Price OR value - What REALLY makes you buy?

24 replies
Okay its taken me awhile to wrap my head around this question. I'm the kind of guy that always looks at value. I'll always buy the product with the most value for the dollar regardless of the overall price (as long as the value is something I need). I'll buy the phone that is $2 more expensive and has caller ID (which I need ) over the cheaper one that doesn't have it.

But I am noticing that's not the case for a lot of people. They buy almost strictly on price. Its the single thing that impresses them the most.


"$9 phone? Heck Yea!"
"but the phone is made of cheap plastic, No caller ID, fuzzy reception and you only saved $2"
"Yeah but I got a phone for $9! Woot! Woot!"

Its foreign to how I think and yes I do mean a slight difference in price like $2. In IM products I can actually take out a needed feature and drop the price by two bucks and 95 cents and lo and behold it sells better.


So how about you? AM I drawing the wrong conclusions or have you found the same (or do the same) ?

When it really comes down to it do you buy on price or value?
#buy #makes #price
  • Profile picture of the author JoeOFarrel
    Interesting post.

    The example of the phone you gave is probably someone who sees that phone as a tool to make calls. Pretty good price then.

    When setting the price, you need to decide whether you are offering a product for:

    - pure consumption, that people don't care much about => price
    - shopping products - customer starts getting a bit more picky, but is looking for a good deal => offer value at a discount
    - luxury/exclusive products - NO discount, the very idea of dropping the price is an insult to the product, and the customer relates the price to the value/brand.

    So whether or not we buy for price or value, is linked to our price sensitivity regarding specific products. You need to understand your product before asking this question.
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    • Profile picture of the author Mike Anthony
      Originally Posted by JoeOFarrel View Post

      So whether or not we buy for price or value, is linked to our price sensitivity regarding specific products. You need to understand your product before asking this question.
      Don't think so. In my life experience and in testing its not related to product as much as it is to personality. I get your point in general terms but to the specifics of slight changes in price and deleting features I have customers that LOVE the features and see the value and I have others that will rave about a feature thats needed only when the price falls $2.

      I made the phone analogy for a reason. I can think of one person I know who will buy a slightly cheaper phone without caller ID and yet he's paying his phone service for the feature because he wants it. Its just at that moment of purchase at the store he's in price mode.

      So to me this isn't about understanding your product. Its understanding people and hence the question. Thats why companies poll their customers. Same thing here. Can't really know without asking.

      Anyway I really am focusing on the slight changes in price minus features because I get the whole issue of it not being a real value for something unless its a feature you need.
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  • Profile picture of the author Barry Unruh
    Interesting question. The problem is value is tied to price, dependent on each person's available funds.

    For one person, spending $5000 for coaching with a Guru is worth every penny and the best value they could have. For someone down to their last $40, a free guide like BUM Marketing is a huge value.

    As your income increases, your concepts of value change along with it.
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  • Profile picture of the author sandra.IMqueen
    Good question.

    Joe, your answer was a gift because it summed up succintly the broad categories people fall into when making decisions to buy.

    As for myself I always look for price and value. If I am buying something expensive, whilst price may not be the issue I still expect value. Equally if I am buying at the lower price point I still want value, I don't expect to throw my money away just because something is cheap.

    In the end though I guess value will always have the edge.
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  • Profile picture of the author Paul Hancox
    Great question, Mike. I love it when people ask the RiGHT questions.

    I personally don't see it as either / or. People use both criteria to a certain extent, but it depends on the circumstances.

    When I sold $7,000 home improvement products, people were a lot more concerned about price when they were just renting out the house to others. They didn't have to live there, so they were basically just looking for the cheapest, and something that wouldn't fall out after 2 or 3 years.

    However, a young couple who had recently moved into their first home, while still wanting a good price, wanted to have quality installed. It was their home, and every time they opened the curtains they would see our product. They were usually less price sensitive, depending on their budget, i.e. what they could afford.

    Ultimately, everyone wants VALUE FOR MONEY.

    But different buyers have different strategies for determining VALUE to them... and how much MONEY they have (or don't have).
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    • Profile picture of the author homebizoutlook
      Value always, although if a product is out of my price range I will not (cannot) even consider it.
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    • Profile picture of the author Mike Anthony
      Originally Posted by Paul Hancox View Post

      But different buyers have different strategies for determining VALUE to them... and how much MONEY they have (or don't have).
      Voila! Thats what I am really trying to dig down to the different strategies that different people use to determine value. One sentence and you summed up the objective this this thread has for me. To understand mentailites that are not my own . My personality type looks alot at whats in the box not just the the price but as I have become aware other people just check the sticker price and grab.

