Cheaper Is Not Always Better
I see this mistake made by people and businesses all the time. They have a product they want to sell and figure “If I price this significantly lower than all my competitors, people will buy from me instead.” WRONG.
Most people associate lower cost to lower quality. So when a person releases a product that is cheaper than a competitors, people automatically assume that it is worse.
The Proof Is In The Jewelry
This is an example from Robert Cialdini’s book Influence. A woman owns a jewelry store and has turquiose pieces that just don’t seem to be selling. She is about to leave for a trip and tells her salesperson to list the items at 1/2 price, thinking that if the price gets marked down, more people will buy it.
When she gets back, all the pieces have sold out. But the salesperson mistook her 1/2 price for 2x the price – each item sold for twice what it was selling for originally.
Why did that happen? People saw the large price tag and immediately thought, “This is expensive. It must be good quality and prestigious. SOLD!”
Drubeck Brothers Story
When I first read this story, it blew my mind. These men are absolute geniuses. Direct story from the book:
Culturist and author Leo Rosten gives the examples of the Drubeck brothers, Sid and Harry, who owned a men’s tailor shop in Rosten’s neighborhood while he was growing up in the 1930s. Whenever the salesman, Sid, had a new customer trying on suits in front of the shop’s three-sided mirror, he would admit to a hearing problem, and, as they talked, he would repeatedly request that the man speak more loudly to him. Once the customer had found the suit he liked and had asked for the price, Side, would call to his brother, the head tailor, at the back of the room, “Harry, how much for this suit?” Looking up from his work and greatly exaggerating the suit’s true price – Harry would call back, “For that beautiful all-wool suit, forty-two dollars.” Pretending not to have heard and cupping his hand to his ear, Sid would ask again. Once more Harry would reply, “Forty-two dollars.” At this point, Sid would turn to the customer and report, “He says twenty two dollars.” Many a man would hurry to buy the suit and scramble out of the shop with his “Expensive=good” bargain before Poor Sid discovered the mistake
How To Sell Stuff For Cheaper
Brilliant.
So you want to sell stuff for less but let people know that your wares are just as good as the overpriced products sold elsewhere. Here are two ways:
1) Reduced from _____
Let your buyers know that the actual product is worth $XXX but you have decided to reduce the price. This way, people will associate the value they are getting as the inflated price and score a great deal with your reduced price. [From Influence]
2) Let them know the opportunity cost
This just came into my inbox today and I really enjoyed it.
http://www.insideinfluence.com/article.html – July 09
Here is the crucial excerpt:
The authors of the research note that the furniture retailer/manufacturer IKEA used this strategy brilliantly in a recent ad campaign in Singapore. In one advertisement, the left pane featured an unhappy woman standing by a fancy-looking cabinet containing only a single pair of shoes. The caption underneath read, “Customized cabinet ($1670) + 1 pair of shoes ($30) = $1700.”
In contrast, the right pane of the ad featured a woman in front of a less ornate IKEA cabinet that was filled to the brim with shoes. The caption underneath showed that the cabinet’s price ($245) plus the price of 48 pairs of shoes ($1440) was still less than the $1700 from the other pane (Frederick et al., in press, p. 24-25).
Make the customer think about all the money they will save and what they can spend it on instead of blowing the extra cash on a competitors product. I wish I could find that ad…
Well there you go. Keep in mind, when coming up with a product price, always test from high to low. Usually doesn’t work too well the other way around.
especially important during a recession!. Whilst our customers were reducing prices (and margins) we increased our prices by 30%…. the result was an increase in sales orders and profits. believe it! :)
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So THAT’S why I keep seeing those “Original price: ____ NOW: only ____” in stores. And it’s effective lol.
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We humans are weird aren’t we? It is true though. If something is too cheap, I become suspicious. You could show the same pair of shoes side by side. One is marked $29.95. The other is marked $129.95. Guess which one I want.
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