Recently a number of my clients have asked me about pricing and promotions. In particular one client, who has a “higher end” offering, was using a discounting method that was simply devaluing her brand. Reflecting on this I decided to write a series of 3 blogs focused on pricing, and this is the first… the second will cover the price ladder and the third will consider price elasticity.
Your approach to pricing and promotions should reflect your positioning…
A number of business writers and coaches talk about “arrows up” and “arrows down” in relation to positioning. If you want a bit more detail or have not come across this before then have a look at this from Shirlaws Online.
In summary, there are 4 arrows which represent 4 key areas of your business proposition. These are market, product, service and price. If your portray your proposition as up market, top end and have a high quality, exclusive product with a price point to match, you will understand the incongruence of a low level of service offered… And the impact that will have on word of mouth, loyalty and trust in your business!
Positioning, in a nutshell, is about aligning all your arrows relative to the whole of the market and making sure that your market is given a product, price and service to match.
So what has that got to do with pricing and promotions?
Everything – as explained above, price is part of the impression you give – not to mention if you present an upmarket, glossy (read expensive) brand and offer a fantastic product and service you MUST have a higher price point in order to cover the costs of the other 3 areas! Don’t forget the very clever strapline used by Stella Artois, “Reassuringly Expensive”, this is so true! People assume if something seems too good to be true then it probably is… I am sure you’ve also heard the statement “It’s too cheap – something must be wrong”. It is. Your arrows aren’t aligned! And just to reiterate what Shirlaws say in their article as above – you don’t have to be a high end business to make a profit, what you need is all your arrows pointing in the same direction. Think “no frills” – Easy Jet has become massively successful with the ultimate arrows down approach!
Bear that in mind when it comes to pricing. You can still offer good, better, best within the assortment you present to the customer. Of course your target customer’s perception of acceptable pricing for good, better & best will be very different if you have down arrows vs. up arrows!
Carry this through with promotions. If you have down arrows you can easily carry off clearance discounts, and the “big red sale” image. If your arrows are all up, as was the case of my client who had used “big red sale” discounting for her end of life products, it simply doesn’t work!
Promotions for “arrows up” brands need to be more creative – still offering good value and an incentive for the customer to purchase, but remaining congruent with the arrows up.
Some ideas include:
- Don’t slash prices – give customers voucher codes – these can still become viral, but the customer feels that it is a little more exclusive.
- Package up bundle deals – offer a collection of products typically purchased together for a special price which represents a desirable discount
- Offer link-save and multi-buys to reduce unit price but without the appearance of item discounting.
- Simply make specific relevant products “featured” e.g. Product of the month – by highlight an item you may never need to change the price at all and still enjoy uplifted sales!
Pricing, Promotions, Positioning – Summary
To wrap up, make sure you are clear on your positioning and from this you will be able to have far greater confidence in your pricing strategy and approach to promotions.
As a final thought, you might want to have a chuckle at my extract from a visit to BBC Breakfast News in November 2010 when we talked about the different kinds of promotional stategies retailers used to “entice” consumers into their stores in the run up to Christmas! Bill Turnbull really just wanted a simple lower prices for all approach… I don’t think he gets it! Enjoy 🙂