      I think this is especially important in product creation. I always want to over deliver but I have to get a better sense of where to draw the line and compete on price and I really am talking about a few dollars in IM related products (my programming and coding background has been more outside of it). Sometimes just two or three dollars tends to make a significance difference.

      I'm guessing thats not just me because I notice alot of $27 and $37 products selling and not so much $30 and $40.
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      • Profile picture of the author Frank Donovan
        Mike,

        I think your question may apply when someone is considering a utility purchase, but for an IM product, for example, price and value are not primary motivations, IMO.

        It's the emotion (benefits, status etc) instilled in your potential customers that is going to be the crucial factor in their buying decision.

        Then they'll use reasons such as price and value to rationalize their purchase and justify it in their own minds (or to their spouse ).


        Frank
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      • Profile picture of the author Loren Woirhaye
        Originally Posted by Mike Anthony View Post


        I'm guessing thats not just me because I notice alot of $27 and $37 products selling and not so much $30 and $40.
        There is a widespread belief among internet marketers that
        prices ending in 7's convert better. The only way to know the
        optimum price for your product's profitability is to test.

        Low-price customers are sometimes a pain, so pricing your
        stuff at the bottom end can lead to problems. If your
        business is suited to doing a lot of volume at low-prices
        it can be a good idea to have low prices.

        Accurate pricing is a complex equation for any business.

        As an entrepreneur I would advise you to stay away from
        dealing in commodities, like basic cell phones. With
        these sorts of things, where consumers cannot tell one
        from the other, most buyers will look at the offerings
        at the lower end of the price range and choose from that
        selection.

        The ONLY way for YOU to charge premium prices for
        YOUR products, and still sell them is to have some
        kind of positioning advantage:
        -> exclusivity
        -> superior service
        -> longer, more expansive warranty
        -> superior location
        -> superior delivery
        -> superior professional reputation
        -> perceived superior competence
        -> quantities on stock
        -> ability to fill custom order faster than your competition

        There are other factors as well. I've done a lot of research
        on pricing, obviously, and the criteria in the b-to-b world
        are different than when selling to consumers.

        Nevertheless everybody looks for the best perceived
        VALUE for what their criteria are. Real salesmanship
        is usually a process of peeling the onion to reveal
        the prospect's deeper criteria and more painful needs,
        finding ways to meet those emotional and practical
        needs with your offer, and eliciting a clear preference
        from the prospect for your product.
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        • Profile picture of the author Mike Anthony
          Originally Posted by Loren Woirhaye View Post

          There is a widespread belief among internet marketers that
          prices ending in 7's convert better.
          I've seen that but what s the explanation for that? IF I can figure out the why of that it might help me understand pricing based customers better.

          As an entrepreneur I would advise you to stay away from
          dealing in commodities, like basic cell phones. With
          these sorts of things, where consumers cannot tell one
          from the other, most buyers will look at the offerings
          at the lower end of the price range and choose from that
          selection.
          Fear not. the phone was just an example. I go in for product creation of applications I code myself.
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          • Profile picture of the author Loren Woirhaye
            Originally Posted by Mike Anthony View Post

            I've seen that but what s the explanation for that? IF I can figure out the why of that it might help me understand pricing based customers better.
            Ted Nicholas revealed in a book he wrote many years ago
            that prices containing and ending in 7's had done very well
            for him.

            Years later Mark Joyner claimed to have tested a lot of
            pricing stuff and also found that prices ending in 7's
            converted best for him.

            Thus with the blessing of the two marketing demigods,
            the "Lucky 7" thing entered into online marketing
            lore as a sort of natural law.

            You have to know your market, your margins and you
            have to test to know for sure. Walmart ends their prices
            in 7's as well. Other successful retailers end prices in
            5's and 9's. There is no solid proof a 7 converts better,
            just claims that it has done well for others who have
            tested.
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  • Don't think we could determine what people see as valuable for them in every unique situation then get an average to a certain level of accuracy which covers all situations, so I believe moving on to knowing how much they value value and price of the value they get would be best.

    I believe value's valued first, then price considered next.

    A multibillionaire would pick up a candy bar he likes in the "impulsive buying" section of a convenience store (assuming a multibillionaire spends time buying from a convenience store). He won't most likely fork out $100 for 1 candy bar. If he forgot his wallet in the car but has a $1K note in his pocket and the convenience store doesn't have change, he'll most likely pick up more of the same candy bars among other things he likes just to break it.

    If a $40/8-hour day person needs to make a phone call but doesn't have change for his last $10, he'll most likely buy the candy bar he likes (or anything he likes) from a convenience store just to break it yet still have enough money for the call.

