sales. Unlike dumping, which is a weapon of mass destruction in marketing and sales, discounts are a good tactical tool for drawing attention to a product, increasing demand and increasing company turnover.
Why are discounts so popular? The point is that people are irrational beings. And, contrary to classical economic theory, we are not always guided by profit. Most people act on impulses of the moment. Discounts activate an ancient part of the brain that is responsible for our automatic functions (instincts). In this case, the ability to reason logically is disabled. It becomes difficult for the client to think about how necessary it is to buy this product right now. Discounts are limited in time, so the decision must be made quickly, at the reflex level. Very often the client decides in favor of purchasing a product. Why do many entrepreneurs, marketers with an international reputation, then take such a negative attitude to discounts? The point is, discounts are like sweet. After applying them several times, it will be very difficult for you to sell the product for the original cost. Therefore, this tool should be used rarely and with extreme caution.
What are the types of discounts? Here are the four that grabbed our attention the most:
Accumulative discount. Often found in large retail chains. For example, when buying a store card, which records the total amount of purchases. Upon reaching a certain level, the discount increases.
An unexpected discount. Does not depend on any factors and is issued to a random client. For example, a thousandth customer of a store receives a 50% discount on all purchases. This action is memorable and has a very strong effect.
Affiliate discount. It implies a special price for the product only for the company’s partners. Very often combined with a cumulative discount. For example, a newbie partner receives a basic discount, and upon reaching a certain volume of purchases, the discount increases.
Festive discount. Timed to coincide with any important event: not necessarily for holidays of national or global importance.
Life hack 5. Now forget everything that you have learned about discounts
Is it possible not to give discounts at all? Yes, and this is ideal for business development. In order for the question of granting a discount from a client to disappear by itself, you need to learn:
There have been many cases in history when companies went bankrupt just because they could not determine the correct price for their product and correctly justify it to the buyer. The right product price is the key to the survival of any business. You can do it for a long time, intuitively try different options, or you can read “Valuable Solutions” and immediately understand what suits your company best.
This small, but surprisingly useful book, you can learn how to analyze the market and identify its readiness for price increases, competently work with discounts, add value to the product, and also understand the reason why the price should always be justified.
Who should read the book
The book is suitable for all entrepreneurs: no matter how long you have been in business, after reading the book, you will get useful ideas for yourself. In addition, the book is very useful for marketers and sales managers.
….. more info can be found here «Road to 100k Instagram Followers»!