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Scarcity And The Next Best Alternative
| Guest post by: David Flannery |
Article Overview: Pricing in essence is all about looking at your customers next best alternative. What does that mean? Simply, in order to set your value based prices, you need to know what alternative options your customers have. If you are selling a service or item that is common place and easy to get hold of, that means your customers have a lot of alternatives rather than buying from you which in turn will dictate your pricing level, if you are selling something that is hard to get hold of that means your customers will have very little alternatives to buy other than from you.
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Scarcity And The Next Best Alternative
Pricing in essence is all about looking at your customers next best alternative. What does that mean? Simply, in order to set your value based prices, you need to know what alternative options your customers have.
If you are selling a service or item that is common place and easy to get hold of, that means your customers have a lot of alternatives rather than buying from you which in turn will dictate your pricing level, if you are selling something that is hard to get hold of that means your customers will have very little alternatives to buy other than from you.
In essence in order to maximise your profits and create massive profit growth in your business, you must price in a value based, strategic manner. In order to do that you must reduce as much as possible your customers next best alternative. The best way to achieve that is through the use of scarcity.
Very Scarce service/product = Limited Alternatives = High Value Perception = Higher Price
Widely Available service/product = Many Alternatives = Low Value Perception = Low Price
By making what you offer as scarce as possible you immediately increase it's perceived value.
For example:
If I am looking for the latest DVD release to buy or rent, I have a low value perception of that item, why? Because I have a huge range of alternatives from which to buy it, and will obviously shop around until I get what I perceive as being the best value.
However, if I am looking for a specialist subject DVD that was made in the 90's and only had 1,000 copies made, I have a huge value perception of that item, why? Because I have very limited alternatives from which to buy that item, that in turn allows the seller to charge a premium value price...which I will very likely pay!
So the question now becomes...how do you inject scarcity into what you sell.?
You create scarcity by wrapping your product or service with extra benefits that:
1. Are of value to your customers.
2. They cannot or will not get if they buy somewhere else.
In this way even a commodity product with high next best alternatives can be turned into a scare item. So, look at your business, what extra benefits can you offer your customers that no one else in your marketplace can offer them? When you find them, wrap all your products and services in those benefits to create scarcity and increase your customers perceived value...and then...price accordingly
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Article Tags: price, pricing, scarcity, value, value based
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About the Author: David Flannery RSS for David's articles - Visit David's website David Flannery is the founder of Profit Growth Dynamics International helping companies methodically and systematically increase their sales and profits, reduce their customer losses to their competitors and separate themselves from their competition. He is the author of The Profit Crisis Exposed report and the soon to be published book The SETE Five Step Action Plan For Doubling Your Profits. For more information on growing your business profits visit http://www.massiveprofitgrowth.com now Click here to visit David's website   THE MOUSETRAP FALLACY The Five Most Dangerous Trends In Australian Small Business Today 12 Steps to Implementing Anything in Your Business Step Four Get Feedback and Refine Strategy Its All About Value Build Your Business With Testimonials |
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