ABCI usually gets involved in a marketing campaign AFTER a product has been developed and pricing has been set, so we work with the variables we have. But it’s great when a marketing firm actually has the opportunity to be involved in pricing strategy.
For the sake of this discussion, the product could be anything you’re selling, even a service.
When you’re setting a price for a product, there are several factors to be considered. What other products are on the market competing with this one? Where does this product fall in terms of quality and features?
You’ve probably seen some version of this diagram in marketing textbooks.
To quickly explain the model – we have at the upper left the economy model – low quality, no frills, lowest price.
Then we have the market penetration pricing strategy, where a product may be high quality but the price is kept low to drive out competition, with the strategy of raising the price later to make up for losses after competitors have been driven out. This happens in some cable TV or cell phone markets.
The skimming strategy is where a high price is charged for a low quality product. The best example of this is the typical “infomercial product” (pet nail trimmers come to mind) where the product itself is not all that great but a huge, short-term marketing push is made to sell lots of them before competitors reach the market.
The premium product is my favorite as a consumer and as a marketing professional, because high quality products are the best value for the consumer in the long run. It’s my job as a marketing rep to prove to the customer that the price is justified.
With the current recession, it seems many companies are tempted to make a bare-bones, no frills product and charge as little as they can for it. This is shortsighted for three reasons -
Reason #3 – There is something to be said for “perceived value.” One Harvard Business Review case study showed that press-on nails sold much better when the price was raised from $1.69 to $6.99. (The product, packaging, and everything else remained the same.) Women who were interviewed later said that they didn’t feel comfortable buying and wearing the cheapest product on the shelf.
Reason #2 - There are always unforeseen costs. Developing, testing, producing and providing customer service for a product takes a lot of time and costs a lot of money. The revenues from sales of the product have to sustain your company, your employees, customer service, research on new products, and, of course, the marketing you need to do to attract customers. Don’t short-change your company by underpricing your product or service.
Reason #1 – (Most important) Quality is worth working for and worth paying for. Building a better product costs more. It involves more research, more testing, and better materials. People understand that, and especially in aviation, consumers are willing pay more for a quality product. And they’re willing to recommend a high-quality product to others, and buy from you again when the need arises.
One small aviation company I know could get a really great deal on a used turboprop twin or a new twin recip, but has determined to wait until they can buy their ideal aircraft – a new KingAir 350 IER configured just they way they want it. Aviation people are very resourceful about making do until they get what they want; but they are also very particular and determined to ultimately get the very best.
Unless there is some compelling reason to use some other strategy, my advice is to always build, price, service and market a premium product.
It’s the most ethical, sustainable, and fulfilling way to do business. Everybody wants to buy (or work for) the best in any particular business. Do you agree? Leave a comment. Disagree? Don’t leave a comment. Actually I’d love to hear from you, either way.
Most of the services we provide are involved with marketing a completed product or service , but we also do consulting in the product development stages. If you have questions, shoot me an email.