INCREASING YOUR ROI: PROPER PRICING IS PARAMOUNT
The ROI Guy with the Latest Research on Pricing and Performance
Hi, Richard Seppala, the ROI Guy here. Sometimes the hardest thing to deal with when you’re offering a product or service is determining your pricing. Well, a couple of new studies offer some interesting insights into how your potential customers are likely to look at certain price strategies.
First of all, it’s no secret that a wonderful way to create interest in what you have to sell, especially if it’s a new product or service, is to offer it for free the first time, bundled with an existing product. A freebie sounds like the perfect way to increase the ROI of a marketing campaign, right? Well, it just might be a big mistake – especially if it’s a new product or service!
According to “The Journal of Consumer Research,” people view the worth of a free item that’s packaged with an existing product as exactly the price you’re asking for it – nothing! They not only figure out you’re giving it away for free as a marketing gimmick – but that it must not be worth anything or you’d be asking for money.
The only exception? When you’re offering for free an existing product or service they’re already familiar with. Because they already know – and presumably trust – the freebie, consumers are much more likely to see it as a deal.
What does that mean for your marketing? Well, maybe you should just turn conventional wisdom on its head. Instead of offering the new product or service for nothing, maybe you do charge for it – but bundle an existing product or service with it for free. That way, it looks like the new product has value – and the customer, client or patient is also excited by getting something they already know and trust for free.
Another study by the same publication zeroes in on what they call “Opportunity Costs.” To use their example, that means if you’re out for dinner and you spend $10 extra on an appetizer, that’s $10 less you have to spend on wine, dessert – or even ten new songs on iTunes! In other words, by choosing to spend money on one thing – it eliminates your option to spend that money on something else!
Calling attention to “Opportunity Costs” can help improve your ROI marketing as well – because most people don’t think that way when they buy something. IKEA, the furniture franchise, used the idea cleverly in an ad showing an expensive cabinet containing one pair of shoes – contrasted with a cheap IKEA cabinet overflowing with shoes. By making explicit the idea that you can buy more of what you want by purchasing affordable IKEA furniture, they gave consumers a real incentive to shop there.
If you’re offering a discounted service, you can do the same thing as IKEA. For example, if you’re a dentist offering a deal on teeth whitening, your marketing could say, “You can buy this, this and THIS with what you’ll save on getting a brighter smile this month!” By showing in real terms what the money they can save will actually mean, you make it more real – and more attractive – to your customer base.
Everyone’s business is about money – so it makes sense that price is a vital part of your operation. Research like this is invaluable to helping us all to going beyond “business as usual” to communicate better with consumers.
Find out more about ways to increase your ROI at http://www.yourroiguy.com.