How to Increase Perceived Value by Raising Your Prices
I wanted to title this post: “Shitty Product? Raise Your Prices.” But you shouldn’t have shitty products in the first place. You should fix them and make them better.
But to look at the psychology behind high prices for bad service, and the oft-related consumer experience that follows, here is why you should raise your prices, even if you are going to run a shitty company or provide poor customer service.
A Case Study in High Prices for Bad Product
The public transit system in Boston is notorious for dirty trains, late schedules, unfriendly conductors, etc. And then of course, high prices.
I’m writing this as I ride the commuter rail train heading into Boston from the suburbs. I don’t ride this particular train very often, and I was just shocked at the price for my ticket: $20 for a round trip ticket to and from the city. So much for saving on gas money.
Perceived Value of a Higher Fare
The T (as the train system is colloquially called around here) has been implementing fare hikes for years. Now, we are at $20 for a roundtrip ticket to Boston. When I was in France last fall, my wife and I rode the train all over the country for relatively much cheaper rates.
The Alternatives
The drive into Boston during rush hour is brutal. If you come up I-93, as I would have this morning, we are talking about bumper-to-bumper traffic for miles. This is enough to make you want to drive your car into Quincy bay. So, the T is getting it’s higher prices. From me today, anyway.
But here’s the point. As I sat down on the train this morning after having paid my fare, I felt somehow satisfied that the fare was $20. As if it were validation that the choice I’d made was the right one, that I was getting some good “service.” While in reality, my knees are bumping up against the seat in front of me as I type this on my laptop, the wi-fi doesn’t work, and I’m not that comfortable at all. Nor am I receiving any type of customer service whatsoever. (But, I’m still typing on my laptop, I’m in an air conditioned train car, and I’m not sitting in traffic, so those things are good.)
The train this morning reminds me of my time in France (where the train was an excellent way to get around) but only because I’ve paid good money for it. Had I paid an $8 round trip fare today – what I think the trip is actually worth – I would not have considered any of the perceived value of the ride in. Not substantially, anyway. I’d be griping about the uncomfortable seat and the unfriendly conductors. This is the counterintuitive value of higher prices. Your brain doesn’t want to make you into a liar or a fool by griping about anything at all after having paid a lot of money for it. You will instead be much more likely to perceive its value and focus on the good things you’ve just purchased.
If you have ever had a less-than-amazing dish at the most expensive restaurant in town, and then willed yourself to believe that the meal was actually really good — despite your taste buds’ opinion — then you know exactly what I’m talking about. This is the same psychology at work here.
How to Be Even More Successful
Raise your prices for your current offerings. (You should probably do this anyway, especially if your products and services are outstanding.) But then work to improve them – even if just a little bit — and also provide peerless customer service. You will be increasing perceived value with the price increase, and creating even more real value when you focus on being a better human provider. You might instantly increase your bottom line without spending even a dollar more on customer acquisition, marketing, or any other time or capital-intensive growth endeavor.
photo credit: walknboston via photopin cc
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