WHAT WE THINK ABOUT WHAT YOU THINK ABOUT.
Pricing is a comparative thing. It’s almost never the deciding factor, but within the consideration set, it is often the tie breaker. “I like this one and this one. But this one is $10 cheaper. So, there it is.”
Pricing is something you should be intentional about. It should take into account your competitor set, your cost to go to market, your feature | benefit proposition. Of course, in aggregate it should deliver the optimum profit. But that doesn’t necessarily mean the highest possible margin.
There are six basic pricing strategies, with infinite possibilities for subtle distinctions within a market:
• More for more. This is where luxury good reside.
• More for the same. Korean auto manufacturers have gotten a lot of traction from this strategy. A Kia that costs like a Honda and drives and looks like a Jaguar is going to win a lot of the time.
• More for less. This is the easiest to sell. It is the strategy sales teams push for. Problem is that it gives very little room for promotional offers. And raises the expectation of a low price.
• The same for the same. Rock salt, baby.
• The same for less. The Gap is the same as Banana Republic, but it costs less.
• Less for much less. No-frills compact cars.
Determining your pricing strategy is very valuable in knowing how you go to market. Nobody is looking for a deal on a Rolls Royce. Everyone is looking for a deal at WalMart. It’s a crucial part of your overall value proposition. And, because it is the most flexible feature you have (you can raise and lower a price in a minute), it is one that allows you to seize opportunity the fastest.