The (Under $25) Price Is Right

December 20, 2010

If you’ve got $25 or less to spend, you could buy a flag football set for the kids in your life (overgrown and otherwise) from SportsAuthority, or a gumball machine (plus gumballs) for your dentist-defying brother at J.C. Penney, or a tutu skirt for your fashionista daughter at the Gap. These retailers are among many who categorize products by price point, offering a variety of merchandise for, say, “Under $25,” “Under $50,” and so on. The practice is especially prevalent during the holiday shopping season, when consumers tend to be buying for multiple people and budgeting is a top priority. Online, many sites offer links to merchandise at a particular price point as a regular practice.

In any case, it’s a winning strategy, say experts.

“Offering anything at different price points is part of how a company creates a marketing funnel,” said Maria Marsala, business coach and founder of Elevating Your Business, a business development company dedicated to helping high-achieving women who own professional service businesses. Offering items at a special price point gets people into the store (whether that store is online or in the mall), with the hope that they’ll be enticed to purchase other products, as well. “The coupon in the newspaper for “x” store gives me a deep discount on “x,” said Marsala. “I go into the store and never leave with just that product.”

Higher-priced items don’t work as well in a “$X or less” model. Imagine buying a television offered in a “$2,000 or less” category or a car offered as one of a group for “$25,000 or less.” Marsala said the higher the price of the item, the harder you have to work to get people to buy it. “There is a price–below $29, or it could be $39–where people will purchase on impulse. Then after that, you need to convince them of the value and how the product or service will help them more and more as the price gets higher.”

If you offer the right products, at the right price, however, customers will come.

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