Increase prices in order to sell more?
The more expensive a product, fewer buyers can purchase; when the price, the number of buyers increases. This basic principle of operation of the law of supply and demand is familiar to any student of economics or business administration. Sometimes, this law stops working and a higher price leads to more sales.
A kilo of straw usually worth the same as another kilo of straw. While almost bought the same, it is difficult to end up paying more for something whose value is apparently very clear. But a liter of wine is equal to one liter of wine? If we look at the shelves of our supermarkets, the answer clearly is no. The reason is that for products and services with a strong element of subjective value, the price can become a powerful signal quality for the buyer.
In 2014 it was made in a California winery a series of experiments were made, which aimed to analyze the impact of price in determining the quality of a product and buy it.
In the experiment, they randomly modified the price of the same type of wine. That is, on different days and at different times wine could be worth 10, 20 or 40 dollars. Since it was a winery tour, customers were never the same and that allowed better see what impact had every variation of price.
Looking at the results, the scientists discovered the following: the same bottle sold about twice as often as worth $ 20 worth $ 10 when. Obviously, the benefits to the cellar were also much higher as well as increasing sales, margin also increased.
How can this behavior be explained? The reason has to do with what psychology known as heuristics: those rules or shortcuts of thought that help us make decisions quickly. In this experiment, the authors propose that the price is one of the shortcuts we use to evaluate the quality of a product. Within certain parameters, the study reveals that customers not only bought more wine bottle with a higher but also tended to value the best price. In short, buyers perceived the $ 20 bottle of better quality than $ 10 but it was exactly the same product. When the price was $ 40 the valuation was too high but the number of sales fell again.
The study also reveals that this strategy has its limits because the same experiments were performed with a very similar wine but of inferior quality. For this wine, the price increase only led to fewer sales and a worse assessment of the product. This time, the expectations created by the price played against the product.
In short, our prices communicate: client speak to the quality of our product and determine its future experience. For good products, raise prices sometimes helps sell more but also better.