For some companies, the pricing policy for goods and services is based purely on a combination of covering costs and making a reasonable profit. Smart management however, understands that pricing is one of the most obvious indicators of a brand’s competitive strategy.
Pricing policies determine where your offering is positioned in the market. It is a reflection of your brand’s core values and helps shape customer quality expectations of your product or service. With this in mind, ask yourself, what is your pricing policy telling your market about your brand?
Top 3 Most Common Pricing Mistakes to Avoid
1. Lowest Price Does Not Always Mean Best Value
Most customers care about value for money rather than lowest price. In tough economic times people still have to spend money and so their tendency to focus on the value of their ROI is even more pronounced. Customers are far more than one-dimensional money savers. They want brands that will serve their needs and offer value for money.
2. Cost Cutting
The current economic situation has come companies cost cutting and lowering prices in an effort to survive until things improve. Brands need to accept the current economy as the new normal. Look at it not as a bad economy but as the economy. Companies should implement a pricing structure that best reflects the core value of the brand, rather than clutching at the lower end of the market.
Companies need revenue more than ever. Cost cutting can position your brand as the low cost provider and that is a risky place to be in. Brands that focus on being the low cost provider are left with little to offer the market if suddenly undercut by competitors.
3. Inconsistent Pricing Strategies
Frequently changing pricing strategies makes it difficult for customers to calculate the value received with each purchase. It can lead to consumer confusion and can trigger a lack of confidence or mistrust in what appears to be disorganized management. Identifying your most appropriate pricing strategy and keep it consistent.
Top 5 Strategies That Can Strengthen Your Brand Positioning
1. Emphasize Benefits
Lowest price doesn’t always win. Customers develop feelings through their brand experience that impacts on their judgment of value. Customers care about value. By remaining consistent in your pricing strategy and focusing on communicating the value proposition of your brand you will provide your customer with the confidence they need when making a purchase and help them feel more positive about the way they spend their money.
2. Focus on Core Values
Core values are the foundations on which brand identity is shaped. Re-examining your brand’s core values can help refocus your pricing strategy and provide the guidelines to strengthen your relationship with your customers. If your brand’s core value was to provide greater quality at a fair price then moving to a low price strategy will damage the very nature of your brand. Customers tend to be more willing to spend a little more money for better value.
3. Bundle Costs
Customers feel a loss when they spend money. Separately listing all the elements they are paying for highlights the extent of the loss in the transaction. Bundling the items into one price is easier to change the customer’s perspective, encourages purchasing and can provide a sense of increased value for money.
4. Stagger Price Increases
Webers Law is a strategy adopted by Starbucks in their pricing strategy. It states that customers do not register price increases until they become highly significant. By raising their prices by only a few cents at a time Starbucks did not deter their customers and managed to rise prices without consumer backlash.
5. Make Your Offering Incomparable
You don’t want to be forced to lower prices, but how do you deal with low price anchors set by your competition? The easiest way to make your offering incomparable to your competitors is by changing the way you present your offer.
For example, if you are in the B2B software industry, rather than a generic offering; “software solutions for business”, try “software solutions for business that maximize productivity”. That one small change can make sure that your solution is incomparable and will make it harder for customers to reference the low price anchor.
Do not compromise your brand integrity by slashing prices. Focus on your brand’s value proposition and articulate it clearly to your employees and customers alike. Make sure the pricing strategy you employ supports a sustainable and profitable future for your brand.
• Do you need to reposition your brand to increase your profitability?
• Are you undermining your brand with unsustainable discounting?
• Could re-evaluating your core brand values help you increase your profitability?