Obesity can help us price our products
There are probably many reasons why obesity exists in America. And it might not be the only reason why Americans are obese as a stereotype. So we won’t be solving obesity with this, but we will be learning on how to better price our products and services by adding value.
Super size me
The fast food industry knows how to price. They know what value is. They know that value matters more than the price. Regardless of the base price, for 30 cents more you can upgrade from a small soda & small fries to a large soda & large fries.
Even if you only want a small, you buy the large because it's so cheap to get more. Maybe you don't finish it, but you eat more and drink more than if you bought the small still.
Maybe you have or maybe you haven’t noticed throughout the years that your favorite combo meal has gradually increased from $5 to $9 in price. But what has stayed the same? That small 30 cent upgrade. Strangely, the more expensive the base price is for the combo meal, the greater the value you perceive in that supersized upgrade.
This may be a leading factor to why there are so many obese Americans, but were not here to talk about obesity we're here to talk about price.
Price vs. value vs. perceived value
How do we know the price of something? Because someone puts a price tag on it.
How do we know that’s the correct price? We don’t.
There are probably hundreds of things you think you know the price of, but almost every single product you come up with has a different price for that same product too.
We know this to be true by looking at an American Classic: Coca Cola.
What’s the price of Coke?
Well that’s easy… or is it?
At Kroger, I can get a 24-pack of 12 oz. cans for about $8.
However, I can also get a 12-pack of 12 oz. cans for about $6…
Wait a minute. It’s not $4, it’s $6. Therefore 12-packs have more expensive Coke in it.
Then if we keep going, I could get a 2 liter (~67 oz.) for $2.19 or a 20 oz. bottle for $2.09.
And that’s just Kroger, what if we changed the venue?
In an airport or amusement park vending machine a single can of Coke could be $4.
At McDonald’s, any size soft drink is $1. Want an extra small? $1 please. Want a large? Also $1.
Quickly, we can see we don’t really know the price of something and a lot of factors go into the price too. Venue, location (even within the same store), cold vs. not, and size all play a factor into the price.
Value vs. perceived value
All value is perceived value. It just varies from person to person.
Your perceived value can change based on just comparing the same two products but changing the situation.
Don't believe me?
Let’s look at the 2 liter of Coca Cola for $2.19 and the 20 oz. bottle for $2.09.
What’s the better value? The 2 liter, you say! You get over 3X more soda for only 10 cents more.
However, imagine it was a hot day and while on your lunch break you already picked up your food and now wanted a Coke? The 2 liter is still $2.19, but it’s on the warm shelf in the middle of the store. The 20 oz. is right by the cash registers in a cold refrigerator. And yes, it’s still $2.09. You don’t want a lukewarm soft drink (and probably don’t want to lug around a full 2 liter either for your lunch). So all of a sudden the cold 20 oz. drink is looking like a lot better value to you.
There are 2 main points we can learn from this.
Creating value & packaging both matter.
You can create value on your own products, just like Coca Cola does. Who knows if the 12-pack is the “real” price or if the 24-pack is? The truth most likely is, The Coca Cola Company wants you to buy the 24-pack. Hence, they price the 12-pack more expensive than they originally would have to create value for the 24-pack. And therefore sell more 24-packs. Oh, and do you want to buy the "more expensive" (higher profit) 12-pack? They'll gladly sell you that too.
What is one product or service that you have where you can create value? What can you split up into 2 offerings? Or can you take a second offering that you already have and change the price to create perceived value of the first?
Is $50 for a book expensive?
Yes, if you are browsing Amazon and see all the $10 books on there… But what if it wasn’t on Amazon? What if it was paired next to 5 other books for over $200 each? Well, look at that cheap $50 book over here!
Packaging. Packaging. Packaging.
Don’t overlook packaging. Packaging doesn’t even mean the box alone (but still could, and that’s important for products). Packaging could be for a service too.
Websites: Starting at $5,000.
That is one way for a web designer to list their price. Here’s another:
Most web designers go to school and learn Photoshop and only focus on making things look pretty. They don’t know business. That’s why I make websites that make you money and grow your business. Oh, and they still look pretty too.
Websites & Strategy: Starting at $6,000.
The truth is, the first web designer might help your business grow too. They might offer strategy as part of every website they design too. They just didn’t package it that way. As a customer, how would they know? I don’t care that the other person is at least $1,000 more expensive. I know what I’m going to get with them. (And look at all the website examples they gave me in their packaging.)
Packaging also means a $4 cold can of Coke in an Airport vs. a $2 warm two liter in a grocery store.
Now it’s your turn
Look at your current products and services.
Where is the perceived value? Do you have it? How can you create it from thin air?
Now make sure you are marketing it. Make sure you are telling everyone that value on your sales pages. We can’t just hope people notice, tell them.
A fast food restaurant always tells you.
“Would you like to supersize that for just 30 cents more?”