{"id":36,"date":"2022-08-04T12:32:24","date_gmt":"2022-08-04T12:32:24","guid":{"rendered":"https:\/\/www.aovantage.in\/blog\/?p=36"},"modified":"2022-10-27T10:07:14","modified_gmt":"2022-10-27T10:07:14","slug":"the-price-conundrum-should-pricing-be-a-variable-to-drive-your-marketing-strategy","status":"publish","type":"post","link":"https:\/\/www.aovantage.in\/blog\/the-price-conundrum-should-pricing-be-a-variable-to-drive-your-marketing-strategy\/","title":{"rendered":"The Price Conundrum \u2013 should pricing be a variable to drive your marketing strategy?"},"content":{"rendered":"\n

Arguably, no component of the marketing mix (generally believed to be the 4 P\u2019s) generates as much discussion, analysis, and at times even angst, as Price.<\/p>\n\n\n\n

It is a function of perceived value for sure \u2013 but everyone\u2019s perception, including different purchaser groups, seems to be different!<\/p>\n\n\n\n

Generally, as a marketer, I would prefer not to tinker with the price once it has been set. However, in many cases, it is not that simple.<\/p>\n\n\n\n

For new launch planning<\/a> \u2013 price is an unknown variable, the more innovative the new offering the more difficult the pricing strategy for the product. However, the fact remains that it is a crucial part of how to successfully launch a new product in the market.<\/a><\/p>\n\n\n\n

For mature products, (typically the BCG grid cash cow), companies try to keep high-profit margins, \u2013 which though helped by rational promotional spending \u2013 still depends largely on a high price. What if then, there is a new entrant with similar features but reduced price? Do you drop your price? Or take a hit on volumes?<\/p>\n\n\n\n

I have 3 learnings on pricing which can help take this discussion further.<\/p>\n\n\n\n

1. Price can be a differentiator: <\/strong>the important factor is where it fits into the overall strategy. Also, it is not the only parameter that drives marketing, some examples:<\/p>\n\n\n\n

a. Higher Price can help occupy a unique position<\/em><\/p>\n\n\n\n

(i) Luxury Fashion brands \u2013 Rolex, Gucci have successfully used a higher price along with sensorial and other brand associations to occupy a distinct competitive position.<\/p>\n\n\n\n

(ii) Apple is an example of a technology brand using premium pricing as one of the important tools for driving its strategy.<\/p>\n\n\n\n

b. Lower Price can drive customer acquisition & loyalty in a specific customer segment<\/em><\/p>\n\n\n\n

(i) Airlines: Ryan Air, Southwest Airlines \u2013 are examples of low-cost airlines on both sides of the Atlantic \u2013 but both had clear unique activities and a distinct value proposition for travelers to support a lower price.<\/p>\n\n\n\n

(ii) Pharmaceuticals: Generic brands follow a clear low-cost strategy post patent in developed markets, similarly, branded generics pharmaceuticals in India, South East Asia, Africa have a clear median position between the innovator (or once innovator) and pure plain vanilla generics, based on price & quality.<\/p>\n\n\n\n

In each of the examples above, price is a critical but not the only component of strategy. It is backed with a synergistic fit of activities reinforcing the overall ethos of the brand\/company. However, when used to drive strategy in this way, price is largely in a clear, constant band of high\/low\/middle.<\/p>\n\n\n\n

2. Pricing Is Complex: <\/strong>Be it setting the price for creating the marketing strategy<\/a> for a new product launch or deciding to lower prevailing prices for being competitive in a particular context<\/p>\n\n\n\n

a. Pricing is not easy to research. <\/em><\/p>\n\n\n\n

(i) It requires a special research expertise: in my experience pricing researches are trickier than others. The questions asked, the way they are framed, understanding the unsaid \u2013 it requires much more finesse and expertise.<\/p>\n\n\n\n

(ii) Customers at times do not reveal correct insights regarding price: often this is a parameter which the purchaser or user is not comfortable revealing<\/p>\n\n\n\n

(iii) Customers at times do not know the price to be attributed to an offering: for totally new segments pricing is an essential part of the product launch strategy, however, customers often do not have a bench mark to compare, hence the pricing suggested goes to either high or low extremes.<\/p>\n\n\n\n

b. Price Action (changing price)<\/em> has other layers to it:<\/em><\/p>\n\n\n\n

even when there is an urgent need to reduce the price (say) due to competition\u2019s \u201cprice moves\u201d, there are various factors to be considered. For example, prior to a price reduction decision, we realized through our surveys that it would impact a small (though important) percentage of customers. <\/p>\n\n\n\n

The others would be largely unaffected because they valued relationships and our product features more than the cost difference to be paid.<\/p>\n\n\n\n

3. Alternative Pricing Plans should be in place:<\/strong> pricing is one area where a certain flexibility is warranted (marketing workshops or simple brain storming sessions are needed periodically to be prepared for this)<\/p>\n\n\n\n

a. Market Shifts may require price action:<\/em> Customer preference shifting to newer trends may at some point require lowering of price or special price linked promotions for retention<\/p>\n\n\n\n

b. Price cutting by new (or existing) competition<\/em>: if a significant % of important customers are likely to shift, it helps to have an alternate pricing plan in place<\/p>\n\n\n\n

<\/p>\n\n\n\n

So, while competing on price does not sound like a smart policy, and is fraught with dangers of slipping into destructive price wars, it may require deeper thought depending on the industry or life stage of specific brands.<\/p>\n\n\n\n

<\/p>\n\n\n\n

<\/p>\n<\/body>","protected":false},"excerpt":{"rendered":"

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