Stay Within Value Pricing
December 1, 2010 § 2 Comments
“Good morning Coach, is value for money pricing about making your customers feel that their money is worth the purchase?” Jake asked.
“Good morning too, Jake,” I said. “You seem to be in a hurry.”
“Just excited to learn, Coach,” Jake said.
“Did you read up on it?” I asked.
“I have read some but some of those I have read discussed about price index, inflation and cost of materials and other stuff too complicated for me,” Jake answered.
“We are not saying that those are not important. But pricing should be more customer-centric rather than index driven. The answer to your question is, yes,” I said.
“Yes, value for money pricing is setting the price where customers feel that the purchase price is worth it,” I said. “Of course, it should cover your cost of services!”
“So they should feel that it is not too high, nor too low, just right,” Jake said. “But how do I know the price range?”
“That is where market research comes in,” I said, “which simply means ask your target market.”
“I will ask them, how much they are willing to pay?” Jake asked.
“Don’t just ask them how much, ask them up to how much they are willing to pay for the kind of service you offer,” I corrected. “Find the highest level possible.”
“What if I offer them a price that I believe is value for their money but they ask for a discount?” Jake asked.
“Try your best to offer added value instead of a discount,” I said. “By giving added value, you will firm up the feeling that it is worth it.”
“Please give examples of added value,” Jake requested.
“My barber gives me a free five minute massage after the haircut,” I said. “I don’t ask for it but he always gives it.”
“How do you feel about their pricing?” Jake inquired.
“I feel it is fair though it is higher than the average barber. It is not too high either. I do not need a celebrity barber,” I chuckled. “My barbershop was able to maintain the price within my psychological barrier.”
“I see,” Jake said, “So I need to do some research on the psychological barrier.”
“Naturally,” I said. “But make sure you ask the target market, not just anybody. Some of your family and friends, which we are inclined to ask might not be within the target.”
“I’ll keep that in mind,” Jake said.
“I have an upcoming half-day seminar, you get a free seat worth $200,” I said.
“Wow. Thanks Coach!” Jake shook my hand.
“You know that I would rather give you added value than give you discounts,” I said.
“I know that coach.”
© Eduardo R. Pilapil Jr. 2010