There was a recent article in Bloomberg Business Week making the point that since the economy is starting to improve now is the time for small businesses to think about raising prices. The piece begins by describing how many small businesses were hit especially hard by the recession and consumers are finally beginning to feel more confident. In this posting we'll be focusing on a main strategy presented in the article, setting prices based on perceived value instead of costs.
One excellent example of this concept is presented by some of the products sold by Tacony Corporation, high end vacuum cleaners. Our dealers face a great deal of competition from cheap vacuums sold at the big box store, so how they can they justify the much more expensive Tacony products? Here's a few ideas.
One of our premium vacuums is a better
value than a cheap one for two reasons, repair and replacement. It is built to last for many years with
minimal problems (you never need to replace the belt on some models), so in the long run one or our vacuums may actually save money due to less repairs and the frequent replacement costs for cheaper vacuums.
Carpeting will last much longer and needs cleaning less frequently. Replacing carpeting in a home is very expensive and it will look much better during the extended lifetime. Our vacuums are recommended by the Carpet and Rug Institute, in fact we have 10 vacuums that have earned their gold level rating.
A
third point on vacuums is that if you keep a vacuum 10 years instead of 2, you
are keeping 4 vacs out of the landfill. At 20 pounds per vacuum, that’s 80
pounds saved. For every 1,000 of our vacs sold, we are saving about 40 tons of
material from going into landfills.
These are examples from the vacuum industry, but the same concepts can be applied to many different products. The point to make is that while the cheapest product may seem to be the best value, further research shows that this is not always the case.
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