Have you ever wondered why some businesses fail despite offering great products?
In many cases, it comes down to pricing. Pricing is too important a factor to be determined by supply issues and purely external forces. A lot of businesses take a backseat approach to pricing, miss the bus on the most controllable Brand lever.
Traditional pricing strategies include competitor-based pricing, value-based pricing, cost-plus pricing, dynamic pricing, and KVI pricing. However, pricing that does nothing to enhance the brand image or the brand narrative or be connected to the overall consumer journey is wrongly priced.
In price segmentation, a value brand will price accordingly for the bottom of the pyramid consumers to maximize affordability. On the other hand, a luxury car brand cannot be bothered about Maruti Suzuki's volumes. The pricing of a product should enhance the overall narrative of the brand.
For all products, businesses should focus on the customer experience, not just the product. There are minimum requirements, but above that is experience.
A luxury lipstick brand invested heavily in the product and priced itself out of the market at 1,800/- a stick. They never built a brand narrative to justify the pricing, so all their inventory became dead stock. A typical of a lot of entrepreneurs, they over engineered the product and value engineered, what they deemed, frills.
As you can imagine, they had to sell well below cost to salvage whatever they could.
It is rarely about the product. It is always about the narrative and the brand you’re building.
Discounts are a great way to get in more volumes, but it's about how you use them. If you push your discount messaging over your brand narrative, you become a ‘discount brand’. If potential consumers are told about the discount at the point of awareness, then the entire brand narrative becomes that of a ‘discount’/’value brand’.
But if you have confidence in your Brand narrative to hold the consumer till the point of decision and then use discounts to flip over the tentative shoppers at the point of purchase, it becomes a terrific conversion tool.
It's called price anchoring. The high price is communicated early and the rest of the journey is used to demonstrate value that justifies the pricing. When the shopper is convinced of the value and has built up the desire to own a product from this brand, the pricing band will be fixed.