Price Signaling 2018-11-19T13:54:15+00:00
Price Signaling

Price Signaling

Price Signaling is used to give a signal to the market that price changes are about to take place.

It is used to communicate with consumers and stakeholders about the prices.

Overview

Simply put, price signal is a price designed to communicate a marketing message. Price signaling is defined as the information communicated to the producers and consumers through the price that is charged for a service or a product. It gives an indication to increase or decrease the demand or supply. The whole market economy depends on it for allocating the scarce sources correctly. It can be better understood by considering the following examples.

 

 

Examples

You can signal the targeted audiences in different ways for different purposes. To understand the concept with more authenticity, consider the following examples.

Welcoming Signal

Some restaurants offer complimentary kids’ meal to every family that comes with children. Because it communicates a message that the place warmly welcomes families.

Good will

For instance, a store may offer a meal of worth $5 at a price of $1 to people who are unable to pay full price. This might be because of some natural disaster such as a flood or an earthquake. This sends them a positive message that they can come to the store for enjoying their meal at an affordable rate.  It also implies that the store is with them in their hard time.

Engagement

Price signaling can also be used involving an event, cause or a cultural festival. For instance, a brand that sponsors a specific sports team may offer a 5% off on all their products for days the team wins.

Quality

A luxury fashion brand can set their prices higher to imply that they are among the best in the market.

 

 

How do businesses use it?

The examples mentioned above show how different companies use price signaling. So whether you want it or not, the price will send out some message to the potential customer. For instance, a high price is usually signaling good quality and status. Similarly, a low price usually indicates low quality about the products or services they have to offer.

There are many ways by which a business can use price signaling for its growth. They need to manipulate the customers into purchasing their services or products.

There’re also more ways you can use price signaling to boost up your business.

Using Over-Discounter

You will be surprised to know how extensive advertising and placing alluring discount-offers over the services or products can mesmerize customers into buying products. That is why price signaling works and influences the moving customers from all ages and backgrounds. As a result business owners or markets naturally tend to re-frame the same product or service at a lower price to create a “Wow” effect.

Customers will not have any chance except to buy the product. Due to the purchase they made will leave them thinking that they got a bargain. In the end, business market wins every time.

Price and value communication

The main feature of price signaling which is the effective communication of price and value. It not only allows business owners to adequately demonstrate the cool features of the product, but also the generous price business owners have to offer.

Framing

The context in which a price is communicated affects directly how much the customer may be willing to pay for it. As a result business markets mention alternatives to their product at higher prices or demonstrate that the other product has a cheap build or other malfunctions, then it is an example of framing.

Strategy card

Strategic importance (retail) 75
Strategic importance (ecommerce) 85
Ease of use 70
Practical implementation 77

How to use price signaling

  • It is almost always easier to get information about the price instead of the quality. Hence the very first thing how a customer is going to perceive your product or service is through your price signaling.
  • Always select price between certain ranges; you should take into consideration all the necessary factors including customer’s preference, society demands and your profit as well.
  • These factors work best when the customer has a shallow understanding of the quality related to the price signal or the price you have demonstrated for your product.
  • Another trick businesses use is to lure the customers into buying high-quality products. This is done just to earn their trust to get them purchasing an uncertain-quality product in the future.