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Good, Better, Best: which would You choose?

Unless you are selling a commodity product or service, such as petrol where all prices displayed on roadside boards where you can compare 3 or 4 stations’ offers before you have to stop to refill, you need to give your buyers clues on the value of your services. Even brands may be treated as a commodity in this respect. You have decided on a particular brand and model of plasma screen TV and now you browse the internet for the cheapest price.

The fuel example is a commodity product and the TV screen example is a commodity service (a retail distribution service of a non-commodity product).

So even if you aren’t selling a commodity product, the first question many people ask is: “How much will it cost?” and if you tell them, it could be a very brief conversation, unless you are the cheapest.

A better answer might be: “It depends”.

Take, for example the launch of the iPad by Steve Jobs. How was he able to charge more than double the price of its nearest competitor? He used a process called Price Anchoring to lift the price to this level. Before the launch of the iPad, the big question was how much to charge for it. The major existing brand digital reader, Kindle, was priced at $259. Apple believed the iPad was superior technology and so should have a higher price. But how high?

The answer was as high as their marketing can push it! So before he walked onto the stage, everyone was predicting the price was going to be around $1000, probably based on rumours spread by Apple! Even on the stage while he was talking about pricing, there was a big image of $999 behind Steve Jobs on the screen.

So at the launch, everyone believed that the price would be around $1000. This is called “anchoring”. Jobs then goes on to talk about how they have been able to contain their costs to keep the price down, but for a full 20 seconds, $999 stays on the screen. Then at the appropriate moment, the true price appears with great fanfare as a massive price reduction. So now everyone feels if they buy the iPad, they have just saved themselves $500, not that it is $240 more expensive than the Kindle.

Jobs then goes on to explain what the extra features cost. So now you compare everything to the base price of $499, clearly reasonable compared with the $999 anchor, and you are just considering which features you want in your iPad. That is the discussion is about scope not price. If you get the iPad with all the features and accessories, you will end up paying just shy of $1000 anyway! This is to be compared with the $259 Kindle. Is it worth it? Millions of people believe so.

Can you offer multiple options of your service, Good, Better and Best? A choice of Yes’s where the customer can clearly see the value of your offers, and if the discussion does turn to price, it can be redirected as a discussion on scope.

This is just one of 57 pricing strategies discussed in my book Price: How You can charge More without losing Sales. Click on the link where you can listen to an interview where I reveal more pricing strategies.


May Your Business Be – As You Plan It.

Dr Greg Chapman – The Profit Whisperer

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