Do Sale Prices Make your Product Look Cheap?
Price is one of those powerful influencers on our perception of quality. So what happens when a product is placed on sale?
Regular price $799; Now $499. We have all seen ads like this one. They are designed to attract buyers to take advantage of a great deal. But what happens to the consumers perception of that product? Does the cheap price translate into a lower value perception?
Perceived value by the consumer is based on the price vs. what the buyer thinks that price should be. The customer will judge whether prices are too high, too low, or on target. Research shows that major price reductions do cheapen consumers perception of the product or service.
Alternatives
- Limit the sale time: “Sale! Saturday and Sunday Only.” Research suggests that including a time-limiting component to the promotion stops this perception of product cheapening.
- Bundling: “Luxury packages” on cars never identify how much you are paying for specific items. Bundling can increase perceived value and minimizes consumer attention to prices. This tends to spur the “emotional buy”.
- Super size: Giving a larger size or an added companion product at the same price is a good way to increase the perception of savings while maintaining value. Buy-one-get-one-free offers seem to have less of an impact on consumers.
- Price Points: Pay attention to the psychological price barriers. What is the difference between a home sales price of $295,000 and $310,000? The $310,000 home will probably be shown to about half as many qualified buyers and it could take twice as long to sell.
I think that sales prices are good, but not always necessary. You make a good point when you say, “Perceived value by the consumer is based on the price vs. what the buyer thinks that price should be.” The key is to educate the consumer as to why your price is what it is. You can’t just throw out a large number and hope that consumers know why they’re going to pay so much — especially when it’s not in their area of expertise. It’s our obligation as businesspeople, and by extension salespeople, to educate our consumers so that they understand the pricing points are grounded in reality, not just magically picked from the air. People understand that they are going to pay more for a Mercedes Benz than a Honda, we just need to help our customers know where we fall on the spectrum!
Comment by morgan — April 10, 2008 @ 10:51 am