OnDemand WTP Pricing Research

Right Price For Brands | mydigitalfc

The key to correcting the pricing problem is not to change the price. It is to establish policies that create an expectation of price integrity and to pay the sales force to sell value rather than volume. Part of the reason that pricing is misused and poorly understood is the common practice of making it the last marketing decision. We think that we must design products, communication plans and a method of distribution before we have something to price. We then use pricing tactically to capture whatever value we can. Right pricing, however, requires that we put pricing at the beginning of the process. For example, a multipart marketing strategy usually is required in value-based pricing. Airlines complicated service packages with arcane restrictions, and their multiple channels of distribution must support pricing that reflects different values of the service to different segments. Without such a strategy, airlines would capture a much smaller portion of the value they have the potential to create. One of the retail chains proved this when they unwisely adopted “everyday low pricing” The strategy actually reduced profits because it undermined the company’s ability to segment customers for pricing. This store’s pricing problem was not with the structure of its pricing but with its inability to create value.

Strategic pricing is about much more than capturing value; it is about orchestrating the marketing fraction to create value that can be captured profitably. We recently recommended that a client design, position and distribute its new product for only a segment of a larger market. The client found this recommendation counter-intuitive since at current prices the product could be better positioned for the larger market. However, going head-to- head with the established competitors would have forced this client to cut prices to defend share, undermining the value of the market and that entry strategy. By focusing on only a segment that could benefit disproportionately from the company’s technology, the chance for competitive reaction was minimised. As a result, more of the value created actually could be captured in the price.

The right pricing will get you up there on profitability, if not market share. What we do not realise is that good marketing begins by determining what marketing efforts are necessary to support good pricing.

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Right Price For Brands | mydigitalfc.

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