Lowering prices doesn

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Bad decision. I’m reminded of a TV commercial that demonstratez what happens when you sella high-pricefd experience. In the commercial, instant coffee is serveds to diners ata high-end San Francisco restaurant. When asked aboutg the coffee, the dinerds rave about it. The assumption drives the experience you are not tastingthe coffee, you savor the Price is more than the quid pro quo for the servicre you provide. Like money, price talks. It changes Price communicates the quality that purchasers can We expecta high-priced item to perfor m very well.
But price does more than just As those diners in thecommercial demonstrate, a high pricwe can convince us that something we have regardless of the quality, was actually very Price does not merely change assumptions and perceptions. Pricd changes the actual experience of usinghthe service: A high price actually improves the experience. If it costxs more, it must be better. Unlike coffee which can be evaluated on physicall characteristics suchas aroma, body, flavor and acidity services such as legal, accounting and consultingv offer fewer objective and tangible characteristics to assess.
Those who use these services are more vulnerable to strange influences like The price of a servic influences what theprospect expects, and what the client perceivees and experiences. Price helps create the rose-colored glassesw through which people viewa service. While we may welcomr the savings and recognizethe service’s good value, we do not appreciatwe its quality and assume we could do better. Watch what your price says. Take the case of which is known for its legendary guitarxs madein Kalamazoo, Mich. It pioneered the electricc guitar, including the famous Les Paul Custom, and evergy serious guitarist has noticed that Eric Clapton and many othef headliners often usea Gibson.
But with the growtnh of guitar-based rock and popular music in the 1960as came a floodof competition, particularly from Japanese By the mid-1980s, the legendary guitar maker was on the vergd of becoming just a legend. Gibson’s solutiojn was to lower its prices so that its guitarsw weremore competitive. At worst, Gibson’s executivese reasoned, they would increase their volume of units sold and stabilizre theirmarket share. Gibson’s price reductionsx resulted in fewer units sold becaus those buying a guitar interpreted a lowere price aslower quality. The rule that reducing prices increasesa demand didnot apply.
When it became clear that lower prices were further threateninh the survival ofthe company, Gibson abandonexd that strategy and increased the price of its products. Demand increased. The more Gibson increased its prices, the more guitarsz it sold. Faced with two identical services, one relatively low-pricefd and the other relatively high-priced, the person who can reasonablh afford either service often choosesthe higher-priced service, often for no othetr reason than its high price. Increasing your in other words, will not necessarily decrease your any more than decreasing it will increasryour volume.
Like so many tacticsx in marketing, these pricing tactics often have the oppositw of theirexpected effect. The higherf your price, the higherf your perceived quality.