{"id":2402,"date":"2014-09-23T09:25:21","date_gmt":"2014-09-23T16:25:21","guid":{"rendered":"http:\/\/lm.sactoweb.com\/?p=2402"},"modified":"2014-09-23T15:54:51","modified_gmt":"2014-09-23T22:54:51","slug":"bargain-rip-point-of-reference","status":"publish","type":"post","link":"https:\/\/ligonmedia.com\/bargain-rip-point-of-reference\/","title":{"rendered":"BARGAIN OR RIP OFF? POINT OF REFERENCE DICTATES WHICH."},"content":{"rendered":"

W<\/span>hen I was in college,\u00a0I\u00a0bought my ties at Macy’s for about $30 per tie.\u00a0\u00a0It’s where my other tie-wearing friends bought theirs.\u00a0 One day I discovered\u00a0Marshall’s and was looking at designer ties alongside an elderly couple.\u00a0\u00a0I remember the man exclaiming to his wife: “I can’t believe these ties cost $10.”\u00a0 I was thinking the same thing.\u00a0\u00a0We were on the same page- except\u00a0he was complaining<\/em> that the ties were 10 bucks, while I was praising<\/em> my good fortune.\u00a0 How come we looked at the exact same ties and one of us thought we were being ripped off, while the other was thrilled at the great bargain?\u00a0 It\u00a0was because of our\u00a0“point of reference.”\u00a0 In my mind ties cost $30; the elderly man thought ties shouldn’t cost more than $3.\u00a0 Neither of us were wrong, it’s just our life experiences were different. (just as there are people reading this who wouldn’t be caught dead in a $30 tie).<\/p>\n

Customer Expectations<\/h2>\n

These experiences often\u00a0dictate what we see as a\u00a0good value.\u00a0 When I was a kid candy bars cost no more than 35 cents.\u00a0 Today, they’re about a buck.\u00a0 But since in my mind they should only be 35 cents, I haven’t bought a candy bar in years.\u00a0 Not because I’m cheap or because I don’t like candy bars, but because I always think I’m being ripped off.\u00a0 My point of reference is based on when I used to buy lots of candy bars, and no matter how much evidence I see to the contrary, psychologically, candy bars are 35 cents. Period. (or they’re handed out for free on Halloween).<\/p>\n

So why’s this important?\u00a0 Because expectations can drive customer behavior.\u00a0 What if you expected to pay $30 for a tie, and you saw the same tie for $10, would you not buy it?\u00a0 What if you never actually saw the tie for $30, but you saw that the list price was $30, but it was priced at only\u00a0$10.\u00a0 You’d probably still buy it, because it’s hard to pass up on a bargain.\u00a0\u00a0Visit the online store Amazon sometime and look at the list price.\u00a0 It’s often times far higher than the actual price.\u00a0 They are setting a point of reference\u00a0to show you what a great deal you are getting.\u00a0 Infomercials do this all the time- “Order today and you won’t pay the expected $100, nor $90, nor $80, not even $60; if you order today get it for the low, low price of $49.99- But WAIT!, there’s more, we’ll throw in an extra …”\u00a0 They are setting the reference point for the product\u00a0at $100, so when they offer you two of them for $49.99 with expedited shipping, that’s a phenomenal deal. Is the product worth $100? Probably not.\u00a0 Has it ever sold for $100?\u00a0 Probably not.\u00a0 But psychologically, you’re getting a great deal, so you are more apt to buy it. I have\u00a0a blender\u00a0I bought on HSN not too long ago because it replaced 5 of my appliances.\u00a0 I couldn’t believe my incredible fortune.\u00a0 HSN set the point of reference and I bought into it (and now I have a cheap, crappy blender … and 6 appliances).<\/p>\n

Creating Value<\/h2>\n

Now let’s look at it this way.\u00a0 You are a business owner and you want to increase sales (or create sales).\u00a0 You need to create value for your customer, while creating a point of reference.\u00a0 Don’t just discount something and call it a day.\u00a0 Give the discount meaning to your customer.\u00a0 Using the tie example above.\u00a0 Let’s say the tie originally cost $30 and you were already discounting it to $15, then you decided to lower the price to $10.\u00a0 If your sign said “was\u00a0$15, now $10”.\u00a0 That’s not quite the same bargain as the $30 tie for $10, now is it?\u00a0 Even though it’s the exact same tie selling at the exact same low price<\/em>.<\/p>\n

Customers are conditioned to look for a value, so companies need to market their products showing a value.\u00a0 Does value always mean money? No.\u00a0Sometimes it’s about ease of use (the blender replaced 5 appliances);\u00a0sometimes it’s about ego (the luxury sedan has Corinthian leather); sometimes it’s about necessity (eat your spinach and grow strong like Popeye); and sometimes it is about money.\u00a0 So set your niche, define it, and explain to your customers why that niche is important to them.\u00a0 Create a point of reference for them that your competitors cannot live up to.\u00a0 “We are the best company because we are the biggest.”\u00a0 “Our cars get\u00a0a whopping\u00a0estimated 50\u00a0MPG.”\u00a0 “With our internet services,\u00a0everyone of your family members can stream a movie at the same time;\u00a0with enough extra bandwidth for your dog to update his Facebook status.”<\/p>\n

But there’s a trap that some businesses often fall into.\u00a0 And that is so frequently discounting their product that customers come to expect it, rather than being persuaded by it (this is different than over valuing it and then selling it at its normal price as though it were discounted).\u00a0 When this happens businesses find it difficult to sell products at their normal price.\u00a0 Over the years, I’ve worked with a lot of restaurants.\u00a0 I’ve rarely ever suggested couponing (there are exceptions).\u00a0 The reason is simple- customers’ point of reference.\u00a0\u00a0 How many places do you know that have become a “coupon only” place?\u00a0 Pizza?\u00a0 Car wash?\u00a0 Dry cleaner?\u00a0 Customers may come to expect a discount, or else they won’t frequent the business.\u00a0 It doesn’t mean they’re cheap, it means the business has done a bad job of creating\u00a0a profitable point of reference.\u00a0 I always suggest trying another way of enticing customers into your business other than discounting your product constantly at a\u00a0loss.\u00a0(unless you’re listing a suggested retail price and you are regularly lower than that, in which case you are showing a good value).<\/p>\n

Savvy marketers understand point of reference.\u00a0 They understand the value\u00a0of putting value on their products.\u00a0 So you need to become a savvy marketer … or hire one<\/a>.<\/p>\n

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Contact Us<\/a><\/p>\n

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If you like, share. If you don\u2019t like, don\u2019t share. And if you\u2019re indifferent, then share or don\u2019t share, whatever.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

hen I was in college,\u00a0I\u00a0bought my ties at Macy’s for about $30 per tie.\u00a0\u00a0It’s where my other tie-wearing friends bought theirs.\u00a0 One day I discovered\u00a0Marshall’s and was looking at designer ties alongside an elderly couple.\u00a0\u00a0I remember the man exclaiming to his wife: “I can’t believe these ties cost $10.”\u00a0 I was thinking the same thing.\u00a0\u00a0We […]<\/p>\n","protected":false},"author":2,"featured_media":2464,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"off","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[4],"tags":[],"yoast_head":"\nBARGAIN OR RIP OFF? POINT OF REFERENCE DICTATES WHICH. | Ligon Media<\/title>\n<meta name=\"description\" content=\"Customers make decisions based on their point of reference. 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