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The role of price in marketing
In a class, I took on marketing, the teacher opined that a business shouldn’t compete on price, because what people focused on wasn’t the price, but other factors including the actual product/service, customer sensitivity, customer convenience, service, place, and promotion. It was an interesting point that he made, but I found that I didn’t agree with him in regards to price.
I think that people value price more than is realized. For example, a friend recently told me how an acquaintance of his stopped giving away free consultations whenever he did a presentation. Instead he offer an initial meeting for $29 and on top of that mentioned that anyone who signed up could get their money, plus an additional $29 if they didn’t have an implementable action by the session. He ended up getting 10 people to sign up, when none had signed up for his free consultation. The reason was simple. He’d assigned a price value to his initial meeting, which raised the value of it to the people listening. He even offered a guarantee and a chance to get double the money spent back. Clearly choosing to focus on price was a good strategy for him.
Beyond that however, there’s the simple fact that people do focus on price. People wouldn’t ask how much you cost if there wasn’t a concern about price. Price may not matter after you sell a service or product, provided you satisfy the customer, but it definitely matters before the sale is concluded. When you shop at a grocery store, for example, you’ll likely check prices and use that as one of the factors for buying what you choose to buy. Why should this be any different for any other transaction?
You can’t compete on price alone. The true test for the business is to actually produce the level of value that will justify the price being paid for your service or product. If you can’t produce a level of value that justifies your price people won’t buy from you and will eventually turn on you (and rightfully so). But people pay attention to price and use that to evaluate the value of your services and determine whether they can afford you, or even decide if your services have value. As such competing via price can be a valuable marketing tactic, if its used in the right way and at the right time.