Too many respond to increased competition by lowering prices. The problem is that lowering the price often comes with unintended consequences. It can lower the image of your product and send the wrong message to customers that recently paid more. What is a company to do? The answer is set the price at the right level by finding out what buyers are willing to pay.
What buyers are willing to pay
Pricing novices tend to be “inside-out” thinkers. They assume that buyers always want to pay less because they, themselves (inside their own heads), want to pay less. What the data shows is that this is true if the product is validated. If you know and trust the company and the product you are buying, of course, you would like to buy it for less. What if the product is not validated? You never heard of the company, or you have never heard of the product. Time and again, a lower price for an unknown product from an unknown company usually means one thing to the buyer’s brain – the product is probably not very good.
What gives you control over the price
Economists tell you that the market determines the price, and that an economic price is where supply equals demand. Rather than fight with economists, good Marketers know that positioning (product branding) gives you control over the price. The more uniqueness and desirability you put into your positioning strategy, the more control you have over the price you can charge for your product. A few examples should help to illustrate how positioning gives you this control.
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