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A Price-Value Matrix - A Cool Tool for Finding Your Just Right Pricing Strategy

Written by: Molly Gordon

Article Overview: Is the price right? Goldilocks tried three chairs, three bowls of porridge, and three beds before finding the ones that were "just right." In much the same way, your working toward "just right" prices and marketing methods will definitely pay off, as it did for me.

A Price-Value Matrix - A Cool Tool for Finding Your Just Right Pricing Strategy

While developing your pricing strategy, it is important to remember that there is an implicit relationship between price and value. We expect to pay more for gourmet food than for fast food and for a luxury car than for an economy model. At the same time, value is a matter of opinion, not fact. I prefer a new Subaru to a '95 Cadillac; my husband prefers the opposite. His wardrobe is built around Dickies; my taste runs to rather more eclectic (and non-synthetic) clothing. Given that there is a relationship between price and value and that value is a matter of opinion, I had always priced my products and services by triangulating three factors: what I wanted or needed to earn, my costs, and what the market would bear. That's what I had taught countless other people to do, and it worked fine. All else being equal, quality, price, and market generally reached a dynamic balance where entrepreneur's prosperity and service overlapped.

But, once came the day when something felt out of synch in the way I used that marketing strategy, and I felt some gritchiness around the prices of products I recommended. I kept examining my assumptions, and everything seemed right. Still, the feeling that something wasn't quite right persisted.

Never one to ignore an itch, I kept scratching until this week I realized what the problem is. I had been using quite different "markets" to assess what the market would bear. That is, I'd been looking at markets that had different values from the values of many of the people I attract. I based my pricing strategy and marketing on the proven best practices of other respected "info product" gurus, but those practices were designed to address the values of people who didn't, and probably never would, be attracted to my e-zine.

Readers of my e-zine were a special case. From their emails and phone calls, I knew that they placed a high value on authenticity, intelligence, and creativity. I knew they had high standards for courtesy, honesty, and what I might call "finish." They were tolerant of mistakes (assuming they were acknowledged). They had a sense of humor, a hunger for spirit, and a fundamental commitment to growth. At the same time they tended to be a frugal lot, willing to pay for high quality, but unmoved by hype and positively turned off by pressure tactics.

The generic information marketing model is designed to address the needs of people for whom profit is an over-riding value. These folks -- many of them good souls indeed -- thrive in the hyper-stimulating atmosphere of the motivational circuit: loud, upbeat music, extravagant challenges to dare to be great and simple formulas for achieving success. The more costly the package, the more this customer tends to believe in its value. And I'm willing to suppose that for the right person, that value can be substantial.

But this model didn't fit me and it probably didn't fit my e-zine readers, either. More than likely, they were past believing in "7 Steps to Instant Gratification." They probably didn't believe in easy answers, however much they might sometimes long for them. (Me, too.)

The bottom line is that, in that case, so-called "best practices" just didn't apply. The sophistication, values, and life experience of this community constituted a different market, and we would just have to develop our own best practices.

What would those practices look like? My hunch was:

Transparency: No fake sales; any specials should be clearly linked to a business purpose, and the regular retail price should always be fair so if you miss a sale you can feel good about buying at another time for full price.

-- Clarity: Accurate, no-hype descriptions of products and services.

-- Simplicity: Prices expressed in whole dollar amounts. Forget the "95 cents" gimmicks. We can round up!

-- Trust: Simple returns and exchanges.

I evaluated the marketing and pricing strategy for my products and those of affiliates, keeping asking the questions that gave birth to "Authentic Promotion" in the first place: "What's bugging me about the way I do (or think I have to do) business? What am I assuming? What is the truth of this? What if the truth were not a problem?"

Goldilocks tried three chairs, three bowls of porridge, and three beds before finding the ones that were "just right." In much the same way, your working toward "just right" prices and marketing methods will definitely pay off, as it did for me. I believe this price-value matrix will help you to find your "just right" price!

For example, my client sells a course which is a comprehensive self-guided seminar that transforms fears and resistance to marketing into grounded advocacy for good work. It’s a high value, if she does say so herself. Still, it has a medium price because she is still working on way to convey to potential purchasers the potency and efficacy of this course. One way she is doing that is to develop a series of follow up emails that remind buyers of key practices and principles, that ask powerful questions to help them move forward, and that suggest specific sections of the program that solve specific challenges. As she develops this support, she will be able to charge -- and receive -- a higher price.

PRICE-VALUE MATRIX
(please see the chart at http://www.authenticpromotion.com/pricing-strategies/pricing-strategy-matrix.html):

HIGH VALUE -- LOW PRICE

Underpriced: value undercut by price. "What's wrong with this picture" pricing strategy.

HIGH VALUE -- MEDIUM PRICE

Attractive pricing: ideal for market penetration. "More for your money" pricing strategy.

HIGH VALUE -- HIGH PRICE

Premium pricing: prestige, prominence. "Connoisseur" pricing strategy.

MEDIUM VALUE -- LOW PRICE

True bargain: may be a temporary special to raise revenue or to move discontinued items. "Inventory sale" strategy.

MEDIUM VALUE -- MEDIUM PRICE

Price and value are in balance, exclusive of other factors. "Square deal" pricing strategy.

MEDIUM VALUE -- HIGH PRICE

Overpriced: informed buyers will stay away; sales may be made to unsophisticated market. "Infomercial" pricing strategy.

LOW VALUE -- LOW PRICE

Cheap stuff. Often sold with lots of "bonus" items or features. "Tourist trap" pricing strategy.

LOW VALUE -- MEDIUM PRICE

Turns sales into complaints. "Caveat emptor" pricing strategy. ("Let the buyer beware.")

LOW VALUE -- HIGH PRICE

Don't even think about it: the "Fleece 'em and run" pricing strategy.

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