Offering your customers more value than you are charging them for ….
When Pets.com collapsed in November 2000, it took $300 million in investment capital with it. In doing so, it became the poster child for everything wrong with the dot-com boom. While there are a number of reasons for Pets.com’s failure, one of the most important was that is consistently undercharged its customers. In order to quickly grow their customer base, they offered steep discounts and free shipping. In fact, the company was selling products for 27 percent less than it cost them to purchase them. It was a business model that was built to fail – and it did.
Competing on price is a common fix for poor marketing.
It invariably results in a devalued perception of the business’s products or services, inadequate customer support, and a constraint on the ability to grow margins. Lowering prices can be a trap that’s very difficult to escape. Once consumers have purchased a product at discount, there can be significant resistance to paying the full price. Pets.com eventually realized their business model was faulty, and tried to make the shift to products with thicker margins. But in doing so, they struggled to shift their perceived value.
Raising prices by focusing on delivering more value than your competition enables you to charge a premium while increasing demand. At the same time, it helps to communicate the value of what you are offering beyond a shadow of a doubt. Higher prices will lead you to better customers, who have a better understanding of your offer’s true value.
Increase the Value Perception
Link the Price to the Result
Move to the Next Psychological Price Hurdle
Provide Education Services for Your Product
You may like to use the phrase from Dan Kennedy “selling money at discount” …Continue Reading >>