Four strategies to stop customers fixating on price
A universal fear of companies is the chance that one or more of their products could be considered a commodity by their consumers.
Why is this so bad? If the customer views your product as a commodity, they will shop around for the best price, they will believe that there is no tangible benefit in buying from you over another supplier, thinking your product is equal to a host of other companies products.
Buyers in a commoditised market will focus on price, show scepticism, have low expectations on additional services, have low brand loyalty and have a very strong preference for swift and effortless transactions.
This is a bad situation for almost all businesses.
So what can you do to stop customers from fixating on the price of your goods?
1. Adopt a price structure that clarifies the benefit of your product
If you change the pricing structure of your product to reflect the value it delivers you will draw attention to, and educate the customer why they should spend a little more. When Goodyear realised their customers did not appreciate their efforts in extending tire life, they restructured their pricing to reflect the number of kilometres each of their tires would last. The change educated the consumer that not all tires are the same, that tires are not just a commodity and that it was worth paying more to get something better.
“Very price based on what is most distinctive about your offering”
- Marco Bertini & Luc Wathieu
2. Intentional Overpricing Raises Curiosity
Research that shows that when consumers are presented with a product that is priced higher than the market standard, they feel compelled take a closer look at your product and its value. This moment of stimulated curiosity presents an opportunity to break through the commodity approach of the consumer, and results in a greater awareness of your product’s value over the other, more commoditised options.
Careful overpricing forces the consumer to think on the products values and benefits
Research by Bertini and Wathieu showed that the most effective overpricing seemed to be between 50% and 80% above the market standard price.
3. Partition Prices
This strategy revolves around breaking down your product’s charge or service into several more line items in a way that highlights any potentially overlooked benefits. Research shows that :
“Presenting a cost as a set of smaller mandatory charges invites closer analysis and therefore increases the likelihood that a customer will revise a routine consumption behavior”
- Marco Bertini & Luc Wathieu
Bertini and Wathieu found that when you partition price, consumers will investigate the partitioning and this presents an opportunity to educate on quality and value that they may not have been aware of. This strategy only works however, when you actually have value and quality to draw attention to. Implementing this strategy to highlight standard features is more likely to annoy and frustrate consumers than deliver any marketing benefit.
4. Adopt a One-Price-Fits-All Strategy
Whenever you present to the consumer a list of different prices for similar offerings it has the unwanted effect of triggering the consumer’s focus on price. When Apple set the iTunes price for music at 99c (US) it felt fairer to the consumer than a mix of prices (usually caused by tactics such as price skimming) and forced the consumer to think on the benefits of the iTunes service instead. Research by Bertini & Wathieu showed that consumers were usually happier to accept a higher uniform price than accept a mix of prices, even when the mix of prices would result in a lower total cost.
All four of these methods attempt to draw focus away from price, towards the unique value of your product. They do this by either encouraging you to investigate the link between price and the key product benefits, or by making the price choice so simple (flat fee) they you move onto considering the key benefits.
What are your strategies to stop customers fixating on price? Not sure how price sensitive your customer base is? Look for these eight factors that indicate price sensitivity.
If you’d like to read more on these four strategies, then look for a copy of the Harvard Business Review article “How to Stop Customers from Fixating on Price” by Marco Bertini and Luc Wathieu, published May 2010.
Thoughts, comments? Hit me up below…