Many books have been written on the art of product pricing, but one element of pricing that is difficult to quantify is the level at which a product price can influence certain human perceptions and behaviors.
How much actual or perceived quality, value and uptick in social standing can a price have on a buyer, is something that can often be observed but not necessarily measured.
Premium priced products such as luxury automobiles and watches often have a loyal following of customers willing to pay those higher prices. Onlookers often perceive these customers as connoisseurs, leaders, discerning and successful to name a few.
Product positioning in the market not only means pricing the product accordingly, but it also means providing the perceived benefits that differentiate market segments from one another.
In other words, if you want to command a high price for your wood crafts, these must be made of superior materials, craftsmanship and design and must appeal to the buyer's other senses of perceived quality, value and status.
Let's look at a couple of examples of industries that either focus on or offer products and services in the premium price range.
Apple has long been known for its design and leading edge technology. Their iPhone has garnered such a loyal fan base, that it is not unusual for fans to line up in the middle of the night waiting for an Apple store to open its doors to sell them the latest greatest mobile phone. The premium price does not imply that the buyers are affluent. But owning an iPhone has become synonymous with having an appreciation for this fine product. And as one of the first ones to own a new model makes these buyers leaders in their social circles. Something to be proud of when showing their phone to friends and family. Apple has this figured out and is an expert at producing the hype and products that fans are clamoring for.
In addition to regular priced seating, the airline industry also offers premium pricing for the first class travelers. Did you ever notice how many fewer seats there are in first class than in economy? The demand for first class tickets on commercial flights just isn't enough to fill a plane entirely with first class seating and services. To many buyers, economy tickets are the way to go. Why pay more for the same trip as the passengers in first class? But sitting in first class can be a real treat.
Luckily for us all, there always seems to be a market for products priced at both ends of the pricing range. So, what are the factors that influence an emotional purchase?
In addition to the well known relationship between price and resulting demand, the purchase decision is also affected by 3 of the more important psychographic elements (in yellow) that come into play.
In most buying decisions, product selection evokes a number of human emotions in terms of actual and perceived benefits.
As the diagram above illustrates, premium pricing is often associated with a perceived higher quality. "Perception" does not imply that true quality isn't actually there. To many buyers if the product or service is higher priced, it must be of higher quality.
For value based buyers, some level of quality is nevertheless expected from economy priced products. Here, quality is not the major focus of the buying decision.
In general, perceived value (or return on investment) diminishes as prices increase.
Premium pricing often contributes to a buyer's status of being a connoisseur, leader, discerning, successful, sophisticated and appreciative of the arts and so on.
Your product pricing strategy must not only take into consideration the competition and quality of your crafts, but also the expectations the target market has with respect to the human elements described above.
Key ingredient: A high reputation for the quality of your crafts and services.
Key ingredient: Competitive pricing with a focus on value, fabrication cost controls
Key ingredient: Competitive pricing with good quality and craftsmanship with opportunities to differentiate.