In my last blog I wrote about situational pricing. The main point was each situation is different and a customer who is normally price sensitive will not be in some situations and vice versa. This past week I received a clear reminder of that. I have two kids in college, the price of which can take your breath away. I have gotten over the sticker shock of paying for higher education, but the price-insensitivity reminder this week came in the form of shipping charges.
My son is a junior studying finance and statistics, and this is interview season for college students looking for summer internships. His first few interviews were all scheduled as telephone interviews, however he had an on-campus interview scheduled Friday. Early Tuesday morning I was talking with him and he mentioned he was having trouble finding the suit he wanted to wear Friday. When I asked if it was possible the suit was at our house, rather than his college home (6 hours away), he said he did not think so, but it was possible. Of course it was at our home, and it needed to be dry cleaned. We quickly concluded our only option was to overnight his suit to his house for Wednesday delivery, so he could get it dry cleaned and pick it up late Thursday. At this point, how sensitive do you think I was to the price of shipping?
We packed my son’s suit in a box and used the USPS website to select overnight express shipping for delivery by noon . The price was $45. I was not particularly happy paying $45, and I observed that 2-day shipping would have only been $16; but 2-day shipping would not work for us. We were just not very price sensitive at that point. We needed overnight, and we paid the $45 fee.
There are plenty of other areas where we are price sensitive. When my son comes home for holidays, we pay for the bus, not a plane ticket. We ask our kids to look for good options for books, like used books or rented books. We give them budgets for food, comparable to what they would spend if living on campus, and they spend their own money for entertainment. But when it came to things like the choice of college, and having a suit on time for an interview, we have been much less price sensitive.
Your customers are sure to have similar variation in their levels of price sensitivity, and your pricing strategies should reflect that. There will be some products or services whose prices will be scrutinized and negotiated very carefully by your customers and others where price is less of an issue. Products that are critical to your customer’s operation will receive great scrutiny, but that scrutiny will be more focused on how well your product meets the customer’s needs and protects the customer’s brand. Price will receive some attention, but will not be the deciding factor.
Part of my son’s brand would be how professional he looked in the interview. It was an easy choice to pay the extra money and protect that brand.