Price
is such an essential part of product management and marketing that I devote an
entire chapter to the topic in my book Business Fits. Does a high price insure quality? Definitely not. Does a low price indicate poor quality? Definitely not.
Many
entrepreneurs start a business with the intention of competing on price, which is
usually a formula for failure. A larger,
more established competitor is in a better position for a price war.
I
was involved in a price war once when I was in the recreational vehicle manufacturing
business. We basically bought the
business in an eight state area. There
was no way a smaller competitor with less financial reserves and a smaller
geographic market could compete.
I
know of several products that are poor quality, but have the perception of
quality due to an extensive advertising campaign. Companies often make a conscious decision to
spend money on promotions and advertising instead of product quality.
Engineering
is so good today that many products are only made to last as long as the
warranty period. Keith Elwick was the
founder of Hawk Bilt. He once told me
that they originally made their products to last, but then the engineers got
too good.
I
give an example in my book of a product that did not sell because the price was
too low. When the price was raised, it
sold very well and continues to sell today.
Some
products need a high price to denote quality and exclusivity. The cosmetics industry is a great example of
this. Cost of production is
minimal. The biggest portion of
production cost is the packaging.
When
I was a Ford-Mercury dealer, I noticed that many parts for a Ford, Mercury, or
Lincoln, were identical, but had different part numbers and prices. The Lincoln
Most
pricing is called odd pricing or psychological pricing. The idea is that $19.99 sounds less then
$20.00. This practice is very common and
is especially successful with lower priced items.
When
I was in the collector car business I did not use odd pricing on cars. If I priced a collector car at $49,950, the customer
only heard $49,000 and expected to negotiate from there. I priced the car at $50,000 and told the
customer we did not negotiate. The car
now had a much higher image of quality.
Shipping
costs can affect the price of a product.
If the product has to be shipped to the customer, the shipping cost is
often included in the price. Shipping
costs can turn off a potential customer.
I give a great example involving grass-fed buffalo meat in my book.
For
more about pricing, read Business Fits which is available on Amazon.
God bless the
United States of America . God bless President Trump and guide him to
make America
great again.
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