People often compare a product’s price to a “reference price” that they maintain in their minds for the product or product category in question. A “reference price” is the price that people expect or deem to be reasonable for a certain type of product.
Several factors affect reference prices:
• Memory of past prices
• Frame of reference (compared to competitive prices, pre-sale prices, manufacturer’s suggested prices, channel-specific prices, marked prices before discounts, substitute product prices, etc.)
➢ Creating the most advantageous (and believable) competitive frame of reference is essential to achieving a price premium
• Prices of other products on the same shelf, in the same catalog, or in the same product line
➢ The addition of a more premium priced product typically increases sales of other lower-priced products in the same product line
• The way the price is presented – for instance, absolute number versus per quart, per pound, per hour of use, per application, for the result achieved, etc.; also four simple payments of $69.95 versus $279.80; for automobiles: total purchase price versus monthly loan payment versus monthly lease payment
• The order in which people see a range of prices – like when a realtor uses the trick of showing the poorest value house first.
The Blake Project Can Help You Grow: The Brand Growth Strategy Workshop
Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Growth and Brand Education
