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The article below is the sixth of seven articles by infomarketing guru Marcia Yudkin that give you a quick, well-informed introduction to the key principles of creating and selling information.  After reading this piece, click on "NEXT" to read the next article in the series.  START AT THE BEGINNING.

Four Paradoxes of Pricing

by Marcia Yudkin

Profitable pricing is a psychological affair, not only in its relationship to the value perceived by the customer but also in the tugging many marketers feel toward what they perceive as safe ways of setting prices. Yet conventional ideas about pricing often leave huge amounts of money on the table because they overlook some unintuitive principles about perceived value. 

Here are four paradoxes of pricing that I've learned from mentoring marketers and from keeping my eyes and ears open, that can help sellers of products and services earn more for the same amount of work.

1. Complaints, Shcomplaints!

When customers are yelling "Highway robbery!" asking "Why are you charging so much?" or trying to drive a bargain, it's natural to wonder if prices need to come down. That conclusion doesn't follow, however. If people are whining while buying, you should just ignore it.

People from some parts of the world, from certain cultures and regions simply regard this as normal behavior. They expect you to play the game they're playing or to hold firm. If you cave in, they're disappointed.

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By raising prices instead of lowering them in response to complaints, you often attract customers who don't try to dicker, don't demand special treatment and respect you more as a vendor. 

2. Lower is Not Necessarily More Appealing.

When business slows down or hasn't ever speeded up yet, the reflex of many is to price low. However, low prices undercut the perception of quality and can therefore have a disastrous effect on sales. 

Some years ago, a speech therapist venturing into corporate seminars asked me to critique a flyer describing her offerings. The main flaw I saw in it was her fee - just $700 for an all-day seminar when the going rate in her metropolitan area was $1,500 - $2,000. "But I have a full-time job and don't need to earn much while I'm gaining experience," she said. 

At $700 a day, however, she wasn't credible. She ran the risk of potential clients dismissing her because she wasn't priced like a professional and therefore couldn't be any good. Only half-convinced, she substituted $1,500 for $700 on her flyer and was hired for $1,500 during her first foray into the marketplace. 

3. Upgrading the Presentation Can Be a Mistake.

One of the experts who appeared as a featured guest in a monthly teleclass series I run appreciated having the teleclass CD as a product to sell, but urged me to make it look nicer and have it spruced up with voiceovers and music. "But then I couldn't charge $49 for it," I responded. 

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She found this baffling, but if you look at information products, you'll find that the higher the prices, the less they fit the mold of perfect-bound, bookstore-style books and jewel-cased, record-store CDs. On-the-fly production methods like three-ring binders and drab, homemade labels for CDs signal exclusivity and timeliness, while mass-market gloss, color and polish imply ordinary fare. 

It's difficult to charge more than $29.95 for a paperback book that looks like it belongs in a bookstore, while the very same content duplicated at the local copy shop can fetch $295 or more. Low-grade production puts the focus on the value of the information, heading off comparisons with familiar commodities.

4. It Doesn't Sell? Keep It on the Menu.

A photographer friend of mine learned at a conference that customers tend to buy the most of the next to most expensive option they're presented with. She added a larger frame to the display on her studio wall, and her earnings from enlargements rose. Whether or not anyone actually bought the largest size was immaterial; its presence influenced buyers to spend more.

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The same principle was at work when Norma's, the restaurant at Le Parker Meridien Hotel in New York City, added a $1,000 omelet, containing sevruga caviar and lobster. More than 200 articles have spotlighted this extravagant menu offering, bringing the restaurant loads of attention, providing diners with a fun topic of conversation and shining a halo of quality across the rest of the chef's offerings. Although not one patron has ordered the dish, they're smart to keep it on the menu.

When pricing, don't give in to fears and conventionality. Be bold, and profit from these paradoxes of perceived value.

Copyright 2005 Marcia Yudkin.  All rights reserved.  NEXT ARTICLE.

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