Communicating Value with Trial Promotions

Deciding what the list price should be and what price first-time buyers actually pay are entirely separate questions. Determining the actual price for early adopters depends on the relative cost of different methods for educating buyers about the product's benefits. If the product is frequently purchased, has a low incremental production cost, and its benefits are obvious after just one use, the cheapest and most effective way to educate buyers may be to let them sample the product. For example, satellite operators Sirius and XM built interest in their product through aggressive discounts for placement in rental vehicles with either a low or no cost of trial (satellite radio was typically included in the regular rental fee).

Not all innovative products can be economically promoted by price induced sampling, however. Many innovations are durable goods for which price-cutting to induce trial is rarely cost-effective. A seller can hardly afford to give the product away and then wait years for a repeat purchase. Moreover, many innovative products, both durables and nondurables, will not immediately reveal their value when sampled once. Few people who sampled smoke alarms, for example, would find them so satisfying that they would yearn to buy more and encourage their friends to do the same. And many innovations (for example, Web-enabled cell phones) require that buyers learn skills before they can realize the product's benefits. Without a marketing program to convince buyers that learning those skills is worth the effort and strong support to ensure that they learn properly, few buyers will sample at any price, and fewer still will find the product worthwhile when they do. In such cases, price-induced sampling does not effectively establish the product's worth in buyers' minds. Instead, market development requires more direct education of buyers before they make their first purchases.

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