When most people think of marketing, they only think about “promotion.” Actually, they only think of advertising, which is only one promotional factor.
The marketing matrix includes product, promotion, place (distribution), and price.
Most business owners are more sensitive to price changes than their customers are, and tend to be very reluctant to increase their prices. “I can’t increase my prices! All of my customers will leave me!” Yet customers expect price increases from time to time. They know business owners are experiencing increased costs that have to be paid for and must be profitable to stay in business.
Here are some considerations for price:
- The price positions the product for value. Price can actually increase value in the mind of the customer. What is better, a $15 pair of Levis or a $50 pair of Calvin Kleins? (I made up the prices.) What is better, a $2 Maybelline lipstick or a $25 Loreal Paris lipstick?
- Price is a huge determinant of profit.
- Products with bigger gross margins (price – cost of sale) support bigger marketing budgets. If you can far outspend your competitors to profitably get a customer, you have a huge competitive advantage.
- Price positions the product for its marketplace. Is Paris Hilton more likely to buy a diamond necklace for $150 at J.C. Penney or for $15,000 at Tiffany’s?
- Although you may lose some customers by raising prices, you may be losing your most undesirable (cheap yet demanding) customers with a net increase in profitability.
- The position of “low price leader” is hard to maintain. If you lose that position, you lose your competitive advantage. (For example, K-Mart, Sears, and Woolworth’s.)
Some sensitivity for handling price makes sense. An example is the public relations nightmare of NetFlix with its recent price increase. Notice that, although it lost many customers, NetFlix reported record profits. Hmm.
I have paid thousands of dollars to hear what marketing guru Dan Kennedy has to say about price strategies. Now you can read his ideas for only $17.95. Why is the price so low? See the special offers from Jason Marrs and Dan Kennedy at the back of the book. The book is actually self-liquidating marketing media.
The information used as “bait” is still invaluable for the small businessperson.
I recommend that you buy and study No BS Price Strategy and every other Dan Kennedy book you can get your hands on!
Buy it on Amazon: No B.S. Price Strategy: The Ultimate No Holds Barred Kick Butt Take No Prisoner Guide to Profits, Power, and Prosperity.
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