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Price Matters (But Maybe Not How You Think)
I just read about a retailer who was trying to move a certain line of jewelry. She had tried moving the display, asking salespeople to push the items, and running a few traditional sales but nothing was helping. These items were just not selling. She left a note for the floor manager to mark them with price tags that were ½ the current price in hopes of getting rid of them while she was visiting another location. When she returned, she discovered that the pieces had been marked at 2x the price, not ½! And the pieces had been selling like hotcakes!
This retailer was shocked of course, but I’ve seen this many times. Price can indicate quality. In this case, her customers were looking for good quality pieces and to them, expensive meant good. The price tag indicated to them that these were good quality pieces and when they viewed them as such, they were happy with what they saw.
This reminded me of a time when my wife was working for an environmental education center and they wanted to make sure every child had the opportunity to join their new nature class. They developed a great curriculum and hired top-notch instructors and then offered these classes free. Guess what? No one signed up! Six months later they offered the exact same classes with the same title, instructors, etc. but attached a $25 fee. The classes filled and had waiting lists! This was hard for a nonprofit organization dedicated to spreading their message to as many people as they could, but again, people equated price with quality and did not want to waste their time with a “free program.” They assumed that a higher price meant a higher quality. And the organization was actually able to reach more people by charging higher prices. This is a lesson in how underpricing can send the wrong message.
I have always maintained that you cannot build long-term customer relationships on the cheapest prices. There is always someone who is willing to offer a lower price. My advice is to never sell on price alone. Sell quality, value, service and unique benefits. And sometimes in order to increase your sales, you may have to raise your price!