    So, I don't think people would buy something without value for them, and they won't give away more than the value they get from it.

    They'd have their own reasons, yes, but I think one of the main ones is not to make a fool of themselves by buying something without value for them or give away more than what the value they get from it.

    I believe it's a balance thing, maybe even a natural 50-50 one.

    Say I create a product, and factor in value and price 50-50 (higher number-higher number = higher value-higher price; lower number-lower number = lower value-lower price).

    I'd probably sell good.

    60-60.

    I'd probably sell good.

    70-10.

    I'd probably sell great but be broke real soon.

    70-50.

    I'd probably sell great.

    70-40.

    I'd probably sell better but earn less.

    100-50.

    I'd probably invest more in product development but sell way better and a lot more, which could cover investment costs and give great net.
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    • Profile picture of the author Tina Golden
      I don't know that this correlates from the offline world to the online world but I would think that it does. I've noticed that people who are used to lower incomes will base value on price a lot more than people who are used to more income.

      I've been there - when I was a single mother raising my children, funds were stretched to the max. Price was the only factor I could worry about. Now that my funds are less stretched, I can afford to pay more for better quality.

      Tina
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      • Profile picture of the author Mike Anthony
        Originally Posted by TMG Enterprises View Post

        I don't know that this correlates from the offline world to the online world but I would think that it does. I've noticed that people who are used to lower incomes will base value on price a lot more than people who are used to more income.
        Hi Tina,


        Too true and I think it does correlate as well but with a few exceptions. A few years back (probably not so much now) the average internet user made significantly more money than those not using it but the Internet has always been about free things - primarily information. The advent of open source has reinforced so that some people actually justify software pirating based on the idea that all software ought to be free.

        I am amazed that even fairly affluent people are often times caught complaining about something not being free or cheap on the Internet. Its like that underlying information/Internet is free mentality has kind of flowed over.

        I actually hear people better of than I am complaining if hosting is more that $10 per month and they mean hosting for their business.

        Still you can't just complain about the mentality. I learned early in business life you can't fight the market and win. SO I am just trying to understand better how people think in regard to pricing and value without passing too much judgment. At least in IM most (yeah most not all) have the sense that if its for their business they can invest something.

        Although I did have a guy in the SEO section recently DEMAND (and he used that language too) that I teach him search engine optimization. :rolleyes:

        Thanks everyone . Its helping
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  • Profile picture of the author enwereuzo
    Value is the most important.
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    • Profile picture of the author JohnMcCabe
      Mike, I think value is always the determining factor. It's just that buyers' definition of value changes.

      Take the candy bar example...

      If I want a couple of ounces of decent-tasting chocolate, I know that I can get it for around $1. So trying to sell me the same chocolate bar for $100 isn't going to work.

      If I want to show someone just how well-off I think I am, I might pay that $100 if the bar comes with a fancy wrapper and I can prove it sells for $100. The value isn't in the chocolate anymore, it's in the wrapper and the receipt that proves I can drop a C-note on a candy bar if I want to.

      As far as people looking at the lower price ranges first, I think it's mostly people starting with a budget and looking to maximize value within that budget. If I have a $50 bill and need a phone, that $600 iphone isn't an option no matter how good a value I might think it is. I need $10 to buy some air time, so I'm going to make the best choice I can from the phones $40 and under.

      Finally, those value judgments rarely take place in a vacuum. Most people consider the opportunity cost of a purchase, either consciously or in the background. 'If I spend the extra money on this model over that one, then I have to give up something on another purchase, or wait until I can cover both. But if I wait, I have to go without, so I'll take this (even though it might not be my first choice) and still get that...'

      > If I order that expensive wine, I have to order the chicken and skip dessert. If I drink house wine, I can have a steak and dessert. Half a carafe of house wine, it is...

      > If I get the 'lite' version of Guru Joe's latest whizbang, it will do what I really need, even though the deluxe version has the whatsit I want. But I can take the difference and buy some more ads, instead...

      And so on...
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      • Profile picture of the author Loren Woirhaye
        Originally Posted by JohnMcCabe View Post


        Finally, those value judgments rarely take place in a vacuum. Most people consider the opportunity cost of a purchase, either consciously or in the background. 'If I spend the extra money on this model over that one, then I have to give up something on another purchase, or wait until I can cover both. But if I wait, I have to go without, so I'll take this (even though it might not be my first choice) and still get that...'

        > If I order that expensive wine, I have to order the chicken and skip dessert. If I drink house wine, I can have a steak and dessert. Half a carafe of house wine, it is...

