In this post I discuss the phenomenon behind increasing price to increase sales.
Pricing a product seems simple – price lower than your competitor, but not so low you don’t make a profit, and voila!, you’re selling faster than Beanie Babies circa 2001. But slapping a 99 cent ending on a number, offering deep discounts on typical sales holidays or price matching may not be the the secret to earning more revenue than your competitor.
In his book, “Influence – Science and Practice,” Robert Cialdini tells a story of a friend who owns an Indian jewelry store in the Southwest. The owner was having a difficult time selling a certain collection of turquoise jewelry. The store was busy, she displayed the jewelry in a centralized area, asked her sales people to push the product, and priced them at a very good deal for their quality, yet they still would not sell. Finally, she left a note to her head saleswoman to price the turquoise “x 1/2,” before leaving on vacation. When she returned, she found that all of the jewelry had sold, but not at half price, at double. Because the saleswoman had misinterpreted her note, she doubled the price of the turquoise, and all of it sold.
This is not the outcome most people would expect. Logically, it seems that the turquoise would have sold at a quicker rate with a cheaper price. However, the buyers were using a standard principle that many of us are guilty of – assuming that “expensive” = “good.” When people are unsure of an item’s quality, they often use this stereotype to make their purchasing decision. Because the price had become a trigger for quality, a dramatic increase in price led to a dramatic increase in sales.
While this isn’t a suggestion to throw caution to the wind and double the price of every item or service you sell, it does provide an insightful angle as to the mind of your consumer. If your typical customer is one that is motivated by quality more than they are snagging a good deal, it may suit you to increase your price to test the expensive = good theory. If this influential motivator doesn’t seem to work for your customer base, you can always put the items on sale and bring them down to a lower price to see which motivates your buyers more.
Have you tried the “price determines quality” theory? Did it work for your business? Tell me in the comments below!