Pricing Strategy

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.

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