The Five and Dime

Recently I gave a presentation to the Fond du Lac Area Association of Commerce about writing your own marketing plan. During the presentation a question came up about pricing. Although pricing of products and services typically is part of the business plan, it can also be an important marketing strategy. Sometimes by raising your prices you can actually increase your business. As any marketer knows, it is all about perceptions and your higher pricing often helps convince of higher quality.

I then mentioned a strategy of “marking it up to mark it down.” The thought process in this strategy is that if you have a higher list price it allows you to mark it down (sales, coupons, etc.) and still get your margins. (Obviously this is more for a retail/consumer product environment than for a service or B2B account.) I then spoke briefly about the psychology of “getting a deal” and how consumers feel good about that process. Even if they could have purchased a competitor’s product of a better quality for less money, the idea of getting a deal trumps the comparison shopping.

Later, I received an email from Carol Smith at Just Fare Market (www.justfare.org). She asked an interesting question on whether the strategy “to mark it up to mark it down” was ethical. I asked her to elaborate:

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