It’s really hard to give folks a good deal! This is especially true when your price matches a point that is not known for high quality. We ran into this perceived value challenge when we started Barefoot Wine. Our concept was to produce a product that delivered the value common at the 10-dollar price point for 5 dollars. Seems like a slam dunk, right? Wrong!
Quality and Value at $5
We were up against the perception that anything at 5 dollars had to be mediocre because the vast majority of the choices at that price point were just that, mediocre. Their producers would say, “What do you expect for 5 bucks?” And we were thrown into that same boat. Never mind that we won gold medals and Best of Class in open pricing competitions, and were written up for quality in all the industry journals. “It can’t be any good at 5 dollars!” we’d hear.
It took us years to demonstrate Barefoot’s superior quality at the 5-dollar price point. Meanwhile, we had marketing consultants telling us to raise the price to communicate “quality,” and to divorce our brand from the 5-dollar “cheapies.”
We held our ground and our price, and added value queues to our package instead. We used gold foil ink, multicolor screening on the logo, covered the fill line with longer capsules, and were the first in our industry to attach gold medal stickers to the package on the bottling line. But we didn’t stop there, we added point-of-purchase merchandising materials with third-party accolades for quality. Whenever we won a competition, we would drop everything and get news of that win to the retail buyers and on the shelf in that territory within 24 hours.
Oh, and the price. We eventually “communicated quality and value” by upping it by 1 dollar and immediately offering a 1-dollar discount. That way the perceived value changed to, “This is a higher quality product and its on ‘special’ for a limited time.”
All of these tactics were ultimately expensive, but in the scheme of things, that’s what we had to do to get around the cheap-price-means-cheap-quality stigma. Raising the price permanently would have hurt our volume, discouraged the customers who had discovered our value, and put an end to the recommendations coming from our growing tribe of advocates.
Perceived Value Lessons on Big Prices
We learned a big lesson in perceived value from a New Jersey store owner we were calling on. When we walked across the parking lot, we saw a storefront with huge signs that covered up the entire windows. They were prices, not associated with any brands or products – just prices. But they were ginormous, like 6 feet high. They said, “$3.99” and “$5.99”! We were miffed.
So, when we got into the store, we asked Abe, the owner, “Hey, what’s with the big prices in the window?” to which he replied, “You’ve got to qualify the customer! Everybody has $3.99 in their jeans. It puts them at ease. They can afford to come in. They know that at least something in here is $3.99!” So here was a merchant using nothing but a large sign with a numeric price to attract customers. Wow!
But even as our jaws began to drop, Abe continued and said, “Turn around and tell me what you see.” As we looked out across the store we saw boxes of products, each one had a stick in it going straight up in the air. On top of each stick was a big sign with a price in two and three-foot-high numbers saying $4.99, $8.99, $12.99, and even $19.99. We turned back to Abe and said, “Big prices?” Abe jumped back, “They are big prices, but not high prices. BIG PRICES!”
Abe pointed to one particular box of products, “Ya see that one over there? I had it for $5.99 and no one would buy it. Now it’s at $8.99 with a much bigger sign and I can’t keep it in stock!”
Simply put, Abe’s customers perceived the larger signs as a special, marked down from even a higher price. Yikes! It worked!
Value Perception Resource
There are a ton of ideas and suggestions out there about how to handle the value perception game, but the most current and best resource we have found is from Dave Schneider, the co-founder of Ninja Outreach. Dave has done an excellent job of defining the dilemma brand builders face trying to achieve the perception of value without breaking the bank. He offers the most thoughtful and comprehensive list we have seen of ways to increase the perception of value to your brand. Check it out!
Meanwhile, if you are interested in finding out more about our mistakes and successes building the Barefoot Wine brand, check out our New York Times Bestseller, The Barefoot Spirit: How Hardship, Hustle, and Heart Built America’s #1 Wine Brand. You’ll get a good laugh and learn a ton!