Can your customers, clients or users tell the difference between you and your competition? Do they understand the differences in price…and value?

Can price be a key differentiator? 

Here’s something we teach in class: 

• You can as a company make your product stand out by lowering the price but if you cut your margin and earn less, that won’t help your bottom line. It will shrink it. 

Most people wouldn’t usually think of “price” or pricing as a variable and a way to differentiate your product or service. Price is often thought of only as a result of “cost of goods” plus profit. In sophisticated marketing strategies, pricing can be very impactful as a differentiator.

In summer 2017, Amazon acquired the upscale chain Whole Foods for $13.7 billion. So, what did Amazon immediately do? It cut prices on a variety of different products and drove store traffic. In 2019, Amazon cut prices again to add traffic. Interestingly, in both cases there was so much publicity by the media which generated an increase in promotion, too.

The big question is “Will these price cuts be sustained and will they change shopper behavior? (Brief Update:  Through its strategies Amazon has been training its Prime members (“People”) to expect low prices. Amazon offers its Prime members an additional 10% off sale items when they shop at Whole Foods. … To get the discount, Prime members will have to scan their Whole Foods app at checkout, after signing into the app with their Prime membership.)

Let’s look more closely at “Price” one of the nine elements or components:

• “Price” and “Pricing” are the sum of the values that customers exchange for the benefits of having or using the product or service. “Price” is all of the aspects regarding pricing. The amount of money a consumer is willing to pay to obtain the product. Pricing includes wholesale/retail/promotional prices, discounts, trade-in allowances, quantity discounts, credit terms, sales and payment periods and credit terms. Pricing decision making also involves adjusting prices concerning the competitive environment, economic situations and involve buyer perceptions.

• Examples:
  • There are actually four ways to increase sales revenue:
    1. Increase the frequency of transactions per customer (“People.”)
    2. Increase the number of your customers.
    3. Increase average transaction size.
    4. Raise your prices.

Be sure to look at strategies of competing for the customer, not against your competition. As 2 Guyz Brian will often say, focus on satisfying your customer’s wants and needs, and you won’t have to worry as much about competition.

You can as a company make your product stand out by lowering the price but if you cut your margin and earn less, that won’t help your bottom line. It will shrink it Under “Price,” your firm can lower the price to the point it separates your company from the competition.

You can raise your price to create differentiation or exclusivity. It’s not always easy, but think of elite brands like Rolex, Bentley, or Tiffany. If the prices drop too low, the brand is actually devalued.

The 2 Guyz teach that with pricing, there can only be one “lowest price” leader. Fighting for the lowest price can also lead to fighting to win at failing, if profits are not maintained.

A common fallacy is that “we’ll make up for lower prices with volume”, but that rarely, if ever, works.

Walmart has done it by reengineering their business, their operations, their purchasing, and their distribution to not only make them the lowest price, but to be profitable at the same time.

It was a fun drink in high school. Larry would go to the liquor store on Slauson. Brian would go to the Mayfair Market. After football, basketball or baseball games we would buy a Hostess product of some sort and an RC. In the south they would drink an RC and have a Moon Pie.

Don’t see it promoted much in the USA, anymore. Don’t hear of it much, either.

How it selling in Uzbekistan? It’s gaining market share from Pepsi and Coke.  It’s promoted all over the place.  Also in Tajikistan.

The brand manager is using “price.” Lower pricing for RC. Plus plenty of outdoor advertising and instore displays.

But the reason for this post…You’d never guess they are using a pro-America slogan. “American Cola RC cola since 1905.”

The 2 Guyz on Marketing don’t think that would sell here in the USA. But it is in central Asia.

Cinemark, the third-largest movie theater chain, has a marketing partnership with the AAA (aka the Auto Club). The AAA promotes that they have movie tickets discounted for Cinemark.

As an AAA member, you can purchase tickets for $8.49. Not sure you knew that. Sounds like a pretty good deal, right? Discount programs and sales promotion fall are part of “Price” and “Promotion,” under the 9P’s of Marketing.

Today, Cinemark said customers of “Movie Club” pay a monthly fee of $8.99 for movies. But wait there’s more. It’s only one movie a month. Really? The Movie Club members will receive a credit for only one movie ticket a month. To be fair, these subscribers can also buy additional tickets for $8.99 each. Seems to the 2 Guyz that the program doesn’t amount to much.

In a major city like Los Angeles or New York, average ticket prices are twice that much. But nationwide, ticket prices average less than $9, so again, where is the benefit.

Discounting and sales promotions are usually designed to be short term sales boosts to get people to try something or possibly switch brands. There is a downside, though, in that people can get “hooked” on it. J.C. Penny tried to eliminate their coupon discounts a few years ago, only to find sales drop dramatically.

So as movie fans, when we heard Cinemark announce their $8.99 movie promotion, “Movie Club,” we had to look more closely. And we also found it odd that it limits only one ticket a month. Cinemark sells tickets to Auto Club for $8.49. That’s a better “movie” deal.

In sophisticated Marketing there are more than the classic four P’s of Marketing, but “Price “ is in the four P’s and is one of the important elements under the nine P’s of Marketing.

Can your customers, clients or users tell the difference between you and your competition? Cam price be a key differentiator?

Most people wouldn’t think of “price” or pricing as a variable and a way to differentiate your product or service. Price is often thought of only as a result of “cost of goods” plus profit. In sophisticated marketing strategies, pricing can be very impactful as a differentiator.

In summer 2017, Amazon acquired the upscale chain Whole Foods for $13.7 billion.

So what did Amazon do immediately? It cut prices on a variety of different products and drove store traffic. Interestingly, there was so much publicity by the media which generated an increase in promotion, too.

The big question is will these price cuts be sustained and will they change shopper behavior? (Brief Update: In it’s most recent annual report, after less than a quarter of ownership by Amazon, a declining sales trend was reversed and sales were up 4.4%.)

Let’s look more closely at “Price” one of the nine elements or components:

• Price/Pricing are all aspects regarding pricing. The amount of money a consumer is willing to pay to obtain the product. Pricing includes wholesale/retail/promotional prices, discounts, trade-in allowances, quantity discounts, credit terms, sales and payment periods and credit terms. Pricing decision making also involves adjusting prices concerning the competitive environment, economic situations and involve buyer perceptions.
• “Pricing” is the sum of the values that customers exchange for the benefits of having or using the product or service.
• Examples:
  • “Believe it: there are four ways to increase sales revenue:
    1. Increase the frequency of transactions per customer (“People.”)
    2. Increase the number of your customers.
    3. Increase average transaction size.
    4. Raise your prices.

Be sure to look at competing for the customer and not against your competition. You can as a company make your product stand out by lowering the price but if you cut your margin and earn less, that won’t help your bottom line. It will shrink it Under “Price,” your firm can lower the price to the point it separate your company from the competition.

You can raise your price to create differentiation or exclusivity. It’s not always easy, but think of elite brands like Rolex, Bently, or Tiffany. If the prices drop too low, the brand is actually devalued.

2 Guyz Brian adds that with pricing, there can only be one “lowest price” leader. Fighting for the lowest price can also lead to fighting to win at failing, if profits are not maintained.

For more Marketing insights, ideas, concepts and Marketing solutions: Go to Londremarketing.com and look under “Articles and Resources” and the 9P’s/Nine P’s ©2007. Specifically you will find them detailed at 9P’s/Nine P’s or Nine P’s/9P’s of Marketing.

*Created by Larry Steven Londre. Copyright 2007.