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Add Perceived Value- and you can Increase Price

Many companies does this: take some generic product and add some perceived value, then increase the price. If the perceived value can potentially convince customers that they need the product, then the company can charge a bomb for it.

Some of the ways to add perceived value:

  • attractive packaging
  • persuasive writeup on the product
  • getting celebrities or well known people to be ‘official ambassadors’ of the product
  • use attractive colour, scent, etc
  • freebie or contest to be thrown in

There are many creative ways- after all, marketing a product or service successfully depends on how you can convince your potential (and hopefully you target your market well) customers that their lives will be better off with what you are selling.

Example-  Tealight Candles

Tealight candles with extra scent and colouring sold for RM15.90

Tealight candles with extra scent and colouring sold for RM15.90

 

Cheaper alternative of generic tealight candles

Cheaper alternative of generic tealight candles

Initially, Ikea used to sell generic tealight candles in a packet of 100- the normal white colour ones without any colouring or scent for about RM10. Then the product was repackaged in individual packs of 36- with scents and colouring added. The new version is sold for RM15.90 (as per picture above). The new price is more expensive and the tealight candles have been reduced by almost one third. I was hoping to buy the generic ones (because I dislike those with scent) and was dissapointed.

At a nearby pharmacy chain, I managed to find the generic packs- sold in packs of 100 for RM12.51 as you can see on the picture on your right.

 (Note: These pictures were taken in Oct 08 and as such, the pricing may have already changed by now)

Does repackaging with higher pricing works in hard times?

In good times, many companies enjoyed good sales by adopting effective marketing strategies. But as hard times have hit, consumers are clearly becoming more discerning. They would now rather stick to more generic or cheaper versions of the same product. Many products, whom are adopting creative pricing- selling similar products but at a much higher price are falling into hard times. If seemingly invincible financial institutions can file for bankcrupcy, what’s more for an SMI company or expensive boutiques.

Few days ago, I went into a shopping mall during lunch time and I observed that folks are searching for cheaper alternatives. And for the same value, they would rather go for food that are more filling like rice with dishes as opposed to sandwiches or mee soup. Places like Starbucks and Secret Recipe seemed to have much fewer customers. Some of this chains have to resort to offering value meals or cheaper set lunches- or else, risk closure.

If you are a small business owner falling into hard times, survival will depend on competitive pricing. Nowadays, companies who managed to source the cheapest suppliers wins because cheap pricing will always attract shoppers. Another important factor is to offer service and that ‘personal touch’. You will need to make yourself memorable to your customers- with so many keen competitors out there. This has been covered in a previous post: How Small Business can Win Over Customers.

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