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Name your price Pricing expert shares his secrets with AMA Dr. Paul Nesbitt is a social psychologist, the managing director of the Research Strategy Group in Toronto and, not incidentally, one of Canada's experts on pricing strategy.
On February 26, AMA and the Professional Marketing Research Society had Dr. Nesbitt share his insights at the Ottawa Congress Centre. He discussed the complexities of finding the right price, given demand, consumer
perceptions, competing prices and consumer price sensitivity. Every choice about pricing objectives implies certain trade-offs. A low price can encourage sales, but higher prices might suggest quality. A new
supermarket product, for example, might have a weak launch because of a high price, but might ultimately succeed if it is perceived as having greater quality. Nesbitt says that marketers must remember that the price
of something communicates messages to a consumer. They come to a product with certain price expectations, may equate price with quality, may equate their own purchasing power with status, will look for value and
fairness, and often evaluate themselves on their own skills as shoppers. Ultimately, "price is in the eye of the beholder." Price can be presented as a simple dollar amount, or it can be compared against
another price, or positioned in terms of quantity, or supplemented with an incentive (such as club points), for example. "A given or changed price will be interpreted against what is remembered as the base
price," says Nesbitt. Consumers will also evaluate price in relation to competing products, but this can happen in a variety of ways.
· In some cases, such as new pharmaceutical products, there may be no comparison. · In other cases, such as mortgages or newspapers, consumers will compare only indirectly, and then on products that are themselves
differentiated by more than price. · Sometimes, as in cable television, consumers may not even realize how much they are paying. · Often, however, consumers will be comparing competing and similar brands that sit
right next to each other on a shelf. · Marketers also need to remember that "competition" can be very broad. Someone comparing different brands of vodka may decide instead to buy beer. In each of these
examples, consumer price sensitivity will vary according to the situation. For marketers, price is one of the classic four P's. The others P's (product, place and promotion) get consumers to the precipice of buying
the product. But price takes customers over the edge.
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