Perception is Reality -

Let’s face it, the Internet makes it easy to shop. In a few minutes you can locate a number of stores that carry a product you want. You can compare products and prices easily. Gone are the days when a merchant had a captive audience of customers. Increased travel and the commercialization of the World Wide Web has seen to that.

This exposure to stores and services offered globally has both simplified and complicated something as basic as shopping and selling. There is the availability of, and constant access to, products and services consumers want. Shopping has become simple, instant, and convenient. Global competition and increased expectations of consumers has made pricing and marketing more complicated for merchants.

In a market where there are potentially limitless people selling the same product, how can an individual gain an “edge” on the competition? The most basic way to increase perceived value is to adjust the price. If I sell shoes and my neighbor sells the same shoes at the same price, our customers are likely going to be equally divided. If I lower my price, then my shoes could become seen as a better value. Alternately, if I raise my price, my shoes could be perceived as having a higher quality (thus more value).

People look for value and they can generally be divided in three groups. There are those who look at the “bottom line” and will ultimately make all decisions based on lower cost. Price can be adjusted down to appeal to these customers, but lowering pricing to a point where there is only a marginal profit is very risky.

The other group are people who believe “you get what you pay for”. This group of people are generally willing to pay more for a product or service, but their expectations are higher regarding customer service and customization. These people generally take a long term view looking at how a purchase will be able to benefit them in the long run.

The last, and smallest group, are those who buy based on prestige. They are looking for a name brand – the Rolex or designer fashion buyers. The general quality may or may not be better than average and the customer support is generally going to be particularly good. However, the main draw is the label, the brand, and the status or luxury that it implies. This last group is likely going to be difficult for most businesses to attract. Marketing and establishing a brand take many years and lots of money to do.

In a series of articles, I hope to address ways to appeal to the second, and largest, group of shoppers. People who are looking for quality and are willing to pay for it. In the current economic climate, the “edge” to making a sale online may not be as simple as lowering your prices.

Further Reading:

• 3Cs of Marketing (McDonough School of Business – Georgetown University)
• Pricing Strategy (About.com)
• Pricing Strategy (Internet Center for Management and Business Administration)