How to raise your margins by two to ten dollars Want to increase your margins? If you’re like most business owners, you’ll answer with an enthusiastic “yes!” Of course, your customers might not be as thrilled as you, which is likely why you haven’t done it. What would they think if you raised prices? You’re afraid it could drive them away to competitors. But fear not. There is a subtle way to increase margins with little to no objection from your customers. Product packaging. It can have a dramatic effect on price, which in turn can double or even triple your margins. “But how is this possible?!” you ask. It all comes down to perceived value.
What is perceived value?
Perceived value is the imagined amount of value a customer believes he or she will get from a given product. Let’s take a buffet-style restaurant as an example. Say you’re going to take your wife and 3 children to a buffet restaurant that costs $9.99 per person, totalling $49.95 for your whole family. There’s a huge variety of food options to choose from at the buffet, such as steak, mashed potatoes, vegetables, shrimp and even an ice cream bar. For that $9.99, you probably think you’re getting a lot of value, right? With so many food options in an all-you-can-eat setting, it’s easy to think that. The reality is quite different though. Psychology Today notes the many ways customers get less value than perceived. Buffet restaurants do this by serving larger drink glasses so customers fill their bellies’ with more liquid, providing small plates so customers can only take so much food at once, and surrounding higher cost menu items (such as steak and seafood) with lower cost starches (such as potatoes and cheap veggies).
Throw in the fact that your 3 children will almost inevitably eat less than you and your wife, and the restaurant owner has just made a healthy profit on your family’s meal.
Are you cheating your customers with perceived value?
Considering the example above, it may be easy to think that. However, the reality is that every business needs to make a profit. That is in fact the job of any business. You shouldn’t feel bad about it. You are providing service, and you deserve to make money from it. And by making a profit you are creating jobs and supporting the families and lifestyles of your employees. What’s not good about that?
How perceived value applies to product packaging
We’re all customers and consumers of a variety of products and businesses. And the truth is, most of us have no idea of the actual cost of a product we buy. Just like the buffet example above, product packaging can influence the perceived value we believe we’re getting from a product. So how can you improve the perceived value of your product with packaging? Here’s 4 packaging features you can apply.
● Glass bottles/containers – people tend to believe glass packaging is reserved for more expensive products. So consider using a glass bottle instead of aluminum can, or use a glass container instead of a plastic bag.
● Colors – in Thailand, the color purple is often associated with premium products. So if you’re based here, consider using purple in your packaging. For those outside of Thailand, we recommend using silver, black, white and gold colors to increase the value of your product.
● Boxes – while minimalism is becoming increasing popular these days, packaging your product in a big box still has a psychological impact on your customer’s buying decision. A product in a big box is often perceived as more valuable than one in a small bag.
● Leverage popular trademarks – that Star Wars cup you sipped coke from while watching Rogue One likely cost less than a $1 to produce. But you paid a good $3 to $4 extra for it because of its association with the popular movie franchise. So if you have the opportunity to leverage a popular brand or trademark, it can give a big boost to your product’s perceived value.
While making these packaging changes may sound expensive, the reality is they’re incredibly affordable. You can generally add most of these features for less than $1 dollar, and then raise the price of your product by $3, $4, $5 or even $10. Now, how’s that for increasing your margins?
Ready to create product packaging that boosts profits? Our experts can produce packaging that will not only increase your margins, but also get customers’ attention. Call us today at 02 663 5930.