In a price competitive mature market the logic behind willful overpricing seems counterintuitive. At the same time, I can well remember that our primary pricing strategy at the funeral home I managed was to be $100 higher than anyone else. This “strategy” is one I have often encountered as well as its evil twin: being $100 lower than anyone else.
According to research, customers don’t automatically dismiss ...view middle of the document...
That closer look could (and should) reveal information they care about that works in your favor. (it bears repeating here that the point of all these strategies is to get consumers focused on value over price) Some of the things I can think of are quality (“your mother never leaves our care”) or reputation, or an unconditional guarantee, etc.
In one experiment products were priced at an 80% premium. Subjects were able to recall twice as much product information than the comparison products; this enabled them to cite more arguments in favor of buying the products. “The overpricing also evoked a more passionate response to the products which led to a willingness to pay much more than was originally intended. By contrast, people who were exposed to a premium close to their expectations (10%) or one that was outlandishly high (190%) simply acted according to their pretested inclination…” THIS IS IMPORTANT because most funeral homes in price competitive markets are only marginally higher than the lower priced firms. This research would tell us they are not enough higher to provoke the necessary attention to value.