3 Options for Brands Positioning Their Product’s Price
I was helping our conversion marketing services team with a pricing challenge recently. The client advertised its product through TV and print ads and the calls to action were a phone number and a website.
The product was relatively expensive, and quite a unique product that had indirect and replacement competitors, but no real direct competitors.
The challenge was: How do we position the price for an e-commerce sale?
We outlined three very broad positioning options for them, and I’ll share them with you here today. This is a simple mental framework to help you address your pricing challenges and opportunities. And for clarity of terms, when I discuss price in this article, I’m simply focused on the monetary remuneration your customers pay for your product. (Keep in mind, your customers pay more than just money — mental cost, for example.)
Option No. 1: The Low-price Leader
If you have the lowest price in the marketplace … congratulations! You are the low-price leader.
Price is an asset that you likely leverage early and often, and the price is a large part of your customer acquisition strategy. For example, you advertise through comparative shopping engines or include price as a prominent feature in your advertising and marketing. To get a purchase, customers must only perceive that your product is good enough to meet their minimum needs and not have a significantly higher total cost of ownership than the competition.
One of your key marketing challenges is for customers to perceive that your price is the lowest. After all, your price may be lower without customers even realizing it. So you likely price signal with your store design (a bare bones, warehouse feel); your product display and packaging; and messaging about your business model (direct to consumer, we cut out the middleman).
If your business has the operational efficiency or sourcing advantage to maintain low-price leader status, this can be an effective price position.
However, many marketers fall into low-price positioning almost by default … even if their business operations can’t sustain it. Perhaps they overuse incentives. Or they haven’t established a strong enough value proposition to justify higher pricing.
Customer value perception exists on a spectrum of level of value differentiation (see image below). If customers perceive your product as a commodity, your de facto pricing position will be the low-price leader — if you intend to get any sales. That’s why gasoline stations have giant signs out front that prominently display the daily price of gas.
Low-price Leader Example
In the eyewear industry, Zenni Optical is an example of a low-price leader. You can buy a pair of prescription eyeglasses for $6.95. How high-quality are they? I can’t say. But the customer only needs to perceive that they might be good enough to take a gamble on paying that $6.95.
Option No. 2: Similar Price, But Better Value
You don’t need to beat the competition on price to win the customer’s purchase. Customers will buy your product if it’s roughly the same price as competitors’, but they perceive that it delivers more value.
When leveraging this position for your pricing, you are going head-to-head with competitors — but leveraging an “only factor” that your competition can’t replicate. Perhaps you have a similar-priced product, but it is more durable than the competition. Or your service is similarly priced, but is quicker than the competition.
I would go so far as to say that your main goal as a marketer is to clearly and credibly communicate your value prop’s “only factor” so customers readily perceive that differentiation.
This value perception happens through major marketing initiatives. Branding, taglines, and campaigns are built around it.
It’s the reason the customer experience is so important. As Monetate Founder David Brussin told me, “Price transparency to the consumer online means that pretty quickly, everybody normalizes around the same price ... Customer experience has become incredibly important.”
And it happens with minor tactics, as well. A features matrix on your website, for example. Or you might choose to display competitor prices on your website. The goal isn’t to show that your price is significantly cheaper; but rather, that customers aren’t going to get more value from shopping around.
Similar Price, But Better Value Example
Warby Parker, with prescription eyeglasses starting at $95 and titanium frames that can start at $195, is in the same general price position as affordable traditional competitors.
While the monetary price is similar, Warby Parker’s position is that it offers a better value — more fashionable eyeglasses, better customer experience (which is why they’ve started building brick-and-mortar stores) along with a commitment to doing good by donating a pair of eyeglasses to someone in need for every pair purchased.
Price was a key element of Warby Parker’s positioning. The price was a signal that these eyeglasses had the same quality customers were used to. The founders were originally considering pricing the eyeglasses at less than half the current price ($45).
