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"Why
Your Price Can Kill Your Ad"
No matter how you write them, your advertisements will
always set up expectations of price with your customers. Set the wrong advertising pricing strategy,
and your ads will fail.
Pricing strategy is about consumer perception of value. You use your
advertising to position your company in your client's mind. The pricing
strategy you use in your advertising will strongly determine what your
customers think of you.
Common
Mistakes
Whether you list a price in your ad or not, customers are making
judgments about the value of your offer. If their perceived value isn’t
greater than the asking price, or the perceived asking price, customers won’t
contact you, and they won’t buy.
A common
mistake in advertising pricing strategy is to list a price in your ad
that may shock people. Good prospects will rapidly eliminate themselves
if they believe you are overpriced. If your product or service needs
some explaining, you probably want to only list a starting price ["From $1,999..."].
And
trying to explain or justify your price in your ad is poor
advertising pricing strategy. It is human nature to look at the price
first, and not to read the explanation.
You want to use your ad to get
your prospects excited enough to contact you. Then your sales staff can
properly explain your service, before they discuss price.
Alternatively,
it is a mistake in pricing strategy to not list a price if you can
offer a good deal on a well known product or service. If people know the
value of the item, and you can offer a great price, then that is exactly
what you want to put in your ad - the great price.
Note
that consumers consistently guess that prices are higher than the actual
price when no price is given. Unless your prices are going to shock
people, your want to list a range of pricing in your ads.
Any
credit terms you can offer will also affect your advertising pricing
strategy. If you can break down an expensive item into low monthly
payments, readers who believed that they could not afford your item will
become active prospects.
Another
advertising pricing strategy is to highlight the price of loss-leaders,
or highly discounted products. As long as these are known products [like
branded soft drinks], the consumer will immediately understand the value
being offered. Offering a loss-leader as a pricing strategy works to
bring consumers into your store.
Pricing Strategy - Price Versus
Value
If you do list a price in your ads, you
are
educating your customers to make price a primary purchase
consideration. If your price is prominently featured, or it is located
at the top of your ad, you are telling them to buy on price. And they
will get that message, whether it was your intention or not.
If you want to compete on price alone, then your
pricing strategy is fairly straightforward. Scream as loud as you can about low
prices, and hope the competition doesn’t undercut you. After all, you
have educated the consumer to buy on price.
On the other hand, if you want to compete on
value, you must work to insure that the message you are sending builds
value for the customer. Your pricing strategy will be to price correctly for
the customer
perception of the value you are offering.
It’s a balance. If the price is too low for the
perceived value, they will be suspect, and they won’t buy. If the
price is too high for the perceived value, they won’t buy period.
Price should be equal to, or be somewhat less than, perceived value.
The good news is that if you can successfully
build value in the client's mind, you can charge higher prices, and
increase profitability. [Rolls Royce, anyone?] As long as they believe
they are getting a good deal for their money, you can charge higher
prices.
The key is to
communicate value in your advertising and in all of your marketing materials. Then you must
follow up at all of your other customer contact points. Your phone
contacts, your service department, your in-store contacts – everywhere
your customer makes contact needs to add perceived value to your
products or services. Keep adding value until it is greater than price.
Example
[Although you may think
this is a silly example, it shows exactly what we
are talking about with pricing strategy. It is also very effective marketing]:
“You get the incredible slicer, dicer, mix-o-matic for the
amazingly low price of just $29.95!
BUT WAIT
- Order now and we will throw in this TEN-PIECE kitchen knife set –
FOR FREE!
BUT WAIT -
Order Right Now and you also get this SOLID WOOD chopping block – an
incredible $19.95 value – ALSO FREE!
AND for the
first 50 callers, your order will be shipped for FREE! And if you order
right now, we will GIVE YOU an extra slicer, dicer, mix-o-matic FOR
FREE! YOU GET ALL OF THIS - PLUS…”
Get the idea?
Keep adding value, or perceived value, until that value is greater than
the asking price. Then you get the order.
And your cost
of goods sold or services provided [your profit margin] have nothing to
do with any of this. If you make a 500% profit because you have
successfully built up customer perceived value, good for you. Your
customers are happy, and you are happy.
So, as you
begin to outline the goals for your advertising pricing strategy, consider how
perceived customer value and price will fit in. It's what your customers
believe that counts. How will you educate them in regard to price and value?
And before
you set your pricing strategy based on some standard formula or markup, or even
based on your competition, think about what your customers want and
need. How can you provide value that your customers want and will pay
for?
This certainly should be considered when you create your marketing
materials. Maybe price is more about knowing and targeting your
customers than it is about your cost of goods sold.
Ask
for Help
As always, we
strongly recommend that you ask a marketing professional to review your
advertising plan or your marketing materials. We can help you to build
value for your customers, and to increase your bottom line. That’s
what Professional Advertising is all
about. Please contact
Professional Advertising
for these services and additional assistance.
Professional
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