How I Achieved a 40% Growth in Sales, Despite an $80 Price Increase

You may believe your product isn’t selling because customers feel it’s expensive. But this simply isn’t true.

Photo by Sharon McCutcheon on Unsplash

Whenever I’ve struggled to increase sales, my immediate response had always been to reduce prices.

But in 2018, I learnt why this was the worst thing I could do.

In a price sensitive country like India, I usually price products conservatively. Especially true while selling adorably designed, kid’s furniture for my second startup — Littlebird India.

I priced at $200, what could be valued at $250. Because I felt customers
“ needed a deal”.

I would decrease prices by 5%, then 10%, then 15%, etc..

But it didn’t help.

Luckily, I stumbled upon an article, which made me realise — pricing is arbitrary.

Pricing is a game of communication & perception.

Everyone knows, a good brand can command a 50% — 500% premium on their products. The secret lies in their communication.

You may believe your product isn’t selling because customers feel it’s expensive, and aren’t getting value for money.

But this simply isn’t true.

Chances are, your product isn’t expensive. Customers have and will continue to pay far more for similar products.

Nothing personal, but they just feel YOUR product isn’t worth THEIR money.

It’s not you, it’s them…..

Nope, it’s actually you.

The problem is — either you haven’t offered enough value. Or more likely — you haven’t communicated the value properly.

So, in the face of slowing sales, you have 2 options -

1. To reduce prices to the level where you can convince customers to part with their money.
2. To provide & communicate enough value, that customers throw their money at you.

I did the latter.

I talked to customers — noted their pain points, and essential features, for which they are willing to pay more.

And, then I focused my communication on those offerings. Via crisp write-ups, video testimonials, engaging creatives, etc.

Et voila — sales started increasing. From 10%, to 15% & finally 40% of the original number.

The best part?

I did this, after increasing prices from $200 to $280.

For a secondary explanation on how price increases can lead to more sales.

Marketing strategist Gerardo A. Dada, covered the effect of price increase on P&G’s Olay.

• At $12.99, sales were good. Affordable to the mass market.
• At $15.99 sales tanked. Not expensive enough to be considered premium cosmetic for mass market, but also too cheap for the prestige shopper.
• At $18.99 sales were great. Good value but not too cheap for premium shoppers, yet affordable for Mass market

Launching at $18.99, Olay became a $2.4 billion dollar business for P&G with double digit growth and fantastic margins.

In the words of psychologist Robert B Cialdini,

“Markets in which people are not completely sure of how to assess quality, they use price as a stand-in for quality”

If you have examples on the quirks of pricing, from your own life or others, feel free to share! And if you have any questions, advice or inputs, don’t hesitate to reach out or comment!

Originally published on my Linkedin — lnkd.in/dAKxbk3