Wednesday, November 13, 2019

MBA in a Nutshell #13 - Marketing : Marketing Mix - Price

Wow ! It took ages to get out of the product segment.

The segment of Price only has enough material for one article. Here are all the possible approaches to price a product

Premium Pricing - Charging a high price relative to other brands. Hermes is a great example of a brand that does this. I wish I were here.

Fair Pricing - Price that is objectively regarded as being reasonable. NTUC Fairprice is definitely in this category. (OBVIOUSLY !)

Penetration Pricing - Charging a low price to generate volume. My program was here a year ago. I would argue that many unicorns like Grab employs this strategy.

Parity Pricing - Charging a price that matches that of competing brands. If you cannot differentiate your product, you will have no choice but to do this.

Cost-Plus Pricing - Charging a mark up based on costs incurred. You don't really want to get into a business that does this. I suspect the smaller law firms are slowly moving into this territory.

Idiosyncratic Pricing - Price based on what the value is to the individual customer. Another heaven I wish I could be in. The rules for selling in this domain is almost all consultative driven.

Leasing arrangements - Allow the customer to lease to push decision making into lower level management. Photocopiers employ this strategy very well.

Preemptive Pricing - Nasty stuff. You lower the price to damage a new entrant into the markets. I don't like doing this but over time, some folks may want to compete in my territory. As I do not spend my trainer fees on living expenses, I have enough dry powder to start a price war and even engage in painful IP litigation. As a somewhat paranoid, I have already assumed that this would happen and have a network of allies on standby. I guess the price for success is eternal vigilance.

Push versus pull pricing - Pricing at a compromise between buyer and seller. This is possibly what happens when a B2B arrangement occurs.

Threshold pricing - The reason why charging $99.99 will eliminate a lot of buyer resistance compared to pricing something at $100. This is so common I am not even sure whether it works anymore.

As much as I believe that I deserve Idiosyncratic and Premium Pricing, I don't think the market will allow my own product to be priced this way yet. I think the training industry has not really recovered from the crazy 2000s where these guys with fake credentials hawk derivatives strategies promising some kind of pipe dream to the hapless investor.

We currently price fairly for a 2-day workshop and lifetime access to a FB group. Price increases occur frequently, but I generally do not increase price unless I convince myself that value has increased.


No comments: