Tuesday, October 12, 2010

Clarify Item Advantages via Pricing

Present item costs as benefits that the product or service brings in units important to the shopper. This helps move your shoppers beyond a fixation on the item price so they can more accurately assess the value of the alternatives and more often consider purchasing items that bring you a higher profit.
     Researchers at London Business School and European School of Management and Technology gathered some examples of this tactic:
  • Embrex (now Pfizer Poultry Health) offered poultry breeders inoculations by the egg.
  • General Electric priced airline engines by the power delivered per hour.
  • Goodyear dealers priced tires according to how many miles they were expected to last.
  • Explosives supplier Orica charged customers according to the fragmentation of the rocks extracted.
     Here are the steps to clarifying advantages via pricing for items you sell:
  1. Ask your customers and prospective customers about the benefits they find in using the product or service for which pricing has become an issue. Questionnaires, focus groups, interviews, and customer diaries are the chief methodologies for gathering this information. Be sure to ask customers about their beliefs, their emotions, and their intentions when it comes to the product type you’re investigating. To help ensure accurate results, don’t limit yourself to one or two of these three.
  2. Analyze what you’ve gathered. The most revealing, and therefore most valuable, discoveries will come from statistical techniques like conjoint analysis, factor analysis, and cluster analysis. However, since these techniques require use of an outside consultant, you might choose to employ less sophisticated looks at the data.
  3. Word each main benefit in terms of units the shopper would use or process: fertile eggs, engine power, road miles, rock fragments, and so on. The units might be different for different target populations or for different roles the shopper takes on. In the role of household accountant, the consumer might be assessing cost per serving, while in the role of parent, the consumer might be assessing cost per set of daily nutritional requirements. If you’ve used the statistical analysis techniques, they’ll help you in this segmentation.
  4. Set pricing in terms of the units.
  5. Announce both pricing and benefits using the units.
  6. Over time, regularly analyze how well this pricing structure is meeting your profit objectives, and make any necessary adjustments.
For your profitability: Sell Well: What Really Moves Your Shoppers

Click below for more:
Ease Customer Pain About Item Prices
Move the Customer to Accept Higher Prices
Know Your Potential Customers' Intentions
Use Cluster Analysis on Customer Data
Keep Customers Happy About Data Collection
Analyze What Your Shoppers Say and Do

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