Typically price is seen as a means of positioning yourself against your competition. But what level and why?
Pricing – Low or high?
More sales at a lower price may likewise mean lower profits, compared to fewer sales at a higher rate. For new market entrants or new product launches, the strategy may be to claim better or premium value to support a higher price or, even a strategic ‘grab’ for market share – by undercutting competitors to gain a market foothold quickly.
Often, price points are set below what they should be because the Company involved does not have sufficient confidence to do so, perhaps due to market immaturity or competitiveness.
This is where research is very important. If a product is truly unique and genuinely better than its competition then it should be priced accordingly. Consumers are smart, they quickly evaluate their experience and draw conclusions that can be long-term positive or negative.
Price, the perception of Value
We all have a preconceived understanding of what price indicates, namely that price is typically related to quality. Therefore, it is almost impossible to compete on both quality and price at the same time.
Until a product/brand builds a perception of value in the mind of consumers, price (whether low/high) will be the immediate qualifier.
You cannot ‘play’ with Price
Once set, price is very difficult to change. Dropping your price to gain market share with the thought that you can raise it later, will not work. That would irreparably damage the brand and the Company. Customers would quickly lose confidence and stop buying. Getting the price right, is so important.
If your Company genuinely has a new product or service that is clearly differentiable in terms of quality and value then pursuing some level of a higher price strategy is best. If concerned about initial sales there are still ways to attract early adopters.
Consider “introductory offers” to get customer take-up. This could be in the form of coupons, discounts and even free samples. That will gain initial usage and users can believe they are being rewarded for being early adopters.
In valuable but competitive markets, rivals can re-formulate or ‘improve’ their products, thereby largely eroding points of difference. Often that means over time that there is a transition from competing on quality and value, to competing on price.
Premium and Niche Pricing
Pricing high and building a strong brand around the value you offer, requires a deep understanding of your customers and considerable confidence to maintain. It is expensive to deliver and the brand must continue to maintain customer satisfaction, but the financial rewards are clear e.g. Versace, Reiss, Jimmy Choo.
Pricing Strategies – Getting them right is so important!