Marketing Tip Mix: Price...

Beth and I were at a Big Box home improvement store last week. I was overwhelmed by the new and half-finished projects on my mental "To Do" list. Then, as we walked down the HVAC aisle, Beth added one more "To Do" to my list: Change the furnace filter.

"Come on," I said. " I think I just did that for Y2K."

"You changed it last month," she chided me.

"So, how often are you suppose to change this thing?"

"I think it's every month," Beth said.

I picked up a 3M branded filter looking for a recommendation. But first I spotted the price.

"Holy cow!" I said "For this price, I'd go broke changing the filter every month. Can't we just dust more or something?"

"That's one of those Ultra filters." Beth clarified. "You only change those every three of four months. And it keeps your house cleaner."

"What? Does it come with maid service?"

"It's better. It filters out more dust and allergens." she explained. "You get what you pay for."

I stood in the aisle weighing the decision...

Today, I'm talking about the third of the 4 P's in the Marketing Mix: Price.

Price is definitley one of the more complicated and misunderstood components of marketing.

Most consumers don't realize that in most cases price has nothing to do with the cost of producing a product. It has to do with demand and the value of the product to the business or consumer. For instance, it is not COSTING more to pump oil now than a year ago. Yet the price has sky rocketed. That is because, for one reason, international demand has grown. And as long as they get their asking price, they will continue to charge it.

Value on the other hand is me being willing to pay four times more for a furnace filer that lasts four times longer. It doesn't cost them four times more to make it. So they are able to increase their profits greatly by investing slightly more in better materials.

Many salespeople think by lowering price they can get more customers. And that is correct in some cases. If your product is a commodity, then there is nothing you can do but compete on price and service. But there are very few true commodities in the marketing world. In fact, I once
paid more to buy screened dirt. So, there is always some way to increase the value of what you are selling.

In fact, in certain product categories, lowering your price will reduce the number of customers that will buy it. For instance, in luxury items. Ever notice someone in a Cashmere Burberry Nova Plaid Camel scarf. It runs $300 at their store. Think you'd sell more if you lowered the price to, say, $30? I doubt it. The reason the scarf was popular is because it was a signal to others in the know that you could afford it.

Did I choose the more expensive filter. Yes. But not because it's a status symbol. But since changing the air filter in my furnace is something best handled by a contortionist. So, I elected to invest in a filer that saved me the headache.

And they give me a reminder sticker I can put on my calendar to remind me when it's time to change the filter again. Brilliant marketing!

How is your pricing strategy affecting your sales?