Tivoli Radio: Sweet Sound, Steep Price

There is a great pricing story that I ran across at TheStreet.com today. For those of you who are not familiar with TheStreet.com, it is a website for financial news and investment advice, and, as with many other publications of its ilk, it also covers topics like life style and technology.

Gary Krakow is TheStreet.com’s senior technology correspondent, and today he wrote about the Tivoli Internet radio. Tivoli Audio has been around for only a few years, but entered this fledgling market with a great pedigree – its founders are legends in the higher end of the home audio industry.

So the story is about this Tivoli Internet radio and what Gary is saying is that it is darn expensive – and worth every penny! In addition to this Internet radio, Tivoli sells a range of tabletop radios and music systems. None of them are cheap. So what Tivoli has done is to monetize its pedigree, to provide products with a perceived value higher than other tabletop radios and tabletop music systems and price them higher as a result. A quick web search shows that the Tivoli Internet radio costs two to three times more than other similar products, yet, according to Gary, it is worth the extra expense. So let’s expand on why that is so.

Firstly, it is likely that experiences of the founders of Tivoli ensure that the product exceeds the actual quality of other products in the category; it may be better designed, better built and may use higher quality components. Secondly, the price of a product is part of the marketing mix and the messages the company communicates to its prospective customers. Thus, the higher price causes the customer to expect a higher quality, better product, something that Tivoli can deliver on. But, as pricing also drives the perception of value, the psychology of pricing says that the customer of the premium product are more likely to be satisfied with his or her purchase. For as simple a reason as paying the premium price, they come to expect a premium experience. And where it gets interesting psychologically, is that regardless of the actual quality, many times the customers will convince themselves they have had a premium experience – resulting in high customer satisfaction.

Thinks about how you communicate with your customers and how your pricing fits you’re your overall message. Also think about how you can leverage the psychology of pricing for your company. What messages can you deliver to your customers that increase their perception of value, that you can then capture in pricing actions to increase your profits?

For those who like to read the article here is a link: http://www.thestreet.com/story/10430699/1/tivoli-radio-sweet-sound-steep-price.html

With warm summer regards,

Per Sjofors
Founder, Managing Partner
Atenga Inc
www.atenga.com