Price Perception: Understanding Your Buyer for Sales Success

It’s always interesting how people perceive prices – why £200 to attend an event will be expensive to some and cheap to others.

There are lots of elements which influence this perception and, as small business owners, we need to understand how others perceive the value in our offering when we set our prices.

Why is Price Perception Important?

Price perception directly impacts our buying decisions and therefore any business success.

What Impact Does Price Perception Have on Buying Decisions?

Putting it simply, your buyer needs to believe your product or service is worth the price you have put on it. Sometimes however, particularly when selling services, this can be difficult to demonstrate.

The impact of price perception is particularly high in competitive markets; where consumers have a lot of choice they’ll be more diligent about finding the most fairly priced option. Understanding your market and your customers is important in understanding the price sensitivity of your offering – and therefore the importance of price perception.

There are other factors which will influence your customers decision making, including:

• Their financial situation
• Previous experience with buying this product (or products of this type)
• Their knowledge of the market and competitor pricing.

What Factors Influence Your Customers Perception of Price?

So, what do you need to understand about buyer behaviour and price perception within your business?

Perceived Quality

To determine the value of your product, or service, your consumer will take a view on its quality. Quality might be measured by any set of attributes – effectiveness, ease of use, reliability – you need to know, therefore, the value your customers put onto these things.

It’s generally accepted that price and quality are related, so customers expect more expensive products or services are better quality. If this is found not to be the case then consumers will lose trust in you.

Price Comparison

Your customer’s idea of prices within your market will impact their perception of your pricing. Where your pricing is significantly higher or lower than the norm, people will wonder why. If higher prices can be marketed as signs of quality or status that might be desirable; on the contrary, low prices will work best when shown to be great value for money rather than low quality products.

Branding and Packaging

How you present your product (and this is also true of services) to the world, will impact how your consumer perceives what you do and will impact their perception of you, your value and your pricing. Understanding how you want your offering to be perceived, you should be able to demonstrate those factors within your branding.

Reputation

Price perception for small businesses is also strongly affected by how the brand or provider themselves are perceived. If you are believed to be fair and trustworthy as a business, your prices will be considered more positively.

Customer Experience

Great service can win over a consumer who has a bad experience with a product. Similarly, consumers may pay slightly more to shop in a more desirable shopping environment.

How Can You Improve Your Price Perception?

Considering your experience of buyer behaviour will help you understand your customer’s price perception and how that fits in with your pricing strategy.

What kind of perception should your buyers have of your product or service? Do you want to be seen as “Value for money”? “Quality”? “A bargain”? “Accessible”? Or “Exclusive”?

Until you know how you want others to perceive your goods and services, you won’t know how to change that presentation.

When it comes to determining the price for your products and services, there will be many elements you need to consider – including your own costs, the market and how much your customers will be willing to pay. But it’s important to recognise that lower prices are not always better – who your customers are and how they perceive your price are key to ensuring you can ask for the price you want.

Consumer Research

So, recognising how you want your product to be perceived, you’ll then need to make sure you’re reaching out to the right people. When promoting an exclusive, high-value brand, you need to be talking to people who can afford it and exploring what will encourage them to buy – the status, exclusivity, or superior quality.

If you are hoping to sell large quantities at a low cost, you’ll need to understand who else is in the market and what your consumers need to see to choose you above the competition.

Communicating Your Value

What will make you stand out?

Whatever you are selling you are unlikely to be the only option in the market, use your understanding of your ideal customer to communicate the thing that makes you different, the thing those buyers will value. Some of this communication will happen through branding and packaging, some through your service level and customer experience. Ensure your marketing messages reflect those values your customers are looking for.

For Your Small Business Success

Price perception is just part of your small business pricing strategy, but it’s an important element to consider. Whether you feel your service or product should be priced at the higher or lower end of the market you sit in, you’ll need to understand what your customer values about your product and how they perceive your price.

We know that these decisions can be complicated. At Your Business Matters, our members benefit from the support of the professionals and experts in their groups. Our meetings also include an Adding Value section at which we explore subjects such as pricing.

If you feel you would benefit from a team to support your small business success – come along to one of our meetings, we’d love to see you there.