Category: Price/value

When it comes to marketing, one detail people often overlook is how pricing comes in to play.

If you think pricing is an insignificant part of your messaging, you should think again. Pricing is a marketing tool, not simply a way to get money. And while marketing may change your pricing, the opposite is also true – pricing should change your marketing.

Stories That Sell

In any sales transaction, countless stories are being told, including the stories we tell ourselves and the image we convey to those around us.

The exorbitant price of a brand name basketball shoe communicates an obvious story to the people who see you wearing it. And the rock bottom pricing at a clearance closeout tells your internal budget coach a story about what a fool you’d be to overlook this sale!

As a marketer, price determines what your business stands for, who you’re designing for, and the story you tell customers. How might that play out? Here’s a practical example.

Consider a baker who wants to adjust prices and marketing accordingly. This entrepreneur might take one of four approaches.

1. A Free Baking Blog with Helpful Recipes and Webinars

If a business wants to make money, it can’t afford to give away freebies, right?

Wrong.

A free idea is far more likely to spread than an idea that’s tethered to money. When a chef gives away her recipes or leads an online seminar, she’s distributing ideas for free, but building popularity and leverage for her name.

While you can reproduce her baguettes at home, enjoying a pricey, oven-fresh roll in her bistro is even better. This allows her generous compensation while building awareness, trust, and a larger platform to sell her products.

2. Products Priced for a Quick Sale

If the ingredients and overhead associated with a loaf of bread cost our baker $1.95, selling loaves for $2.00 may allow the baker to move a lot of product, and fast.

In this case, the marketing storyline should match the budget-conscious shopper’s mindset, using phrases like “your bargain bakery favorites” or “first-class French bread at no-frills prices!”

3. Mid-Level Markups

Say the baker decides to sell loaves at $3.00 apiece.

Now she makes more than a dollar a loaf, or more than twenty times she made at the previous level. If she kept prices a dollar lower, she would have to sell 21 loaves for every loaf sold at $3.00, which might mean the difference between a few customers an hour versus a line out the door.

To sell her story at the $3.00 level, the savvy baker might invest in a sparkling clean shop, a new sign in the window, and taglines like “artistry in every bite” or “you deserve something delicious.”

4. Majoring on Luxury

Here the baker prices loaves at $6.00 apiece, choosing to sell not just a product, but also a full-scale experience.

Loaves are nestled snugly in custom burlap bags and paired with a small spread of the customer’s choice. Elegant café seating allows customers to enjoy savory soups and decadent desserts onsite. Everything about the bakery screams indulgence, and marketing is based around taglines like this: “Heaven on Earth is here.”

Intentionally Shape Their Experience

As you price your products, craft marketing narratives that correspond to the story people will experience.

And remember, when people are heavily invested in a bigger financial commitment, they need narratives that justify this expense. Work hard to set their conscience at ease, and you will be rewarded with loyalty and sales.

In September of 2019, Apple unveiled the iPhone 11, featuring a dual-lens rear camera, automated night mode, and built-in support for vision, hearing, and mobility.

One of the biggest surprises of the iPhone 11 was not its technical features, but its price. The iPhone 11 started at $699, down from the iPhone XR’s previous price of $749, and signaling one of the biggest year-on-year reductions in iPhone history. Apple also implemented $150 cuts on products like the iPhone 8 and the Apple Watch. Tech specialists were quick to comment:

“The biggest news from the Apple launch was the price cut for iPhone 11,” Chris Caso, an analyst at Raymond James and Associates, wrote in a note to investors. “We view this as an admission that Apple stretched too far with the price points at last year’s launch.”

Apple executives were not afraid to adjust pricing to current customers, especially knowing it may encourage upgrades or woo digital streaming subscribers. Lowering prices also increased the likelihood of up-selling related products: people who buy iPhones are far more likely to purchase iPads or AirPods.

Pricing that is “Just Right”

What is the best strategy for pricing the products or services you sell?

At first glance, this question seems pretty straightforward. But in reality, pricing is an art. Pricing well can enhance sales and create a prospering business, while the wrong approach can alienate customers and give competitors the edge.

There are a variety of pricing strategies in business, with some psychological influences in the approach you take. Here are four models to consider.

1. Cost-Based Pricing

The most straightforward pricing strategy is “cost-plus” pricing.

This involves calculating the total costs it takes to make your product, then adding a markup to determine the final price. This method is simple, fast, and lets you quickly add a profit margin to any product.

2. Market-Oriented Pricing

Market-oriented pricing starts from a cost-based perspective but adjusts pricing up or down with an eye on the competition and the customer.

For example, after comparing your products to similar items on the market, you can consciously price your products higher and brand your products as “best-quality” or “better performing.” Conversely, companies that price products low can lure more customers or sell large volumes that easily compensate for slim profit margins.

3. Discounts and Markdowns

Discount pricing is a strategy where items are initially marked high but then sold at a seemingly reduced cost to the consumer. 

This can be especially effective during seasonal demand, inventory liquidation, or when marketing to value-oriented purchasers.

4. Flex Pricing

Flex pricing (or dynamic pricing) allows businesses to manipulate sales based on current market demands.

Flex pricing is at its best on big retail days like Black Friday or Cyber Monday, but can also be linked to timebound marketing strategies. Similar to what many sports teams and airlines do with ticket prices, you can manipulate prices up or down in a timebound fashion.

Coupons are another way to discretely provide dynamic pricing to a subset of prospects or customers. This allows you to attract new users or build momentum during seasonal promotions while remaining profitable.

Dynamic pricing can be challenging but worthwhile. In 2013, Walmart used flex pricing to change the prices of its products almost 50,000 times a month, and with this pricing model, its global sales grew by 30 percent!

Adjust as You Go

You have a great deal of flexibility in how you set prices.

And the good news is this: there is no surefire method to pricing things “just right.” Consider the current pandemic situation, your target customers, eyeball the competition, and hone your marketing to match the pricing strategy you pursue. Experiment, adjust, and see what works for your business.