TOPIC - Create a price strategy to avoid mixed messages
Colin Mason - Marketing Matters
(Originally published in the July 2012 issue of the Nova Scotia Business Journal)
Pricing is perhaps the least well-managed marketing function in many organizations — ironic because the price tag is the most easily controlled aspect of a company’s offer to customers. Price is also the most visible buying criteria and often mistakenly targeted as the main hurdle to a purchase decision. Lowering price often becomes the first response to counter a competitor’s initiatives. For these reasons and more, pricing is easily mismanaged by organizations as part of their overall marketing strategy.
In judging your own pricing strategy, consider the potential buyer to have one of three distinct behaviours:
1) The company or brand loyal patron: These are the customers who have an established comfort with your firm or product and continue to buy from you because they see no reason to change.
2) The “price is everything” buyer: This customer seeks the best price without much regard for relationships or product performance. They often like to brag about their ability to find the cheapest deal around.
3) The value seeker: This customer seeks performance, service and product satisfaction as their criteria for purchasing. The value seeker wants to understand the extra benefits they get, and will pay a higher price if satisfied with the reasons.
Almost every business faces these different mindsets in customers. Trying to satisfy all three usually leads to loss of customers and market share, so plan which of these types you intend to attract.
Consider your own experiences as a buyer:
• Have you ever spent a lot of time researching the performance of a product then purchasing it, only to have it go on sale the week after you happily paid full price?
• Have you just bragged about getting the best deal in town on a product, only to find your neighbour got it 10 per cent cheaper at the same place?
• Have you returned a soiled or damaged product to a favourite store for a straight exchange, and been offered a discount to keep it?
• Have you accepted the lowest bid on a project and then been billed after the job for every little extra you assumed was included in the original price?
It’s unlikely these firms were planning either to cheat or anger you. All of these familiar examples simply demonstrate companies with no particular price strategy and thus sending mixed messages about their worth and reputation. Unfortunately confusing buyers this way leads to disappointed and lost customers.
Make it a firm principle to establish the price positioning you want with your select customer group. Communicate this effectively to your sales staff and be clear about any interpretation. Finally, make sure that the use of pricing in your advertising and communications always reinforces the value perception you want to create in potential customers’ minds.
And remember, a customer will determine the value of a product or service by its price, but only in the absence of other criteria.
Colin Mason has invested over 30 years in the management of marketing and advertising. He has authored and implemented marketing plans for corporations, government, not-for-profits and small business. You can reach Colin by e-mailing email@example.com