Price Perception

THere is lots of great dialogue about this in Predictably Irrational. With real studies and everything. But the basic point is that our FIRST anchored price is the one that anchors our perceptions. So, if you offer a product at $27, then the buyer will put you in the $27 product price point and it is difficult to break out of it. If you offer a product at $1997 then the same think happens. Ergo, the "guru" launches. That is why they are generally ALL priced the same at $1997.

Another example is the price of gasoline. Most people can remember when it cost around $1 a gallon, so they are always pissed when they think about paying $3 a gallon now - but in reality, the difference in price probably only accounts for an extra $100 a month on their overall budget. An amount that most people waste on other stuff like starbucks without question.

Interesting that you use the article as a marketing lesson.

Wal-Mart, while rolling back prices, also dropped about 300-400 products that were very good and that people bought. The reason for this was to push vendor products that didn't sell real well. The thought was that if the product was there, the customers would buy for lack of choice.

Problem was that people would find another option somewhere else.

The other reason Wal-Mart isn't doing so well is they have lost touch with their different markets. This is the same store that will roll out winter clothes in August in Florida (where I live). It doesn't take a rocket scientist to realize Florida doesn't really have a winter, but when you have someone sitting in an office at headquarters making decisions, it's no wonder they miss it.

Here the part that really takes me aback.

Where I live Wal-Mart is it. It's superstore that has everything under one roof and yet it's one of the worst run store/businesses I have ever shopped in. Maybe it's the area, but the store is a pig sty (they just remodeled it about 6 months ago), the employees are useless (not surprised with what they pay them, minimum hours to work, no benefits to speak of).

The kicker is that they constantly can be out of popular items for a week at a time. This is really bad with the grocery section and yet every week when they don't have what I need, I can go to another store and buy the same items for a little bit more.

This can average $20-$30 a week. Now times that for how many other people will do the same thing. Is it any wonder their same store sales are flat? I pointed this out to a regional manager one day and he acted like this was a new concept of not making sales.

The funny part is he gets incentive bonuses based on store sales, so I asked him how much money did he not make every year. I walked away with his jaw a hanging.

Having shopped at 'Wally World' for the last 25 years I am always amazed at how they ever got to be the largest corporation in the world the way they do business.

Sam Walton must be rolling in his grave.

Thanks,

John