So far in this series on marketing, we’ve discussed three fundamental marketing questions:
– What product or service do we want to sell?
– What “competitive advantage” separates us from our competitors?
– Who is uniquely suited to buy from us (who is our “prime prospect”)?
Now, to conclude this series on marketing, let’s talk about a very powerful marketing tool, price.
Too often we jump to the conclusion that our price has to be lower than the price of our competitors. Not so. Our price has to be seen as a better value than that of our competitors, but that’s not the same thing as cheaper. For instance, if our product is priced 50% higher than that of our competitor but it lasts twice as long, our product is the better value.
But price also has strategic value beyond dollars and cents. Let’s say our company makes razor blades. We can’t sell any razor blades unless our customers have the handle that holds the blades. So we can put a very low price on the handle (or even give it away) because our customers only need one. But now we have a captive audience that will need to continue buying replacement blades for a lifetime.
Pricing also has great impact on the way we offer our product or service. Maybe our competitor “bundles” the products or services we both offer . . . that is, products A, B, and C come as a set. To buy one, you have to buy them all. Our response might be to offer those products a la carte . . . you can buy one individually or in any combination you want. In similar fashion, our competitor might sell his product in packages of 10. So we might appeal to smaller users with a package of 5 or to larger users with a package of 20.
The list of pricing strategies is endless. But price (and every other marketing consideration, for that matter) needs to be set so that our sales force can sell the way our customers want to buy.
In the last several postings, we have barely scratched the surface of marketing, and there is certainly a lot more to it than the few points we have discussed. For a more in depth view of marketing, pick up a copy of “Duct Tape Marketing” by John Jantsch or “Meatball Sundae” by Seth Godin. Both are excellent books and both are aimed at small businesses who need to practice sound marketing on a limited budget. And for a great look at how to distance yourself from your competitors, pick up a copy of “Creating Competitive Advantage” by Jaynie Smith and William Flanagan.