Illegal or smart? I guess it does depend on the size of your business and how far you push it but essentially it can be problematic for your business. Marketing a product, for example a paint brush you use to paint a house. You manufacture the brush and package it in a wooden box which initially costs more than the actual product itself. To manufacture the brush it costs £1.00 and the packaging costs £2.50. Your client would buy the product for £4.00 but you’d agree that the retail price would be £10.00. Any other brush on the shelf would cost £5, why pick yours? By fixing the price at £10 you have to sell the product based on quality. The quality of the handle, the bristles produce a particular coat when applied to the wall, they don’t wear as easy etc. This may be because your brush is 20% better than any other brush on that shelf, but you market it as though it is 100% better. So the quality of the packaging, the design and material of the brush is what makes you better than anyone else. So you could sell the product for £2 or £3 more than your competitors but then the impulse buy doesn’t work as effectively. By increasing the price to double what your competitors are charging creates a thought in the consumers mind, “Why is this double any other brush?”. The price itself justifies any doubt that your product has to be better than anything else on the shelf simply because its double the price of anything else, and the packaging seems to make it stand out, gives it the polished look to support the price tag. Any professional decorator would have the mind set that your product is simply the best otherwise why would it be double?!
Price fixing is extremely effective if used correctly however I believe it isn’t always the right way to go and sell a product. If you can’t 100% back up the reasons for your prices then you have to play a fair game with your consumers. Surprisingly this happens a lot and is used in many products we buy today. The marketing behind these products is flawless and therefore creates an impulse buy in which we all fall in to. A great marketing campaign always creates a need and that’s why we have leading brands.
