by Adam Juda on Wednesday, October 29, 2014
When I first started reading about pricing strategies, I thought that there were only two: those that relied on honesty and those that relied on lies (fraud). It all seemed pretty simple, but as usual the real world turned out to be more complex.
Marketers soon realized that making statements that were completely devoid of meaning could be a highly utilized pricing strategy.
One recent ad for a new housing development stated no reasonable offer refused. Those words scream great deal, but why? It all comes down to a point of view. In this case, the sole arbiter of the word reasonable is the vendor. Of course he'd accept all reasonable bids. At what point in his business career did he choose not to? Businesses only make money when items are sold, so there is little reason for a business not to accept reasonable offers in the first place - especially in industries that are known for utilizing negotiated (rather than fixed) pricing, such as real estate or the automotive industries.
Another method is to list the price of a single component inside of a bundled purchase. Get a bag of chips for just ten cents when you purchase two bottles of soda!. While the pricing tactic sounds amazing at first, it still leaves many customers with one overriding question: What's the actual price? Many companies will have simply increased the price of the bottles of soda to compensate for the cheap bag of chips. Even if the final price is the same, consumers are harmed by the forced bundling of products which artificially reduces their choices.
A closely related technique is the abuse and rampant overuse of the word free. With few exceptions, every time I hear the word free I reach for my wallet and find a business person's hand moving toward the same place. Rather than bundling additional products or services, the free technique focuses on the addition of fees and surcharges. How many times have we seen late night infomercials that proudly describe the product being advertised as free, you just pay a shipping and handling fee? Of course these fees are always required. There is no way to break out the free item from the additional charges. But if this is the case, how can the product be free in the first place?
My favorite strategy is to utilize the words up to. Save up to 50% sounds great until one realizes that 0%, -25% and 1% are all equally up to 50%. The phrase literally has no meaning, other than the fact that it caps your maximum savings - a feature that is of little interest to a savvy consumer. Yet these words appear magical. Up to implies that great deals are to be had, even if no such deals exist. It is only outdone by the slightly more devious version that tacks on or more, as in: save 50% or more. While the new verbiage adds exactly zero additional meaning, it certainly implies that even greater deals could be had - though if greater savings are to be had, certainly they'd be announced.
While techniques such as these can work, they scream fly by night to customers who are aware of your pricing techniques. As such, I'd strongly recommend against using them in the professional setting. Trying to trick your customers is hardly the way to build a long-lasting business relationship.
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