        > If I get the 'lite' version of Guru Joe's latest whizbang, it will do what I really need, even though the deluxe version has the whatsit I want. But I can take the difference and buy some more ads, instead...

        And so on...

        There's also a crazy amount of "micro-vascillation" - swinging back
        between YES and NO, even on smaller purchases, that runs in
        the background in prospect's minds. The book "Predicatably
        Irrational" covers this - it's also worth checking out Malcolm
        Gladwell's stuff.

        There's a widely-held belief among marketers that all buying
        decisions are emotional... and they are, but they rational, generally
        to the person making the decision. Within that person's mind,
        their decision-making process makes perfect sense and may
        even be self-perceived as totally rational.
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  • Profile picture of the author talfighel
    For me it is basically both but sometimes you get what you pay for. There is no rule here because:

    If there is an ebook that sells for $9.99. It might be worth more in value then if you would buy another ebook that sold for $49.

    Tal
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  • Profile picture of the author JonMills
    Neither.

    It comes down to my " Why "
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  • Profile picture of the author jasni
    MIke,

    For most customers price by itself is not the key factor when a purchase is being considered. This is because most customers compare the entire marketing offering and do not simply make their purchase decision based solely on a product's price. In essence when a purchase situation arises price is one of several variables customers evaluate when they mentally assess a product's overall value.

    just an opinion....
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  • Profile picture of the author sylviad
    Originally Posted by Mike Anthony View Post

    Okay its taken me awhile to wrap my head around this question. I'm the kind of guy that always looks at value. I'll always buy the product with the most value for the dollar regardless of the overall price (as long as the value is something I need). I'll buy the phone that is $2 more expensive and has caller ID (which I need ) over the cheaper one that doesn't have it.

    But I am noticing that's not the case for a lot of people. They buy almost strictly on price. Its the single thing that impresses them the most.


    "$9 phone? Heck Yea!"
    "but the phone is made of cheap plastic, No caller ID, fuzzy reception and you only saved $2"
    "Yeah but I got a phone for $9! Woot! Woot!"

    Its foreign to how I think and yes I do mean a slight difference in price like $2. In IM products I can actually take out a needed feature and drop the price by two bucks and 95 cents and lo and behold it sells better.


    So how about you? AM I drawing the wrong conclusions or have you found the same (or do the same) ?

    When it really comes down to it do you buy on price or value?
    It is exactly how bargain hunters think. Those are the people who scour yard sales and the bargain bins. They aren't so concerned about value and quality as they are about saving money. It's like beating the odds to them. In a way, they might get the same thrill that an addictive gambler gets. Bargain hunters see it as some sort of accomplishment - a win - to get a product at a discount.

    The scenario kind of reminds me of my old boss. His wife was out shopping one day and came across this fantastic new couch on sale. It still cost thousands of dollars (she could have purchased one much cheaper), but she was ecstatic that she got the expensive one for such a great price - even though she didn't need a new couch. Her husband was not pleased. She was putting him in debt by saving him money, he said.

    Coming from a poor family, I was raised to respect value over price. Rather than buying more frequently (because the products don't last), my mother always paid as much as she could afford for important items like clothing.

    I still look for value over price, but if the price is too high, I will seriously evaluate whether I actually need that product. In many cases, I don't because although my life might be a bit inconvenienced by not having it, it's not something I really need.

    Sylvia
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    • Profile picture of the author Mike Anthony
      Originally Posted by sylviad View Post

      Coming from a poor family, I was raised to respect value over price. Rather than buying more frequently (because the products don't last), my mother always paid as much as she could afford for important items like clothing.
      That may be it with me as well. Not a really poor family but we were never with such excess that we didn't have to think about a purchase in regard to its value. I guess thats where I get that approach as well.

      Anyway I have proven what matters in one of my niches which is why I asked. I lowered the price by $2 and and sales started coming in again. One marketing rule I have always gone with - never fight with your market. If thats what they want then give it. They know what they want. Its their money. Always overdeliver regardless but keep the price where they want it. If you have to take a feature out them do so. In this case thats where its at.
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  • Profile picture of the author JonMills
    I think it would be safe to say.. No one wants to spend more than they have to ( reason why so many like coupons and deals )

    but having said that it all comes down to what it is, how badly i want it and why i want it

    Think of anything you buy offline, you might be able to go to a town over to get something $20 off but is it worth it, with the cost of gas, time etc..

    Again it comes down to what is being offered.
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  • Profile picture of the author CesarGalano
    Expensive things are worth the money we pay for (there's some exceptions though) and cheap things someway somehow are always associated with "poor" products.It all depends on the product but sometimes it's difficult to choose...

    If I would have to answer I'd go for for value.
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