#2 Price Point & Costing Thoughts Part 2 of 7
Price Point & Costing Thoughts
Cost of Things: How Price Point Impacts What We Buy
How much something costs often heavily impacts whether or not we buy it. Our spending habits are greatly dictated by price point – what we perceive to be a “good deal” versus what we feel is too expensive. When it comes to price point, we usually think about two things – how much value we feel we’re getting for our money, and how affordable the item is in relation to our budget. Impact of Value on Price Point One of the biggest factors affecting our decisions around price point is the value we feel we’re getting for our money. If we believe an item is worth the price, we’re much more likely to make the purchase regardless of cost. On the flip side, if we feel like we’re overpaying or not getting enough value, we’ll likely balk at the price. For example, let’s say you’re in the market for a new winter coat. You find two similar coats – one is $100 and the other is $200. But, the $200 coat is made with higher quality materials and will last much longer than the $100 coat. Even though the $200 coat costs more, you’re more likely to buy it because you feel you’re getting more value for your money. The same can be said of products and services that may not have a physical form, but offer value nonetheless. For example, let’s say you’re considering signing up for a yoga class. A more expensive studio may offer better quality classes, more experienced teachers, and a more upscale facility. Even though the class may cost more, you’re more likely to sign up because you feel you’re getting more value for your money. Impact of Affordability on Price Point Of course, even if we feel an item is valued appropriately, cost still plays a role in whether or not we make a purchase. After all, we can only spend what we can afford. So, even if we feel we’re getting a good deal on an item, if it’s not affordable, we simply can’t make the purchase. This is why many companies offer payment plans or financing options – to make an otherwise unaffordable item more manageable. For example, let’s say you want to buy a new sofa. The sofa you want costs $1,000, but you can’t afford to pay that all at once. However, the store offers a financing option where you can make monthly payments of $100 for 10 months. This makes the sofa much more affordable, and as a result, you’re more likely to make the purchase. Similarly, many companies offer subscription models which can make an otherwise unaffordable service more manageable. For example, let’s say you want to sign up for a gym membership. A gym
