You Want Customers To Continue To Feel Good After The Purchase

There is some conventional wisdom that says that as long as you pass the price/value calculation at the point of sale, you’re in good shape.

But think about this: Let’s say we’re playing a word association game, and someone asks: “Nike or Adidas?” Your knee-jerk reaction might be “Nike is cooler.” And if you bought a pair of Nike Air Force 1s, you’d probably feel pretty good about getting a really in-style pair of shoes. And you might not pay much attention to the fact that you paid $165 for them. But suppose in a couple of days, you saw a friend with a pair of Adidas Stan Smiths that also look great — and you found out he paid $130 for them. Would you feel you got 27% more value for your purchase? Is the added “coolness” of the brand worth $35?

The price/value calculation at the point of sale matters. But that’s not the end of it.

The moment of reckoning may come later with the customer’s increasing awareness of comparable products at lower prices.

For the customer, there’s a difference between paying a “premium price for a premium product” and feeling you “overpaid for something you could have purchased for less.” Nobody likes to feel they’ve been overcharged. That can lead to backlash and turning against a previously-trusted company.

Too many retailers make the mistake of setting a price as high as “the market will bear.” But that is often based on a myopic view of buying behavior — focusing strictly on the customer’s state of mind at the point of sale vs. a little later on in the early days of wearing the product when a new kind of “comparison-shopping” sets in: “Is it still really worth what I paid?”

Here are a few questions to ask when setting or re-setting the price of a product:

• Where does this price fit vis a vie competitors’ comparable products?
• If higher than middle of the pack, what additional perceived value is conferred? Do a substantial number of customers say they view that added value as worth the premium in price?
• Aside from “brand,” if you were personally called upon to defend the true added value, could you do it? Seriously?
• What are the potential and likely countermoves from competitors, and how are customers likely to respond?
• If you were your own competitor, would you be willing to sacrifice some profitability to gain market share in the near-term?

Sure, you can always lower your price to match competitors’ responses to your overpricing goof. But the reputational damage done by charging too much in the first place may linger in customers’ minds. The smugness and confidence afforded by brand recognition, coupled with the pressure for profitability, can seduce a company into price-setting practices that may not be sustainable and which mobilize competitors against you, resulting in lasting damage to your brand.