“It would have put [Warby Parker] in a category I believed they did not want to be in. There are many companies selling cheap eyeglasses. Anyone can go on the Internet and buy two pairs for $99. But there is a perception among customers that the quality is not as good,” said Wharton marketing professor Jagmohan Raju.
By (roughly) matching on price and using price as a positioning element to help instill the perception that they were matching on quality, Warby Parker was then able to show it provided better value because of its value proposition’s “only factor” and was thus a better choice.
Option No. 3: The Luxury Offering
This doesn’t necessarily mean that you sell diamond baubles or champagne. It just has a better ring to it than “they cost more, and it shows” option or the “it costs more for a reason” option.
Price signaling is often important for this offering, as well. As I’ve mentioned before in this article, your job as a marketer is to help customers come to the proper conclusions about your product, help their perception. One way to help your customers perceive your product is the best option is with a higher price. All things being equal, people perceive a $100 umbrella to be better than a $2 umbrella, or a $100,000 car to be better than a $12,000 car.
Of course, it’s not that easy. For one thing, the higher the price, the more you will limit the potential customers you can reach.
But also, a higher price alone does not connote a better option. It could just signal an overpriced product. You must also increase value perception.
One way is with branding. A Louis Vuitton handbag is sold at a considerably higher price point than a basic handbag sold at Wal-Mart. It’s probably not functionally any better. It holds your stuff just as well, so maybe we can say it’s a little more durable.
However, the brand justifies the higher price. It costs more for a reason, and that reason is the brand. Not only what the brand says about the handbag, but even more so what the handbag’s brand says about the person carrying the handbag.
Aside from the brand, value-infused headlines, websites, print ads, user experience, service and countless other customer touchpoints are critical to communicate the positioning of “this is more expensive, but worth it.”
Take Apple, for example. It’s a company that isn’t necessarily a luxury product, but has taken the “higher price and worth it” price positioning strategy. Every customer touchpoint with Apple — from its print and TV campaign that kicked off “Think Different” (better than IBM’s “Think”); to its product design (no gray boxes); to its retail stores (a destination with a positive customer experience, not just a typical store) — was meant to convey that an Apple computer was worth a higher price than a traditional PC.
The Luxury Offering Example
The “costs more, but it’s a better experience” example is buying Giorgio Armani eyeglasses from your local family eyecare doctor. It costs more than Warby Parker or Zenni, but you’re right there in your neighborhood, your eye doctor handles all of the information to make sure you get exactly what you need (you don’t have to try to figure out your pupillary distance), they can adjust it so it fits your face and ensure it is expertly matched to your vision problems.
The licensed optician gets you a cup of coffee or tea while you peruse frames and then helps you find a frame that fits well and makes you look good, based on the bone structure of your face. The on-site optical laboratory features high-quality workmanship and can make adjustments right there, for you, as you need it, even six months from now. And your eyeglasses will be fitted with Shamir lenses, world-wide leaders in lens design and manufacturing, who hold unique patents.
In reading the above paragraph, do you get that feeling? This will be a higher price, but you see why? My text might not have convinced you to purchase. A pair of $6.95 eyeglasses might be perfectly fine for you. But for the ideal customer of a luxury offering, they will understand that this product is positioned for them. Remember, you’re never trying to get every customer. You’re trying to make sure your ideal customer understands that your product is right for them.
Pricing Factors Beyond Positioning
This isn’t everything. There are many other pricing factors to consider beyond just how you position your product. For example, when in the customer journey should you present price to the customer? At the “Maximum Moment of Motivation.” But hopefully, this article gives you a simple framework to consider how you can position your products’ or services’ pricing.
If you choose Option No. 2 (Similar Price, But Better Value) or Option No. 3 (The Luxury Offering), value proposition is critical. Here’s a free download to help: “7 Steps to Discovering Your Essential Value Proposition with Simple A/B Tests.”
Daniel Burstein is the Senior Director, Content and Marketing at MECLABS Institute. Daniel oversees all content and marketing coming from the MarketingExperiments and MarketingSherpa brands while helping to shape the marketing direction for MECLABS — digging for actionable discoveries while serving as an advocate for the audience.