Capture Your Customer's Attention with Higher Prices

Last Updated May 19, 2011 3:19 PM EDT

The recession has turned many people into what a recent article in Harvard Business Review called "commoditized consumers." Their purchase decisions are based almost solely on price because they believe there are no meaningful differences among competing products -- even when there are.
"They have lost the habit of asking 'Which of these suits me best?'" write authors Marco Bertini and Luc Wathieu in their article, How to Stop Customers from Fixating on Price.
How do you get shoppers to look beyond price? Among the methods Bertini and Wathieu recommend is counter intuitive: willfully overprice your product to get the consumer's attention.

That is, price a product higher than consumers would expect to pay. The authors point to price premiums commanded by Apple, Starbuck's and Burt's Bees. SKF sells bearings up to 40% higher than the competition -- bearings, for goodness sake!

Here's the logic. When you head into a store to buy a product, a flatscreen TV, for example, you have a price in your head. For a 42-inch LCD flatscreen, let's make it $1,000. You might be stopped in your tracks by a model selling for $1,700. What's this model have that the others don't? Perhaps it has features that justify the price. You read the information tags, and you compare it with the commodity-priced models.

"Thus the manufacturer has produced exactly the response it needs to compete in an intensely price-conscious market," conclude Bertini and Wathieu.
According to the researchers, overprices can dramatically increase a consumer's recall of specific product information and evoke a more passionate response. That, in turn, can lead to the shopper marshaling more arguments in favor of buying the product. In the end, the consumer has a willingness to pay much more than originally intended.

The key is to not overprice too little (10%) or too much (190%). Differentiated supermarket products overpriced 50% to 80% seemed to be the sweet spot for price premiums.

Oh, and you have to give shoppers a reason to pay the premium. This strategy is all about enticing them to look beyond the price tag, not pay more for a commodity.

As a consumer, how do you look at higher-priced products? How high will you go?

(Sign image by Agent Akit, CC 2.0)

  • Sean Silverthorne

    Sean Silverthorne is the editor of HBS Working Knowledge, which provides a first look at the research and ideas of Harvard Business School faculty. Working Knowledge, which won a Webby award in 2007, currently records 4 million unique visitors a year. He has been with HBS since 2001.

    Silverthorne has 28 years experience in print and online journalism. Before arriving at HBS, he was a senior editor at CNET and executive editor of ZDNET News. While at At Ziff-Davis, Silverthorne also worked on the daily technology TV show The Site, and was a senior editor at PC Week Inside, which chronicled the business of the technology industry. He has held several reporting and editing roles on a variety of newspapers, and was Investor Business Daily's first journalist based in Silicon Valley.