The Australian Small Business Blog

Saturday, August 07, 2010

Pricing Strategy - Creating Massive Price Increases


Every business would like to be able to increase their prices. How much would you like to increase yours – perhaps by 15% or 25%? How about increasing them by 100% or even 1000%? To achieve massive increases, you need to think differently.


Consider the example below of a fairly basic product, the humble shower head.



Let’s play a guessing game on the price of these showerheads. Which do you think is the cheapest? The choice of A is pretty obvious. You can get one of these for less than $50 at your local hardware store. Now which do you think might be the most expensive?

Well, C looks a little fancy where as B looks fairly basic, but if you thought C was the most expensive, you would be wrong. It costs about $140. It would be more expensive to produce than A having different water flow paths, so we expect a higher price.

So how much do you think B costs? Before I answer the question, I will give a brief description of this product from the manufacturer.

Hansgrohe Raindance Imperial 600 AIR 24" showerhead has air injection technology, RubIt cleaning system, 3 3/4" female inlet, 358 no-clog spray channels, made from solid brass. Rediscover water as a source of relaxation in a soothing, warm rain shower "You can just stand under it, and it helps your psyche” You will find countless possibilities for your showering oasis with Hansgrohe.


Does this now sound like it could be a lot more expensive than showerhead C? It is many times more expensive- I will reveal the price at the end of this article so you can have time to have a guess.

Consider the name – Raindance. What feelings does this evoke? Do you think people buy this showerhead to just wash themselves, or to have a pleasurable experience while showering? Now consider the technical description of the engineering. Of course, the brand, Hansgrohe, is regarded as a leader in design in the industry. Even the German name resonates as we all know that German engineering is world class.

The people seeking a Raindance experience are not the ones in the market for the perfectly functional low cost option A. Nor are they the people just looking for a little bit of affordable pampering provided by option C. They are seeking bathroom luxury, and will be buying other fittings of similar expense for a total bathroom experience. You won’t find this showerhead at Bunnings!

Raindance has been positioned with a context that re-assures value and breaks the connection with production cost. Buyers of this product are not thinking: “I wonder how much more this cost to make than option A”. Option A is nowhere to be seen when viewing the Raindance, just other products of similar value which re-assure the buyer of the value of the Raindance providing value anchors and context.

Massive price increases can be achieved through redesign of your product or service and using different marketing channels to ensure that the focus for the buyer is on value, away from a context where price and production cost comparisons will be made.

By the way, the Raindance Imperial 600 Air retails for $5,457.

Find out more about Product Positioning and Price Anchoring and Context in:

Price: How You Can Charge More Without Losing Sales.


May Your Business Be - As You Plan It.





Over to You. What do You Think? Post Your Comments Below.
Dr Greg Chapman is the Director of Empower Business Solutions and The Australian Business Coaching Club and is Australia's Leading Advisor on Emerging Businesses and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems. He is also the author of The Five Pillars of Guaranteed Business Success and Price: How You Can Charge More Without Losing Sales.

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1 comment :

Anonymous said...

We are still laughing at the Rain dance air technology showerhead!

Perhaps it is priced to compare with a Spa! I think I would have to give this one a miss
- regardless of what I need for my psyche!

Barbara

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