It is said “Price discounts everything”, all marketing strategies and plans are aimed at the pricing decision of the product. The core purpose of every business is to create and maintain profit by increasing sales. Some sales are profitable than others, depending on factors like cost of marketing, advertisement, proper management, and other overhead expenses. Products with less overhead costs to sell bring in a better proportion of their sale price, augmenting more profit for the company. Mostly pricing policy is aimed to create demand for the product or service, but not on the consumption. Pricing policies must also encourage consumption of the product, and make them aware of its cost. The consumer should use the product, which increases the potentiality of repurchasing it.
Increase your bottom line
Higher consumption means the higher sales and increasing profit. To build a loyal base of customers, it is essential to ensure they use the product which they have purchased. Research has continuously shown that the extent of the use of the product, determines whether they will buy it in the future or not. If the product is used regularly or more frequently is more likely to buy it, than it is used occasionally. Suppose a person works out five days a week in a health club, is more expected to renew his membership than the person who works out once a week. The degree of the use of the product which they have paid for deciding if they will repeat the purchase.
In the software industry, the companies make more profit in selling the upgraded version then selling the original one. Once the consumer starts using the software and gets dependable on it, he will have to buy the updated version or else have switched to other platforms. If the consumer has never used the software he purchased, the company misses the opportunity of selling the upgraded version to him. Consumption of the product is essential for the survival of the company.
Two ways of generating revenue is another excellent option for the growth of the business. Selling tickets in the movie, theatre, sports stadium and concert halls is the primary source of revenue. Car parking, foods, and beverages, souvenir selling is the second way of generating revenue which is more profitable. It is estimated a family of our visiting a baseball game spends around $121.36 in the year 2000. Only half of the sum is spent on buying tickets and the other half on food and beverages like hot dogs, sandwiches, beer, soda, soft drinks, and baseball caps.
Cost drive consumption
If a consumer is aware of the cost of the product, he is more likely to consume it. They feel a compulsion to use the product otherwise a feeling of wasting of the money engulfs them. A psychologist of Ohio University Hal Arkes asked students to guess by the error they have bought $50 and $100 tickets for ski sports for the same weekend. In this situation, they have to choose one of the two and let the other ticket go waste. In addition, they were also informed the $50 ticket provides more un and adventure than the $100.Amazingly more than half of the students chose a $100 trip in spite of having less fun and frolic. For them the value of the money they spend way more than the enjoyment, you would get at the less costly ride. Price has a powerful effect on consumption; it should be carefully formulated
The Decoy effect influences the customers’ decision making while buying a product. When you present them two options that are reasonably priced, they will choose the product according to their personal taste and preference. But if there is the third option which has a higher price tag of the same product line, then the perception of all options changes significantly. The decoy effect is to change the view of the possibilities not to sell the product to the consumer. The third option is the “Decoy “alternative. While comparing the products against the decoy, which is unjustly high, they tend to be oblivious about the actual cost of the product. Most consumers opt for the expensive one than the two original options.
National Geography conducted an experiment to illustrate the decoy effect on consumers’ decision making while buying a product. At first, they presented two options; one small bucket of popcorn for $3, and a large bucket for $7.Most of the people opted for the smaller one due to their personal preference. The second group of consumers was offered three options; a small bucket of popcorns for $3, a medium bucket for $6.5 and a large one for $7.In this circumstance, most consumers bought the third one, the large one as they saw more value of popcorn just for $.05.The medium bucket acted as a decoy influencing consumers to buy the large bucket. The larger the difference between the decoy and other options, the more profound is the effect.
The steps you must follow to have the decoy effect
First, choose the product you want to sell the most. There must be three choices, in which one must be a decoy that influences the perception of the consumer. The price of the decoy must be close to the high-end version. The decoy product should be marginally better than the low-end product. The decoy effect can increase your revenue in a short period of time.
Packaging has an immense effect on the brand value of the product. It can be considered as a selling point. The colors, design, shape, text, eco-friendliness of the package affect consumer opinion about the product. Black and gold colors give a luxurious effect on the package. Expensive tech products should be packed in a sturdy and securely to emphasize on the quality and worthiness of the product. If your product is aimed at the eco-conscious audience, then the product should be packed in recycled material using colors like green and brown. It is the first contact the customer has with the product. Quality of the product must match with the price, brand and the promise it carries to deliver. The product must meet the consumer’s expectations.