Two Pricing & Positioning Mistakes to Avoid

Getting pricing and positioning right is the lifeblood of business. Succeeding makes the difference between a thriving company with satisfied customers and one that struggles to find the right market and balance the books. It can be particularly hard for small business owners who have little marketing experience. Not only do businesses need to be experts in product or service offering, but how it’s offered too. Positioning refers to how customers view a service or product, particularly relating to the commercial landscape and how the offering compares. This encompasses various points, from what motivates customers to buy, to what differentiates competitors and the image that is associated with a particular brand. Pricing is intimately intertwined with positioning, as it affects how customers perceive the value of a product or services and how it is presented. For example, a shop selling luxury handbags’ customers will have different expectations and motivations than those selling cheaper bags on a market stall. To get it right businesses don’t necessarily need to spend thousands of pounds on consultants or learning by making mistakes. Here are two of the most common blunders made when it comes to pricing and positioning, and some examples of how to get it right.

Failure to understand customers

Image credit: Moyan Brenn

In order to create a strong value proposition that resonates with customers a good understanding of those customers is required. Without understanding the market the risk is that sales and marketing efforts will alienate customers, be directed at the wrong people, or both. Harley-Davidson show how to do this right. Their well-known positioning statement targets “macho guys” who are buying into the values of freedom, toughness and individuality associated with the archetypal cowboy figure. Businesses with several different products or services, or those who have different types of customers should segment their customer profile. Put simply, this means establishing some of the different types of customers to target. Popular London chain Wahaca, like many restaurants, offers a lunch-time menu which is tailored to their weekday lunch customers who need to fit a speedy meal into their lunch hour. These customers are willing to spend around £10 each, in contrast to their evening customers who want a more leisurely dining experience for which they’re willing to pay much more. Customer identification can be done through analysis and surveying existing clientele and market research, followed up by creating marketing personas based around these findings. This helps to ensure that businesses are focusing their sales and marketing activities on the right people.

Racing to the bottom on price


Image credit: Tim Parkinson

When starting out or trying to build sales it can be tempting to slash prices to try and compete with the bottom 10%, even if bargain basement prices aren’t at the core of the business’ value proposition. Although in the short-term slashing prices might boost business as people snap up a bargain, over the long-term this can create three major problems. Firstly it creates an association between the brand and cheapness, which, unless low price is at the core of the offering, will devalue the brand offering in the eyes of consumers. Even giants get caught in this trap. Tata, one of the world’s most valuable brands, found that their Nano car’s image was tarnished by being marketing as the cheapest car, which stigmatised the brand. As a result, after being initially launched in India, the company is planning a fresh launch in another Asian country where it doesn’t suffer from the same positioning problems, before bringing it back to India with a fresh image. Secondly, it attracts the wrong sort of customer, one whose main motivation for choosing a product or service is price. When a competitor offers a cheaper price what’s going to stop them shifting their allegiance? Meanwhile if a customer isn’t just looking for the cheapest option but a high quality one focusing on low prices will not resonate with them at all. Thirdly, this can be simply unsustainable in the long-term. Customers who started by purchasing at the cheaper price are unlikely to tolerate a rise to a more sustainable price point, which means the business may never be able to charge a profitable price for it. For inspiration businesses can look at how top-performing companies in their sector are doing. How do they add extra value so that people are happier to pay more? This could be focusing on quality, exclusivity or experience rather than price, as Waitrose are doing to attract customers from mid-market stores like Tesco and Sainsbury. Getting these two right ensure that you’re targeting the right people and setting sustainable long-term pricing; essential foundations for business growth.

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