Pricing Tells a Story

Storytelling in marketing is nothing new. In All Marketers are Liars (Seth Godin), we learned that all marketers tell stories and the best marketers tell stories customers believe. Seth goes on to explain that stories are shortcuts to understanding what a product/service is all about.

While reading the August issue of Inc. Magazine, I ran across the line you read in subject header: PRICING TELLS A STORY. Per Sjofors, managing partner at Atenga, is credited with saying that chewy line. He's right ... every price has a story.

There’s a story behind why Air Jordans are so expensive. By buying a pair of Air Jordans, a middle-aged rec-gym b-ball player can Be Like Mike. There is also a story behind the ultra-inexpensive Starbury shoe. The Starbury shoe story tells us we do not need to get caught up in all the hype and dole out a fortune for a pair of basketball sneakers.

There’s a story that goes along with the price for dining at PF Chang’s. You revel in the experience of enjoying family, friends, food, and attentive service from the PF Changs waitstaff. But there is also the story of paying for an equally-tasty and less expensive meal at Pei Wei. The pricing story Pei Wei tells us is about delivering great Asian-inspired food without the pretense of a full-service restaurant like its sibling, PF Chang's.

There’s a story behind Wendy’s 99-cent Jr. Bacon Cheeseburger. Might not be an interesting story, but a story nonetheless. The Quadruple Bypass Burger from the Heart Attack Grill has an interesting story to go along with its higher price. We’re talking a hamburger experience of eating 8,000 calories and if you and your arteries can survive the gluttony, you’ll be wheelchaired out to your car by a nurse-attired Heart Attack Grill employee.

Pricing is one of the shortest shortcuts a company can take in telling a story about its products. So ... what story is your pricing telling customers?

Comments

[Jeffry Pilcher]

Great point. With branding, you need to look at every aspect of a company. Pricing is often overlooked.

Taking it one step further, the range of prices a company offers also tells a story. Are you always expensive? Always cheap? Do you always try to have a cheap, medium and expensive option? Are you consistent with your pricing strategy?

[Pat Nerr]

I think Patagonia is a pretty good example of pricing with a story

[Himanshi Singh]

Let is say this way, successful marketers are able to give what thier customers want. It could very well be a lie that people want to believe. Yes, it provoked me to think how come a cream, "Fair and Lovely", by HLL can change the genetics of skin of Indian customers. SKin color is genetic, right! It has been priced to make it availabe to masses. It claims it is right of all women to look beautiful. Funny though..Beauty or Fairness?

[Lewis Green]

John,

Great post! One of my biggest consulting challenges is convincing clients that pricing not only tells a story but determines what your customers will look like.

Here's one example: Starbucks and Duncan Donuts. Who visits these competitors is determined more by the pricing story than the coffee.

[Andy Grant]

At a higher level, Target and Wal-Mart absolutely tell a story through price.

Very interesting conversation.

[John Rosen]

I have a game I play with my friends who are not in marketing or branding. After listening to them lecture me on how branding is all BS, and how all we as marketers do is to unnecessarily drive up the price, and how they pay no attention to advertising, etc., I make them show me their private label toothpaste, razor blades, shirts and suits, running shoes (Nike was mentioned above) and then demand why they are driving a BMW or Mercedes instead of a Geo Metro. If I haven't made my point by then, I ask them which brand of shoe they buy for their little darings to wear to pre-school -- Stride Rite or Payless? And by the way, do they know that both are most likely made in the same factories in China but that Payless's are made with higher quality standards, backed by doctor's recommendations?

If I haven't go them hooked by then, I ask them if they prefer Whole Foods to Costco. At that point, it doesn't make any difference what their answer is -- either way, they are making a preference decision heavily influenced by price.

[Ritu and Venkatesh Rangachari]

We believe that no brand in marketing history has maintained high profit margins and high volume market share simultaneously over a long period. A choice has to be made.

ANothe rinteresting note we read recently was "Gillette Sharpens Its Pitch for Expensive Razor". We picked up this article in the Wall Street Journal on Gillette and its battle to maintain the premium price of its Fusion shaving system in these troubled economic times. http://online.wsj.com/article/SB122325275682206367.html?mod=rss_media_and_marketing

Here’s a brand that’s keeping its pricing and not trying to blame raw materials for an increase or the poor economy for a decrease.

As marketers, we love very deeply the Pricing “P” of the four Ps. It’s the most elegant and decisive proof of a successful marketing plan. Pricing is the most potent signal of how much a marketing team values its own offer to the consumer. It’s a key differentiator in any market.

Most companies leave pricing to the finance team. No way. Marketing does not exist if the pricing is not under the control of the Marketing Manager.

Well, here’s our take on pricing:

1. In our view, you never drop price on a product unless you accept that your value proposition for consumers has dissolved. (Note: this is not always a bad thing in itself. Most outdated technology based products cut price because new technology offers a better value proposition.)

2. Reducing prices to gain volumes and market share is a no-no. Reducing prices to protect against emerging competition is a bigger no-no.

3. On the other hand, price increases is an equally contentious subjects to us. Most companies in the past few months have raised prices on account of “raw material price increases.” BS!

BS, because raw material prices are now decreasing, but no one is reducing prices. So it appears that raw material based price increases are only crutches for a marketing team lame on good ideas and a company lame on good products.

Increase prices if you believe you have increased value. If you are following raw material prices in your pricing strategy, make sure you REALLY follow it. In both directions.

4. Essentially, you launch a product at a price point. You maintain it. If you’re creating strong demand, you will have the opportunity to raise prices. However, if entry barriers are low, high margins will attract other competitors. Then either you look for more differentiation to justify high prices (this is good and the basis of all marketing) or you drop prices (which takes us to point 2).

Coming back to Gillette. By not reducing prices of its Fusion shaving system blades, what is Gillette signalling to Venkat?

1. You Venkat, who bought the product for over a year at price X, need not feel that you were overcharged.
2. Because the economy is bad, does not mean our product is any worse.
3. Because the economy is bad, does not mean you, our customer shouldn’t have the best shave money can buy. You might as well stop buying toothpaste and chew on the bark of a “neem” tree.
4. You may choose not to buy the fusion. And we have a number of other products you could choose from. But when you’re feeling better, and think you’re ready to go back to the best, we’ll be waiting.

As a side note: another interesting “premium” brand Louis Vuitton has never had a price promotion (or any sales promotion) in its history. Never.

A price premium position takes years of R&D, marketing, sales efforts to develop.
Once you discount a brand, the expectation of future discounts will always remain. You will never again be completely trusted. There is no way to calculate the current value of these future discounts when taking a price reduction decision.

So Gillette, we salute you. Venkat may not buy a fusion blade for a while, but he will again, one day.

However, Gillette we pick fault with your advertising approach at this time. Your communication now is “In the world of high-performance, what machine can you run for as little as a dollar a week?” Why try to play down your price?

Premium products should never walk that path. Premium products charge a premium for an outstanding product experience. Period.

We would have focused the Gillette ad on the best shave a man can get.
“Sure the world’s looking pretty bleak now… even more reason you pamper yourself in the small ways that you can.”

Ritu and Venkat