Price is a promise. The number represents both the worth and the dependability and quality of the product. The alteration of that number produces unrealistic price commitments which damage customer trust.
Leaders require a basic method to modify prices which avoids generating unattainable business commitments.
Why price changes overpromise
A business receives monetary value from customers through price but it represents many other factors. It is a message. A big increase indicates that we have made progress. A deep cut indicates that there are either too many items or items of inferior quality. The rest of the experience stays the same as the message and reality blend into one.
Customers save reference price values in their mental memory system. People use price as a factor to determine the quality of a product. Your company provides service quality and access guarantees through 20% price discounts but these promises remain unfulfilled during times of high demand. The 15% price hike does not provide any better service speed or coverage or support quality which means you make promises of premium quality that you cannot fulfill.
The signal problem
The higher price of a product indicates its superior quality. The product must match it.
The lower price makes the product available to customers. The system needs more capacity to fulfill the growing needs of customers.
The market shows signs of instability because prices in the market tend to change frequently. Buyers either stay in the market or leave it.
The math behind the promise
The price drop causes volume to increase because of elasticity.
The system also shows an increase in fulfillment rates and customer support and return rates.
The discount will create more work when production capacity does not meet the necessary requirements.
The memory effect
The lowest price customers paid becomes their primary memory of the purchase.
People become angry when they must pay additional costs for services which they have already received.
Trust development occurs at a faster rate than trust recovery does.
Reality check
The GCC market functions with high speed. The last-mile delivery expenses experience significant price increases during times of high demand. When you lower prices across the board you need to invest in additional riders and slots and inventory management or you will end up making unrealistic delivery time commitments.
All businesses need to follow VAT rules for proper application. Discounts affect tax-included pricing and invoicing. If stores communicate “before/after” prices poorly, they face both customer backlash and compliance risk. The transport and utility sectors along with other regulated industries use price adjustments to indicate changes in government policies. A single wrong interpretation of customer signals will result in permanent damage to brand trust.
A business must handle price adjustment procedures with care to avoid excessive customer promise commitments.
The safe transfer of price depends on maintaining alignment between operational capabilities and financial resources and messaging consistency.
Tie price moves to visible value
The service provider offers additional options for scope modification which include faster delivery times and extended warranty periods and different support levels.
The system needs to show upgrade details to customers at checkout time and after they finish their purchase.
Show the “what changed” list, not just the new price.
Control volume with targeting
The marketing efforts should focus on smaller audience segments which include loyalty program members and first-time customers and customers who purchase product items.
The system has a capacity protection mechanism which limits each customer to a specific number of redemptions.
Stagger timing by city or channel to avoid spikes.
Protect the reference price
The user prefers to receive bundles and credits and timed perks instead of deep cuts.
The list price should remain constant but the value can be adjusted within this fixed price range.
The price calendar for seasonal events needs to be readily available to customers.
A basic pricing promise architecture exists.
Every price change needs sufficient resources to reach its desired outcome.
One-page pricing brief
The objective of the project is to achieve growth, mix or inventory.
The expected outcomes include units sold as well as Average Order Value (AOV) and gross profit.
The capacity plan includes labor resources and slot availability and stock levels.
“No-surprise” messaging
The evaluation process requires you to determine which element showed the most improvement between speed and features and service quality.
Set limits: quantity, dates, and locations.
The system needs to have a backup system which allows users to join a waiting list or get a raincheck.
Operational backstops
Pre-book logistics and customer support capacity.
The system needs to activate automatic throttle controls whenever Service Level Agreements (SLAs) show any performance degradation.
The system provides real-time access to current NPS scores and cancel rates.
Price changes are not cosmetic. They are public promises. The price should not be changed to avoid overpromising because it should be based on the visible value, targeted demand, and ready capacity. Keep the reference price stable. Be specific about your offerings while being even more specific about your actual delivery capabilities. The right price combined with excellent customer service creates higher trust levels among customers.
References:
Internal Links
https://3msbusiness.store/discount-discipline-stopping-the-race-to-the-bottom/
https://3msbusiness.store/value-based-pricing-charge-for-outcomes-not-hours/
External Links
- Harvard Business Review — Pricing Topic
- McKinsey & Company — Pricing Insights
https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/pricing
- Strategy& (PwC Middle East) — Retail in the Middle East
The link to the report is available at https://www.strategyand.pwc.com/middle-east/industry/retail.
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