Page 54 - Duct Tape Marketing

38 Part I: Getting Started in Marketing

Buying Decisions Are Rarely about Price,
Always about Value

Whatever you charge for your product, that price must accurately reflect the
way your customer values your offering.

If a customer thinks your price is too high, expect one of the following:

ߜ The customer won’t buy.
ߜ The customer will buy but won’t feel satisfied about the value, meaning

you win the transaction but sacrifice the customer’s goodwill and, possi-
bly, the chance for repeat business.
ߜ The customer will tell others that your products are overpriced.

Before you panic over being called high-priced by a customer, remember that
it is only bad news if others respect this particular person’s opinions regard-
ing price and value. It’s often better to let a cherry-picking bargain hunter go
than to sacrifice your profit margins trying to price to that person’s demand-
ing standards. If your prices are on the high end, though, just be certain that
the quality, prestige, and service — the value — that you offer is commensu-
rate with your pricing.

Then again, if a prospect thinks your product is worth more than its price tag

ߜ You may sacrifice the sale if the prospect interprets the low price as a
reflection of a second-rate offering.

ߜ You may make the sale, but at a lower price (and lower profit margin)
than the customer was willing to pay, leaving money in her billfold and
possibly a question mark in her mind.

ߜ The customer may leave with the impression that you are a discounter.
That perception will steer the kinds of purchases he chooses to make
from you in the future.

Unless you really want to try to own the bargain basement position in your
market (a dangerous strategy because some other business can always beat
you by a penny), you’re better off providing excellent value and setting your
prices accordingly.

The value formula

During the split second that customers rate the value of your product, they
weigh a range of attributes (see Figure 3-1):