The Message Behind the Price of Your Christmas Gift

As we are coming up to the final hours of the Christmas gift buying season, I want to leave you with some thought about how the price of the gift you are about to buy affects how you think about the gift and how it affects your willingness to pay. Let's look a couple of different scenarios:

1. The gift you want to buy is simply too expensive.
Depending on your financial situation, it does not matter how much you want to give your spouse a new car, or a luxury watch. Or maybe you want to give your child a toy Ferrari, or a diamond studded Barbie doll. If you do not have to money afford any of these, your "want" is not really important.

2. Your willingness to spend changes with the circumstance.
You price sensitivity changes with the receiver of the Christmas gift. While spending enough for a new game console for your kid may be within reach, spending a similar amount of money for your mother-in-law may be out of reach. In fact, for the latter, the price of a pair of mittens may be too much for you.

3. The price of the gift is also a message.
So even if you don't think you can't afford those mittens for your mother-in-law, you eventually realize that the message an even cheaper gift would offend her. So, for the purpose of keeping the family truce, instead, you decide to purchase an automatic expresso maker. Far more expensive than those mittens, but with the right message.

4. The price and message decisions
For every price for every Christmas gift you are considering to buy will have this thought-process in place:
a/ Do I simply have the financial means to buy this?
b/ What message do I send with the price of my Christmas gift? Do I come across as irresponsible if spend too much or as a cheapskate if I spend too little?
c/ What is the right price level for a gift that sends the message I want to send; that I'm responsible but also that I want the message to be appropriate for the person receiving the gift. So that the person understands my appreciation.

But this kind of decision making on price does not only happen at Christmas time. It happened every time you buy something; for yourself, your family, for your company or for someone else. Is it too expensive for a slew of reasons or is it too cheap, also for a slew of reasons?

As the seller, you need to know how this decision-making works in your market and why. How many of your potential customer think your product or service is too expensive and why? How many potential customers think your product or service is too cheap and why? If you have this information, you can set the price to minimize each; those who think your product or service is too cheap and too expeisive. And so you have arrived at the right price.