Today the Wall Street Journal prompted me to think about price twice today - both indirectly and directly. Indirectly first in an article titled "Learning How to Set the Right Price." As the opening paragraph tied it up "One of the key elements in building a successful business is setting the right price for a product or service. Materials, labor cost and overhead should go into the equation, but it's also necessary to think about whether to undercut rivals. If the price is set too low, incoming revenue might not suffice and the venture might struggle to stay afloat. The Wall Street Journal blog The Accelerators asked a group of startup mentors to provide their insights." The insights focused on naissant businesses but pricing goes to the very heart of business decision-making and yet, all too often, not sufficient energy is spent on getting this right. For a luxury marketer, and that's what I'll focus on today, price is one of the most effective differentiators you have. It establishes two things the relative value of the good or service compared with competing items AND the absolute value of the item based on price suggesting how much has gone into the creation of the item.
Dealing with the second point first it's vital that there is sufficient equity built into the product through a back story which suggests exactly how much effort has gone into creation and, if at all possible, a credible argument to suggest scarcity. It's scarcity that can drive true price differentiation. This gives you, the manager, a fundamental price point where you can then benchmark off the competitive set, the first point.
And here the guide is simple. You always, always, ALWAYS (if you can substantiate it) practice premium pricing. You always want to be the most expensive player in the category. Always. There could well be a role for your brand to be the second most expensive player but that is a vulnerable place to be. It's leadership that counts.
In the USA I played a role in taking a 3rd player brand in terms of volume which had been, for years, historically priced below the No 1 and No 2 players to the price leadership position. The result, growth exploded. The bigger the price differential the faster the brand flew off the shelves. And, at the same time, it became easier and easier to market the brand. Price matters !
And yet why do some brands fail to see this ? For some it's a desperate attempt to gain a short term advantage and sale but ultimately it reduces equity. A few weeks ago I walked through the Burlington Arcade in London (a collection of bijou, luxury boutiques). One brand stood out. Every item in the window had a handwritten card with either 33% or 50% off. All in stark contrast to their stated positioning. If I had previously bought something I would have been appalled (almost cheated) and, if I was considering a purchase, I would have strolled right past.
Price confidently. Be brave. If the product can justify it, the customer will buy it.
And the direct price provocation ? Well after 15 years of always working for an organisation where my advertising clout resulted in me receiving a complimentary WSJ subscription I now faced the hard realities of self-employment and a newly lapsed subscription. However, paying (I've gone for digital and print) actually makes me feel even better about my relationship with the WSJ, a newspaper I consider essential reading for the global marketer, proving the maxim that you value most what you pay for and often that's FULL PRICE !