You can always find a product or service for less. Lowering prices is easy, it just isn’t a lasting strategy.
If you are building a business and want to sustain margins, segmenting the market is a smart place to start. When you can add value, it can be a winning approach to growth. Lowering prices is a race to nowhere. Raising pricing is a market signal communicating strength and pride in what you sell.
If your product or service is “over bundled” with too many bells and whistles, perhaps you need better intel to understand what your customer needs. You may not need a cheaper product; you may need to market a product that is a better fit for use.
Understanding the different ways consumers use your product might also signal how a pricing strategy can help you grow. Towels are a simple example.
Throwing in the Towel
If you were marketing towels, you might consider a good, better or best pricing strategy.
- Good towels might be sufficient for your kid to take to summer camp or for college.
- Better towels might be what you’d buy for your guest bathroom or beach house.
- Best towels might be what you buy for the master bathroom that you will use regularly.
Don’t over design a towel that doesn’t need to last forever. Add value at the higher, luxury end. Design the quality and make sure the pricing matches the signal you want to send.
If you are continually lowering prices in response to customer pressure, consider how adding value and focusing on a limited segment of the market where there is an opportunity to make a profit.
Pricing Strategy and a Portfolio Approach
There are lots of ways to build a pricing strategy.
- One smart approach to pricing could be to become a specialist who focuses on towels for college students. Align your price with the needs of the market. Smart marketing is narrow and specific.
- The middle is always a terrible place to be. Making products and pricing them for mid-market is a vast wasteland and the scariest territory. Avoid the middle market in any category unless it is part of a portfolio approach.
- Another approach can be to focus on the luxury end of the market and make a superabsorbent towel that is priced to match the added value. Like expensive wine, an expensive towel signals quality to the upper end of the market.
- Some companies want to have a portfolio approach to pricing and products, so they market all three levels. Good, better and best. Your products must align with your price points.
The problem companies face is when their product line and pricing aren’t aligned. Strategy matters and your products and pricing need to fit with a customer’s need.
Don’t throw in the towel, make sure your product and pricing align into a clear market strategy.
Photo by chrissie kremer on Unsplash
Want to discuss your pricing strategy? You can set up a time to chat with me about your marketing challenges using my calendar. Email me jeffslater@themarketingsage.com Call me. 919 720 0995. The conversation is free, and we can explore if working together makes sense. Try my new chat feature on my site if you have a quick question.
