We’ve all hit the wall, yeah?!
It is okay!
I tell everyone that if they need someone to talk with, I’m here for them. I think Dr. Fauci said we are at the corner, but we haven’t rounded it yet. And, I said earlier in the week that we see the light at the end of the tunnel, but we are still in the tunnel.
I watched Pearl Jam’s 2010 show in London since they’ve postponed this year’s London show again.
A professional recording is up on their YouTube page until Monday night:
What do I miss about live shows? “Corduroy” live. (Its the 3rd or 4th song, depending on how you are counting them.)
Also, I miss London.
Just to put you in place…
I can’t wait to get to the Tottenham Hotspur Stadium, Hyde Park, BrewDog in SoHo, and about 7 or 8 other bars, restaurants, bookshops, and places.
Here’s one of my favorite pictures because it always reminds me of just walking around London and happening on a cool place.
Back to business, I was on TV this week in NYC talking about pricing.
I often say the thing that has given me the most notoriety around the world is the line, “Discounts are for dummies!”
It holds true and I actually found out that a bunch of people follow me on Twitter specifically because their college professors use my writing on discounts to talk about discounts.
But the topic that folks reach out to me about the most lately is pricing. And, market research.
But I don’t want to get on a rant about behaviors, data, and not being everything to everyone this morning…so we will go with the less controversial topic of pricing.
I’ve been working on a primer on pricing for the last few weeks and got stuck…we are in a pandemic and all. And, I see I’m not the only person that’s hit a wall. So I’ll finish it soon enough.
Your questions about pricing typically fall into one of three buckets and I’ll hit on them this morning:
- Setting the right price
- The importance of price
Let’s start with the importance of price:
Pricing is marketing’s moment of truth. It is the most important moment in your marketing efforts because it is the point where you capture some of the value you’ve been creating for your customers and prospects.
The bigger point in the importance of price is that the perception of value, adds or subtracts to your brand. And, the price button is the most valuable button you can push because when you do it right for every 1% of price you increase, you generate 10-12% more profit.
The important lesson is that you have to work to get your price right.
The second thing, setting the right price.
How do you do such a thing?
Pricing is like all marketing activities, you don’t know what you know until you do some research.
In the case of pricing, you can do your research in a number of different ways, not limited to:
- Conjoint studies
- Real time experimentation
- The Van Westendorp survey
The big thing here is that you don’t allow pricing to become guess work.
Right now we are in the middle of a pandemic, most of the research we are going to do is going to have limited value.
The conditions we are dealing with aren’t natural, so the responses we see aren’t going to be natural.
The key thing is to make sure you are studying your market and researching pricing. Because pricing is art and science.
There isn’t a formula that anyone has that will get you the perfect price every time, even dynamic pricing.
You have to be willing to experiment, do research, and mix humans with technology to get the best possible price. But no matter what happens, pricing is always a bit imperfect.
The original article I wrote years ago about discounts has been translated into a lot of languages:
That’s just that people sent me the translations for!
I mention that just because it makes me laugh.
The important thing is that discounts are destructive.
The fastest way to destroy your brand’s equity is by discounting.
My colleague, Martin Lindstrom, wrote a book that studied neuromarketing and he found that when you discount, you open the mental door in your customer’s mind that you are a discount brand for 7 years, minimum. Meaning that for most of a decade folks are looking for a deal from you.
In my research, I’ve found that for every 1% you discount, you lose 40% of your profit.
I can probably preach the reasons that you shouldn’t discount all day long and people will still do things like tell me, “I’ll just do it this once.”
It is the big red button that people are far too comfortable hitting.
So just don’t hit it.
Once you start, you never stop.
Let’s recap this morning about my basics of pricing:
- Pricing is marketing’s moment of truth.
- For every 1% you increase your prices, you can collect 10-12% in additional profit.
- Setting the right price is part art and part science. But it is imperfect.
- Setting the right price also requires research. And, there is no perfect formula.
- Don’t discount! I mean, seriously! Don’t do it! You won’t stop and you’ll eat away at your profits, your brand, and, eventually, your sales.
See you next week!
BTW, Happy Easter and Happy Passover if you are celebrating!
Just in general, be safe and be well.