The role of pricing in positioning

“Positioning it’s not an option, nor a discreet operation on the company’s behalf, but a real must-to-do. Otherwise the market will provide itself”.

This quote is from a publication of two advertisers from the ‘70s, Al Riese e Jack Trout, Positioning Era, immediately makes the idea of the importance that positioning should have in the strategic choices of each company. Positioning means to be in the mind of your potential customer, working on the brand and product awareness. 

From these first concept is clear that positioning must not refer only to the price, but to the set of features and perceptions of the product. Obviously price is one of the main levers, but must be commensurate to all other tangible and intangible factors.

These factors can be divided into four categories:

  • Functional: the concreteness of the solution;
  • Emotional: emotions and feelings that a product is able to evoke in a customer;
  • Symbolic: in terms of self-satisfaction;
  • Public: intended as the benefits to the community;

These characteristics, which we could enclose in the concept of customer’s perceived value, must be related to the price and be consistent with it.

Pricing and positioning: two related variables

When we talk about positioning we usually refer to the three main one ranges: low, medium and high. Every product placed in one of these three categories has different characteristics. For example, products in the low-end segment will mainly have functional characteristics, vice versa for high-end or luxury products where their emotional or symbolic characteristics is enhanced.

These characteristics must also be reflected in the price that the costumer has to pay to purchase that product or service.

For low-end products, pricing takes on a significant value, and, in some cases, represents the only distinctive and advantageous feature compared to competitors. For companies operating in these segments, margins are reduced to a minimum and any price change can significantly impact the sales volume. For this range of products the characteristics are mainly functional and often very similar among competitors. The price, is therefore, the main element influencing the purchase choices. Is the reason why for low-end products is strategic to maintain low and stable prices, without placing excessive emphasis on promotions or discounts.

Marketing and communication also have a key role and they should release repeated and prolonged messages over time with an highlight on the price. Simple and immediate adv that remain etched in the consumers’ mind.

For brands and products that are positioned in the mid-range, on the other hand, the price plays a different role and is better to try, where possible, to keep it as constant as possible. This does not mean never change it, but to move price within a range (a maximum and a minimum value) known to potential customers. In this segment it is strategic to monitor competitors’ prices and stimulate sales using promotions. Discounts must be used for short periods, in order to not risk to adversely affecting the consumers’ perceived value. Usually, in case of discounts made on mid-range products, there is a high and fast increase in volumes because a part of the customers who usually buy cheaper products, are intercepted. In the communication strategy, the price doesn’t have to be a leverage element. The pricing strategy must be related with the product features, in order to highlight a good quality-price ratio.

In the high-end segment, the price almost loses relevance as long as the product maintains two elements: its high value and its constancy over time. In this range, discounts or bearish policies are not conceivable, because would lead to damage the perceived value and brand image. As far as advertising is concerned the price must not be mentioned and the emphasis must be especially placed on the emotional and evocative characteristics of the product.

How to manage pricing in a repositioning?

If a company decides to change its positioning, it must be noted that this operation is complex and time-consuming. The first option is to lower your price. This relatively simple operation could produce an immediate increase in volumes, but in the long run, the higher customer segment, the one initially referring to the brand, could be discouraged from remaining faithful to the brand. It is even more difficult to act in order to increase your price to position yourself in a higher range. This process, in addition to being very long, requires large investments in advertising and brand awareness. Precisely for these reasons, in most cases, companies decide to directly create a new brand or acquire one.

As we have seen in this overview, price take a different role depending on the segment in which you have decided to operate. Choosing the right positioning and be consistent with it, is fundamental for a successful strategy.

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