We all know that today’s economy poses a tough challenge for companies of all sizes and industries. But through it all, many organizations will survive and even thrive. How? Simply by changing a few fundamental ways they do business– putting emphasis on creating strong loyalty to their brand and preferably, to the company’s premium brands. And to do this, they are dissecting the 4 “P”s and retooling…quickly. For today, let’s focus on one of the 4 P’s – PRICE.
How you price your product or service in normal times can be a challenge in itself. It’s all about PERCEIVED VALUE. Price too high, well you lose most of the time. Price too low, and your profit margin is compromised, plus you may lose out to higher priced competitors because your product/service is perceived as inferior. (I learned this lesson the hard way when my agency came in at 50% lower than a competitor and we lost the bid. The next time we raised our bid up 45% and won. Did we cut corners? No. We just were able to do the job at a lower cost because of our lower overhead, but our client didn’t care — it was the perception that they would get more VALUE at the higher price)!
In these tough times the game has changed. The key is to find the ultimate price point on what your customers are willing to pay, and to get them to be loyal to your premium brand. You could just simply lower your prices to gain or keep market share–but a healthier approach would be to “repackage” your offer so that profitability is acceptable and the consumer is willing to TRADE UP for your more profitable, premium brand by paying the same for the premium brand as they would for the standard version.
Here’s an example:
Say you have three kinds of hand lotions – regular, advanced and premium. They sell for $4, $5, and $7. They are all packaged in 16 oz containers. The price/oz. is $0.25, $0.3125, and $0.437 respectively. Quite a big jump from standard to premium. But, if you price them all at $4 each and repackage the advanced in a 15oz. bottle and the premium in a 14oz. bottle, the price per oz. is now $0.25, $0.26, and $0.28 –not a big difference in the eyes of the consumer. Now the consumer can buy the premium for the same $4 as the standard–and probably will even though they get 2 oz. less. You will take a smaller profit margin then usual, but you are achieving your objective of maintaining your market share and developing loyalty to your premium brand.
We all have our own pricing models whether they are subscription-based or per project or per piece. I’m sure that you can find creative ways to find the ultimate “P” to help you win in this economy and in good times ahead.
Part 2 of this series will examine another strategy that is a MUST for any organization.
I welcome any comments, views, concerns, topics you’d like to hear about… Have a great day! Brian.