Value based on context not price
Every brand has a price. One consumer's willingness to pay more may be greater than another's, but each has a maximum price they'd be willing to pay. How you decide to price your brand can change the dynamics more than you realise.
Consider the experience of an online jeweller - a client of Gullan&Gullan - that couldn't sell a range of handcrafted charms. Displaying the range more prominently on the home page didn't help. Neither did increased awareness and cross-selling efforts. Exasperated, the jeweller instructed the webmaster to mark the range down "x½". When the jeweller reviewed the stats she found that the webmaster had misunderstood the instruction and erroneously doubled the price of the items. Surprisingly, the range sold out. Clearly shoppers didn't base their purchases on an absolute maximum price. Instead, they associated the jewellery's quality based on the price, which generated a context-specific willingness to pay.
This explains why marketers - with multiple brand extensions or variants - sometimes benefit from offering a few inferior brands in addition to their flagship brands. Even if the supporting brands don't sell, they often increase sales of the better quality brands. Don't be the most or least
While this may seem obvious based on your own behaviour, research has proved that the second-most-expensive and the second-cheapest brands are often the most popular. Customers who buy the former feel they are getting something special but not going over the top. Those who buy the second cheapest feel they are getting a bargain without being cheap. Delayed payments not a barrier
While myself, and my clients, have always believed it best practice to close the sale ASAP before it walks out the door, behavioural economics prove the contrary to be true. Delaying payment dramatically increases willingness to make a purchase. This is especially true for high-ticket items, as future payments seem less painful than immediate ones. Even small delays in payment can soften the immediate sting of parting with your money and remove an important barrier to purchase.Some rands are more equal than others
Consumers - that includes you and myself - attach different values to money obtained from different sources. Rather than treating every rand equally, consumers appoint different values to money saved, bonuses, salary and credit. Here's how the continuum works:
- Bonuses are the easiest to spend - easy come easy go
- Credit is easy to part with - you only have to pay it back sometime in the future
- Income is less easy to relinquish - you work hard for your money
- Savings the most difficult of all - so much discipline got you there, why should you waste it away?
The digital environment allows smart e-marketers to harness consumer's mental accounting to your advantage. At Gullan&Gullan we recommend to our online clients to make extensive use of wishlists. They are highly effective in delaying payment, taking the sting away and of course, online payments made on credit card fall in the second most likely accounts to spend. Combine both strategies and you will get results. Of course, you can use similar strategies offline.
Your brand's price is an important part of the overall marketing mix and you should test various price-points. And remember just like consumer's moods and brand evaluations are not static, neither should your prices be. Once you have the optimal price, continue to review the performance as behaviours fluctuate with the macro economic and competitive environment.