The price your company is going to present to the market will dictate not only its operational performance but also how the company is perceived in the market and how they contribute to society.
Price is the most sensitive variable and the hardest to perfectly determine, it’s also the one that’s more prone to fluctuations and the 2nd biggest determinant, after product, in purchase intent.
Price is connected with how a certain audience (a group of people with similar traits) values a certain good or service, in order to successfully increase the price, our target audience needs to acknowledge and accept that our goods are worth a certain cost of opportunity.
In this article, we are going to cover how you can increase the price of goods sold. If you’re looking for a complete pricing strategy guide, In our Practical guide to Pricing Strategy, we cover how you can math your pricing strategy with your company reality.
Table of Content:
- Introduction.
- The Natural Behaviour of Price.
- Methods to Increase Price.
- Closing Statement.
The Natural Behaviour of Price.
In a Free Market economy, the global price of goods and services always decreases over the years, allowing consumers to buy more and higher quality goods with their paychecks.
This might come as a shock for many as they see the prices of consumer goods and all other goods increasing YoY in the supermarket, in the commodity market, and all other markets.
In 2019 with 10USD you can buy the same TV that in the 2000s would cost you 300USD (The History of Electronics – Audioden.com). The same analogy goes for the big majority of consumer goods. Competition and profit-seeking drive companies to deliver higher value at a lower cost, by doing so, they produce better quality goods that are more and more affordable.
A Capitalist society and Free Market approach by governments, allow selfish profit-seeking individuals and entities that by competing with each other greatly benefit society and the environment as a side product.
Why doesn’t it apply to all goods? Like housing, that YoY is more expensive?
Housing and real estate are non-replicable goods (NRG). This means that there’s a limited amount of land and you can’t create more. On housing, the production takes longer, needs to be adapted to local conditions and the good itself is more complex and very often affected by all sorts of regulations that castrate builders and developers from implementing cost-saving methods and materials, but even with harmful government intervention developers are starting to use modular configurations and 3D printing to be more competitive.
We have as certain that prices tend to fall, therefore, for companies to increase the price and therefore, profit, might seem like an impossible mission, but it’s not. Innovation and Marketing Operations can easily help you raise the price of goods sold and increase your profit.
Innovation and Price.
Price, as seen in the A Practical Guide to Pricing Strategy, is set up by the value judgments of the consumers in a given economy.
The reason why prices of TVs fall in the example given above is often that a new (similar) good is offered in the economy that is more valued by the members of that society, if the manufacturer of the first good wants to sell its original good it must lower the price to match the value judgments of consumers.
How to Increase Value Perception?
Consumers often purchase goods and services to address 2 different sorts of needs;
- Relieve Pain;
- Get Pleasure;
Design and conceive a good or service that more firmly attends to one or both this needs.
By doing so, the more value is going to be perceived by the audience, and they will be willing to pay a higher price for this good or service or consume more quantity at the current price level, due to more people purchasing the good or the quantity per person increases.
How to Innovate?
Innovation comes in many shapes and sizes and can be achieved in every single field.
An example can be as simples as Making a Chocolate Cake that tastes the same as a standard cake but has much fewer calories. This will attract the chocolate cake eating audience that wants low calory goods and is willing to pay a premium for such a product.
Innovation consists of making better products or making the same products in a more efficient manner (using fewer resources). Innovation grants the developer a temporary monopoly, and therefore the ability to charge a premium. This effect doesn’t last as other market operators quickly catchup and release updates to their own products, but while you have an innovative product you’re the exclusive seller of this good and therefore have more control over the price.
Marketing Operations and Price.
Apart from innovation, the only way to raise the price of goods sold is through marketing operations. such as promotion and placement with a bigger focus on promotion.
The world is made of narratives. Stories and messages travel from person to person. Disseminating an idea starts with convincing a group of individuals, they will happily spread the message if it resonates with them to their peers. A Narrative that goes along their subconscious beliefs and/or lifts them oftens reaches more people and is disseminated for a longer time.
Convey a scenario that appeals to your audience where your product makes an important contribution to the success of that story and success is guaranted.
A successful example is GoPro Cameras for sports enthusiasts and the vlog industry. With GoPro, being a hero is just a side product.
GoPro not only innovates improving YoY their products but also creates a strong narrative of success and achievement, displaying how amazing all the people that use their camera look and how great they can display and share it with their friends and audiences. For customers owning and using GoPro Hero camera becomes much more valuable, and they are willing to pay a premium.
GoPro Hero9 Presentation. Video originally posted on Youtube.
Marketing Promotion Operations.
In this section, we are going to cover some practical Promotion Operations that you can put in place to increase the price of goods sold.
Some Marketing Promotion Operations are;
- Storytelling;
- Cost Justification;
- Niche Targeting;
- Influencer Operations;
- …
Each of these marketing promotion operations to be enacted efficiently will occupy a full marketing agency. Don’t treat them lightly as your brand reputation and commercial success depend on them.
We will cover each of these operations in detail in individual articles that you will be able to click and be redirected to them in the near future.
Storytelling.
Storytelling consists of literally telling a story, an interesting fact, and/or an event that happens and has something meaningful or interesting. As described above, it’s one of the most powerful drivers.
Cost Justification.
This simply consists of informing the audience of the quality of your product. For instance that uses Alcantara Leather, Titanium, Gold, Diamonds, and so on. By making it aware to your consumer and because they have an idea of the value of these goods in the market, they will be willing to pay a premium.
Niche Targeting.
Promoting and adapting your product for a specific niche that is highly engaged by your goods or services normally comes with the acceptance of a higher price tag.
Why is that? Because they feel valued by the company and appreciated that a certain good was made especially for “them”. Even if reality it was not, what matters is the communication and promotion you make.
Influencer Operations.
Having a network of individuals that are capable of influencing and have a voice in a certain audience aligned with message and furthering the reach and reliability of your products can make huge results and surely increase your price.
Marketing Placement Operations.
Sometimes increasing the price of goods sold is as easy as presenting and displaying them in a different place.
Some Marketing Placement Operations;
- Retail Type
- Physical Location
- …
Retail Type.
Instead of selling your goods on supermarkets, sell them in boutique shops. The type of customer attracted is different and normally the boutique consumers are ready to pay a premium as they associate the goods to higher quality.
Sales quantity might not even get affected if you are able to distribute your product in enough speciality retailers. By exiting mass market you’re already giving a clear positioning to the market that you’re good is not easily available, adding this extra effort of purchase, if your product reflects quality and consumers see value in it they will surely pay the premium.
Physical Location.
Another Placement strategy is on opening stores in neighbourhoods that are normally frequented by more selected, wealthy audiences. This sort of audience is normally less price-sensitive, allowing you to easily sell your products with a higher price tag.
Closing Statement.
There’s no one simple solution to increase the price of your products, ideally, several marketing operations and innovation are in place to successfully increase the value perception of your audience and therefore allow you to sell your products at a higher price.
