Are your prices high enough to retain customers?

Long ago, when I was in college, me and my brother ate the same cereal. I bought the version that came in a white box with green writing on it, the generic version. He bought the version that came in the beautiful box.

Every word that described the contents were the same. The stuff looked, felt and tasted the same (the ingredients were the same).

My version cost 40% less.

I asked my brother why he's wasting his money. He said he wasn't. He was paying more because that meant he was guaranteed a quality product.

Me pointing out to him that the only difference was in the colors used on the box could not dissuade him: higher price meant he knew he was getting quality.

If you know, even if it's through higher price, that you're getting quality, you like whatever you're buying more (internal congruence). If you like it more, you're going to buy it more often (or again).

Higher price can be used to create the feeling of: you belong to a special group of people. Think Starbucks. When they came out, they charged 2 times more for a coffee drink that cost them 1% (guessing that's how much the whip cream was costing them).

But they convinced people buying their silly coffee drink meant they were part of a special group, people who made it, people who could afford the finer things... Yes, it helped that they had more tables and not too crowded. But it was that idea, you're a higher class of people if you buy our stuff... Which they re-enforced with Venti (Italian word that means 20, which is the number of ounces in the cup).

Imagine calling a 20 oz cup Twenty. Nobody's impressed. Call it Venti and it is, worst case scenario, different or, good case scenario: exotic, special, not for the common people.

Many of the generics are manufactured on the same asembly lines using the same staff as the brand names, just slightly different recipes.

Perception of value as well as perception of the stability and competence of the vendor.

I also choose the generic or store brand product if I don't notice a difference. Can't say
that I have any brand loyalty.

I really like Family Dollar labeled potato chips and swear their chocolate bars are the
exact same as Hershey's. Good value to me. When my sister was raising her kids and
running daycare out of her home, she used Sears brand laundry detergent because she
believed it did the best job of any detergent.

At my hotel, for the past two years I've priced the rooms a lot higher than the Super 8.
We used to be about $5 USD different. It's more like $20 to $30 USD higher per night now.
I've noticed that we get better, nicer customers - the rooms are hardly ever left messy
or damaged or smoked in by guests. My town only has three hotels. The third one is a ten
room boutique hotel catering to higher end couples - no pets or young kids.

I think people pick us the first time - blindly off a site like hotels.com - because they think
the higher price automatically means we are better than the Super 8. Those who dig a little
deeper and read reviews will choose us if their budget allows. I think we are becoming a club
of sorts for people who want a safe, clean, comfortable, quiet hotel. We get a lot of refugees
from Super 8 because of that hotel's appearance, the rooms are dirty and/or smell like smoke, and
the customers don't feel safe there. Super 8 is right off the highway, we are a few blocks away.

When it comes to vendors such as web designers or tradesmen, after the experiences I've had,
I usually don't hire the low bidder because they usually don't do the work on time or for the price
they quoted ("I did not estimate supplies right" or "can't get good help") or they just disappear.
The highest price ones seem to be gougers. The mid priced ones seem to do the job well and
are still in business year after year.

Dan

thank you, it's very helpful