Soda sells for $0.67 at the grocery store or $8 at an amusement park. Steaks are priced from $15 at a casual restaurant to around $35 at a fine dining establishment. A cup of coffee ranges from one dollar to more than $5 depending on where you stop for your morning Joe. The vast difference in these prices is a result of brand positioning and the value that the brand represents in the marketplace.
If you want to increase prices in your business and make more of a margin on each sale, analyze your brand to see how you can reposition it to be more valuable in the minds of your current and potential customers. Do this by boosting actual value or perceived
Increasing actual value likely will cost your business more money but will enable you to charge more too if your customers care about the improvements. For example, in the auto business, a sunroof, leather seats and chrome wheels are considered upgrades. It actually
costs manufacturers more to install sunroofs than solid roofs; more to use leather rather than cloth and more to make chrome instead of aluminum wheels. Since car buyers think these features make a car more comfortable, sporty, luxurious, durable or flashy, these add-ons increase the value of the car and customers will pay more for them.
In your business you are adding actual value anytime you are paying more on a continuous basis for the cost of materials or labor to improve the customer’s view and desire for your product or service. In the case of the cars, the sunroof, leather and chrome wheels must be added or available every time in order to offer the increased value and capture the added profits that result. Using premium or preferred materials or skill sets rather than just “good” or “good enough” materials and labor will allow you to have higher price points if your add-ons are desirable to your customers.
Increases in perceived value are generally more profitable than increases in actual value because you do not necessarily have to spend money ongoing—or any money at all—to achieve increases in perceived value but you can still charge more for the added value.
Martin Reimann, a psychologist at the University of Southern California, found in his
research that consumers will pay higher prices for attractively packaged products. Making a product package more attractive may not cost more — it can be as simple as using a brighter or darker brand color, a more commanding or refined font or a different shape for
a bottle. These changes can make a product appear richer or of higher quality, yet the inside product may be the same as a lower priced competitor. It’s all about the perception.
Associations, affiliations and trust also boost perceived value. For example, two identical pots may sell for vastly different prices if one has Rachael Ray’s name attached to it and the other does not. Why: Because Rachael Ray’s brand is associated with fun an competence in the kitchen. If a product is worn, used or favored by celebrities then it suddenly achieves higher perceived value.
Professional certifications work the same way. A Certified Public Accountant (CPA) may be able to charge a premium for bookkeeping and accounting services than an accountant with a degree but no certification.
Protect, build and analyze your brand to figure out ways to boost value for your customers. Whether it is actual or perceived the added buzz and sales can help you reach your annual profit goals faster.
Felicia Joy is a nationally recognized entrepreneur who created $50 million in value for the various organizations and companies she served in corporate America before launching her business enterprise. She is the author of Hybrid Entrepreneurship: How the Middle Class Can Beat the Slow Economy, Earn Extra Income and Reclaim the American Dream and a regular contributor on CNN. Follow her @feliciajoy.