I’ve got to admit I was never a big fan of “The Price Is Right” back in the 80s with Leslie Crowther. It was mentioned in a conversation I was having with an old friend last week and it got me thinking. Price is an important part of the marketing mix, but do businesses get their them right or not?
I often talk on my marketing course about the “EasyJet” factor. When EasyJet first launched in the mid-90s, many people thought that their planes would be held together by duct tape and that they would soon be falling from the sky. This obviously wasn’t the case as the Civil Aviation Authority regulates the conditions that aircraft from any airline must be in for them to be considered fit to fly.
So why did some people have this obviously erroneous concept of EasyJet? Because EasyJet’s advertised prices were so much lower than other airlines that people thought they were cutting corners to dangerous levels.
In other words, the price affected people’s perception of the product.
Let’s take a more recent example. My other half had asked me to pick her up some Ibuprofen from Superdrug. Superdrug stock a range of Ibuprofen products with a value one for 39p, Superdrug’s own for 99p and Ibuprofen for £2.39.
All of these brands contain 200 mg of Ibuprofen as their only active ingredient. The active ingredient is what creates the desired effect. The rest of it is bulk which gives it colour, flavour etc. Here’s my question which one would you buy and why?
Logic says the cheapest. It’s not like you need to be seen taking fashionable Ibuprofen tablets or you’re buying them for their taste or, in fact, for any other reason than pain relief. However:
- Would you trust the cheaper ones?
- Do you think the branded ones would be more effective?
Here’s the point:
The branded tablets are considered better because of their marketing, packaging, positioning and price even though the product is pretty much identical to their cheaper competitors.
Price is a key factor as people paying more believe they will work better. The premium price of the branded tablets also casts doubt over the credibility and effectiveness of the cheap alternatives.
The irony is that it is by charging the higher price, companies can afford to improve their marketing, positioning and packaging. It is these things, in addition to a good product, which lead to the premium price being acceptable.
Many consultants I know suggest to clients that they simply raise their prices. Unfortunately, a pricing change alone will not necessarily re-position you as needed with your existing customers. In fact, I’ve found in the Midlands that many companies resent even a reasonable annual increase in prices from an existing supplier.
You don’t have this situation when quoting for new customers so it is easier to raise your prices and start re-positioning for new clients.
Price is just one part of the marketing mix but it is the only one that makes you money so it is vital that you get it right.