How you answer this makes me judge you as an amateur or a pro.
I come from a long marketing background, and absolutely will make fun of you in private. I guarantee it!
What happens when you DECREASE PRICE?
Here’s what price decreases communicate:
- Your product isn’t worth a higher price.
- Your product isn’t as good as other products at the higher price.
- You might decrease price again later.
- You really want sales/users.
Quite simply, decreasing your price communicates a lower value. And you know what really sucks? The value decrease doesn’t affect only your product, but also your brand! You are cheapening your brand when you drop prices.
But if you insist, there are a few moments you can drop prices without hurting your brand:
- Read about them here: Never Promote Discounts! (PRICING STRATEGY)
So why do businesses keep offering discounts? (I’ll judge each reason below.)
REASON #1 – they think price is the primary sales obstacle
- Unless you’re 100% sure this is true, you suffer a lot if you end up being wrong.
- Price discounting is a CLOSING tactic. You use it only when you have the buyer in the store and want to nudge them for the sale. They need to see that your price dropped just right then and there for them and may be gone forever.
- But what if you realized buyers simply want “a good deal”? You could offer a good deal (increase value) in many ways without decreasing pricing. Offer a free t-shirt/cup/pen with every purchase. Or extra 3 months of support. Etc. Just throw other things to sweeten the deal. Then you don’t decrease your product/brand value too much.
REASON #2 – they want to be seen during sales season
- This is a valid reason. If all your competitors are prominently displayed…say, during Black Friday…it might be good for your brand to be listed beside them.
- But now you have to be careful how you position yourself. Are your deals exactly the same or not? And what do your deals say about your brand in comparison to them? (Choose wisely.)
REASON #3 – they want to stress urgency.
- A limited time discount says “buy now or lose this savings forever!”
- If you think carefully, you’re not selling on the price discount here. You’re selling fear on the price increase afterwards!
- So then why not just sell a price increase in the first place? Don’t even discount, just so you can raise it again! Instead…tell people months ahead that your prices are going up. Done!
What happens when you increase price?
Here’s what price increases communicate:
- Your brand and product value is increasing.
- You are growing.
- You may be better than competitors of lower price.
- You offer more.
- You have other customers paying that price.
Of course, none of these may be true. But that’s what consumers are conditioned to believe about higher prices. So ultimately, I think you should strategize your prices around INCREASES, and never DECREASES.