Marketing Wisdom

Pricing, for the fiftieth time!!!

Okay, so, a simple post this month – why are products priced at $19.94 or $99.95 or $299.95??? Even cars and trucks are priced at $49,995.

Why?

The other day, was speaking with a client about setting up pricing on her new products that she was going to put on the web.  She stated that she would sell them for $30, $35, and $40.

I corrected her and said sell them for $29.95, $34.95, and $39.95.

She asked me why?

All I could say was ”When you were a kid, when you saw a toy, and it said $.95 or $9.95, what happened? You went up to a parent and said, can I have a dollar or ten dollars? Or, if that didn’t happen, what about now, when you go into a store, and you see your favorite shampoo – instead of it saying “$10″, it starts – because we read left to right – with “$9″, right? Doesn’t that make it easier on our mind and wallet to pull out the money?” 

Now, some of you will say, but, if it was sold at the round number ($1.00 or $10.00), you would still ask.  And you are right.  But, did any of you either a) go and give the change back to your parent, or b) you KNEW about taxes and needed that extra couple of cents so you could make the purchase.

So, back to my client.  It is easier for a consumer to “think” that they are saving money by knocking off the price by a nickel.  It is back to my mantra (and the name of my book) – PERCEPTION IS REALITY.

GREEN!!!!

You know, you see everyone advertising and marketing that they are a “green” company, that they are going green, that their product is green, that the company is green, and so on and so on.

This is marketing at its purest.  A perception exists that the world is ending (you can debate what you believe on an environmental blog/web site, not here), the media consistently “hypes” that the world needs to go green, and you, yes you, the marketer, are jumping all over it.

Everyone wants to contribute (not to greenhouse gasses, but to saving the planet), so, if “I” can buy a product that was made in a “green” fashion, or buy from a company that has gone “green”, I am helping the environment.

I have wanted to write about this for quite some time, because I am watching how companies and products are “adapting” the perception out there.

If you don’t think that “global warming” isn’t marketing, then, you shouldn’t be in marketing. Again, the marketing campaign behind this “movement” is truly marketing at its best.

By the way, have you noticed how Wiki’s are taking off? How everyone is now using one? Do you remember my entry about Wiki’s last year? Where I stated that Wiki’s are perfect for corporations and people who need to share info, to contribute to other divisions, and how it should not be exposed to the public? Well, if you are following any of the news on Wiki’s and how companies are jumping all over them and using them to help themselves, it will prove that I was right, again (lol – if any of you know me, I don’t have a big ego, but, this time, I had to brag a little about it).

Wiki’s are WONDERFUL, in a corporate setting, for a corporation. But, sharing that info to the outside world and letting outsiders (who don’t know your business) comment and change your information is (or I guess, was) a big mistake. Use them, they are wonderful tools (but remember, tools are best used by those who can use them).

You spent how much?

Was thinking the other day about how many companies make their decisions based on personal experience and not research.  After the numerous books, articles, and seminars, all talking about research over the past years, and companies still go with “what they feel is best”.  The numerous products, that have failed initially because “My daughter said that this is the way kids are thinking” or “My friend likes the taste of this jam and we will keep it that way”, even after sales keep falling (or are non-existent), is amazing to me.  I learned at an early age that research is important, even though you can get suckered into spending mass amounts of dollars on it.  Over the years, after spending $10 or $10,000,000 on research, it all came down to “research in moderation”.  Gut instincts are important and lead to outstanding products, but, spending a little time (who has that?) and money (now, really, who has that??!!) on some basic research can help guide you and avoid some basic pitfalls.

What do you do if you don’t have time or money? Try these simple, but effective, ways to gain insight into your market (from most time consuming and expenditure to least):

1) Duh – if you have any money to spend, hire a professional research firm
2) Call research firms and see if they information, already compiled, that you can buy
3) Go to your local college or university, speak with the dean in the School of Business, and have them do a Project for you on the research you need (you would be surprised how open they are to this)
4) Go to your high-school (if you are marketing to teens) and ask them if you can have a survey conducted – be upfront and honest on what you are doing, why you want to do this, etc.  Of course, honey gets more then vinegar, so pledge that if the company starts making money, they will receive a $10,000 grant  in three years because of their time – again, surprisingly, schools will do most anything to raise funds
5) Pick up the phone and call people – call lots of people.  No, I’m not saying call 100′s, but, call at least 25 people, acquaintances (not friends), tell them what you are going to market with, that they must be honest with you, and what they think of the idea, product, etc.
6) Search on the internet.  To this day, people only do cursory research on the web – spend the time, spend at least 10 hours, reading every page you can on the market that you are going to sell your product in. Especially, look at your competition – what are they doing, what do they do, where did they get started, what mistakes did they make and what mistakes are they making now – look at old press releases, reviews in the newspaper, magazines, anything and everything you can about them.

Pricing also affects perception

Was meeting with a client the other day and we were discussing the building of a brand around two new products that they wanted to introduce.  They are a small company with sales around $2M a year and a product breadth of eight different consumer products.

During the discussion of building the brand, we went down the path of “what price is the consumer willing to spend and will it help or hurt the brand?”  I discovered that the products were totally disparate in price – one was under $10 and the other was over $30 (cost). The cheaper item was sold for double the price of the more expensive item (retail). 

I told them that the profit margin was great, but, why continue to sell the more expensive product and, more importantly, why try and build a brand around it? The volume of the cheap product made up about 40% of their product line and the more expensive item had yet to be more then 5%.

In our discussions, I discovered that they thought the more expensive item would “allow” them (my client) to be perceived as a more quality conscience company.

Let me help you more understand the dilemma I was in – the products, at Retail were $129 and $99 (with the more expensive retail being the cheaper cost of the two products). Again, if the market will pay, good for them in charging over 100% margin. 

But, would it be worth it to build a brand name around the $99 item, when, obviously, it can be easily perceived as a quality product, but, is extremely niche, does not sell well, and could and should remain where it is, a small niche product that has a nice profit – i.e. remain the same.

More importantly to me, should BOTH products be linked? The same brand name. 

I can’t go further on this right now, but, I think you can understand where I am going. Of course I will advise them on building the brand on both products, but, do they really want to? Where do they see the brands in five years? And, just as important, what do they want that brand to convey?