Page 56 - Duct Tape Marketing

40 Part I: Getting Started in Marketing

ߜ Federal Express = Best reliability
ߜ BMW = Best performance
ߜ Rolex = Best quality

Riding the price/value teeter-totter

Price emphasizes the dollars spent. Value emphasizes what is received in
exchange for the dollars spent.

Pricing truths

When sales are down or customers seem dissatisfied, small businesses turn
too quickly to their pricing in their search for a quick-fix solution.

Before you reduce your prices to increase sales or satisfaction levels, think
first about other ways to increase the value you deliver. Consider the follow-
ing points:

ߜ Your customer must perceive the value of your product to be greater
than the asking price. If you charge 99 cents, deliver at least a dollar in
value.

ߜ The less value customers equate with your product, the more emphasis
they’ll put on low price.

ߜ The lower the price, the lower the perceived value.
ߜ Customers like price reductions way better than they like price increases,

so be sure when you reduce prices that you can live with the change,
because reversing your decision — and upping your prices again later —
may not settle well.
ߜ Products that are desperately needed, rarely available, or one-of-a-kind
are almost never price-sensitive.

The difference between penny-pinching and shooting the moon

What makes a product price-sensitive?

Tell a person he needs angioplasty surgery, and he’ll pay whatever the car-
diac surgeon charges — no questions asked. But tell him he’s out of dish-
washer detergent, and he’ll comparison shop. Why? Because one product is
more essential, harder to substitute, harder to evaluate, and needed far less
often than the other. One is a matter of life and death, the other mundane.

See where your product fits by checking out Table 3-2.