This article first appeared on September 28th, 2010.
I’m looking to set up a boutique jewellery operation and want to price my products at the more expensive end of the scale, but not sure if this is the right thing to do.
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How shall I decide how to price my products?
Pricing is one of the most important and subjective marketing decisions you’ll ever make. There is an old saying in marketing which is “It’s much easier to move the price up, than it is to cut the price down”.
The reason why? Your price is an extremely important communications point. As soon as consumers see the price of your product dropping then it’s communicating to people that you are having difficulty selling.
The price is going up it says ‘this product is in demand’, and others will therefore demand it too. So on this equation, set a price range and start your pricing at the lower of that range, moving it up if demand is strong.
However, the next question is where to set that range, and here the answer is the opposite, set it as high as possible. There is a psychological principle called ‘the price placebo’ – the higher the price the better people feel about the purchase.
It works particularly strongly with goods whose value is subjective – wine, jewellery, the arts. It’s a good way to create increased perceived value with your brand, and increase profitability.
So in short:
- Do some research and select a price range as high as you possibly dare for your product.
- Make your sales price as low as you possibly can within that range.