March 28, 2017 by Scott Howard
You can now listen to these articles on the Genuine ScLoHo Media and Marketing Podcast! This is episode 3.
How much money should a new car cost?
How much money would you pay for a bag of potato chips?
What is the right price for a radio commercial?
The last time we talked, I urged you to be trustworthy and the echo that trust factor in your advertising and marketing. Today, we’re going to explore another element of the human experience that everyone of us consider before spending any money.
Yes, the word is value.
As consumers we want to equate the value of something to be equal or greater than the money we are going to fork over to get that something.
Take a new car for example. The MSRP for a new Chevy Camaro starts at about $26,000.
I could double that and spend over 50 grand for a new Mercedes, or pay 10 thousand less and drive a Kia. All have basic safety features and are road worthy, but the value as reflected by the price tag is significantly different.
How about that bag of potato chips? I saw a 10 ounce bag for a dollar at a dollar store recently and a 3 ounce bag for a buck and a quarter at the gas station. Same brand, same chips, which one is the right price?
All of the prices are right if they make sense.
When I owned a Mercedes, people would ask me regularly about it. It was a topic of conversation because it was perceived to be a classic car with class and more value than the car I had before. My next car, a Pontiac, would never inspire people to randomly start talking to my about my ride.
My most recent car purchase, a PT Cruiser, has been generating nearly as many random conversations as the Mercedes did because it is unique and rare.
I’m not really a car guy, so I find these conversation inspiring vehicles an interesting study of value as perceived by others. Some people assigned a certain value to me when I drove the Mercedes and now the Cruiser. I think the Pontiac was a neutral value. The Cruiser I’ve been told fits my quirky, hip personality and I’m perfectly fine with that.
Let’s talk about the value of a bag of chips. At the Dollar Tree store near my house, everything is a dollar. The lady in front of me at the checkout filled her cart with over 30 items and paid 35 bucks. If she had gone to Kroger, Wal-mart or any of the traditional grocery stores, she would have paid at least 50 dollars for the same 30 or so items.
The other night my wife and I stopped at a gas station and that’s where I noticed the small bag of chips for $1.25. That was the right price even though a couple days later I saw the big bag for just a dollar. How do I know it was the right price? Because people were buying them.
We are all conscious of prices. If an item is priced too low then we are suspicious wondering what’s wrong with that item, unless that is the “normal price”, like the chips at the dollar store.
If the small bag of chips at the gas station was 5 dollars, I doubt they would sell. Even though we are expecting to pay inflated prices for convenience items like that, you can go overboard.
When you as a business person set your prices for the stuff you sell, make sure you know the value you are assigning to those items too, like in my automotive example. Take into consideration the selling environment like my potato chip example.
And before we wrap this up, I’ll share with you a bit about the right price for advertising, specifically radio commercials.
At our company, Federated Media and the primary radio station I work for WOWO, we have a simple method of setting the prices. It’s based on supply and demand.
Nearly every week I get a report that tells me how much inventory we have left for upcoming weeks. WOWO is popular with radio listeners and radio advertisers because we have figured out a winning combination that works for all.
The listeners tune in to hear the news and talk programs and patronize the advertisers. The advertisers are either getting a trackable positive return on investment or a perceived positive return on investment for the money they spend.
In other words, businesses that advertise on WOWO do it because they see the value in advertising with us. The right price for advertising is one that offers value.
One day I’ll dig deeper into the specifics that I offer but for now, the key take away is understanding the idea of Value and how it is both different for each of us and incredibly important for each of us depending on our circumstances at the moment.