On higher prices

Consumers’ perception on price is a funny thing. Sometimes and for some products, a low price is a must have, other times and products you can’t sell if you don’t have a high price. And the fact is that too often marketeers focus on pricing as the ultimate barrier to sell a product to a consumer, and forget pricing is actually a key area on the marketing mix.

First of all, if you have a high price, you need to sustain it with a tight and strong mix in all the other dimensions. Consumers who are ready to pay higher for a product are usually the ones that demand very high standards in product performance and packaging. They are the ones who can only be impacted by clever and spot on communication. And usually place (where is the product actually sold) is cornerstone – you don’t expect to buy a Ferrari in a shack or a Dolce & Gabbana perfume in a Lidl discount store, right? If you can’t actually deliver high performance against high standards in those 4 areas (vs consumers expectations and competitors performance), then, you sure can’t command a sustained high price for your product.

But then, again, there is the other side of the mirror – consumers’ perception and how they are influenced by prices. If you have a great product, but you sell it too cheap, a large proportion of consumers will probably say that the product isn’t better than competitors sold at higher prices (even if they fail to meet the other 4Ps standards) – and thus will reject it. If you want to build a quality perception of your product or brand, you have to sell it at a high price, in order to drive higher segment volume. And be extremely careful at managing your promotional price.

But managing a high price is also incredibly difficult – especially if you need to rely on distributors or trade to reach your end target. They will usually be very pressured to actually drive prices down – especially if they compete vs other stores that sell your product. You have to be extremely careful when managing your price with them, to ensure correct deployment, stressing the strength of all your mix (a tip, make sure your trade actually values higher priced mixes and is interested in sustaining that pricing strategy).

But then there also is a magical side on higher prices. By having the right price, you can actually improve your business margins. And, in a high quality product, a higher price means longer strides – to reach a turnover target, lower priced products need to run, to have a higher volume of sales. Many people think that by selling at a lower price, you can actually sell more volumes and thus compensate the lower prices – but that is not necessarily truth. When thinking about volumes and prices, one also needs to think about elasticity. And the objective is actually always play at the top of it – sell at the highest possible price, without breaking volume.

If you can build a higher quality mix, able to sustain a higher price without significant volume breaks and you can effectively (and legally) manage price in the market, then you can play the high card – a higher sustainable pricing strategy, able to command both higher revenues and margins. Congrats!