Price Image Management
We recently conducted a survey on the price of Beer in the US, by interviewing customers that just walked out of liquor stores and had just bought beer . We asked them how much they had just paid for their beer.
More than 2/3 of respondent gave an answer that was more than 10% off compared to the real price paid (about half of the wrong answers were higher and half lower)
It confirmed several other surveys, conducted in a variety of sector:
Many customers do not really know the price they are paying, but almost all have a Price & Value image that drive their choice (this brand is good value for money, that supplier is reasonably prices….) and, although linked to it, the Pricing image is rarely fully aligned with the real prices charged.
Price image management is all about managing the link between the two to your advantage.
It starts by measuring Your perceived Price positioning and, in sectors surveyed, we have always found substantial differences between perceived & real price levels, favoring competitors perceived as cheaper than they actually are
And hurting those perceived as more expensive
The Price Image Management approach developed by PriValEdge, provides a powerful method to improving your price image, that can translate into substantial improvement in ROS,
It entails 4 complementary steps that combine to sustainably improve Pricing image1.Be clear about Pricing & Value Strategy2.Know & Focus on Products that drive value perception3.Manage Promotions & Campaigns strategically4.Communicate Credibly & visibly
1.Being clear about Pricing & Value Strategy is essential to ensuring consistency & coherence in the way a company defines its offers & sets its prices. It must provide a directions and clear guidelines to all Value & Pricing decision. It must also clearly define the ‘differentiators’ that build and defend the Pricing & Value Image in the eyes of the customers. All too often inconsistency significantly degrade the Pricing image
2.Knowing & Focusing on Products that drive value perception. Not all products are created equal in terms of Pricing image. In most companies a small part of the SKU (Window Products) really drive the Pricing Image, whilst others are really linked to the first group (Shadow) or have little impact on Image
Successful company will focus on Window products and devote important efforts & research to optimize their Prices, both directly & as impacts to the overall pricing image.
3.Managing Promotions & Campaigns strategically, to optimize lift & Impact whilst ensuring that they do not damage the Pricing & Value image
4.Communicating Credibly & visibly, to provide reinforcement & proof of the Value & Pricing image projected (evidence that the value is there / that the prices are what we want them to be perceived as..) and ensuring Clarity, Power & Coherence
Changing an image does not happen overnight .
PriValEdge had the opportunity to assist some of its clients in the development & implementation of Pricing Image Improvement strategies. In the case illustrated on the right (disguised) a Large utility, leader in its market, suffered from a negative price image (largely unrelated to real price levels). Over the course of two, years, by defining a clear & actionable Pricing & Value Strategy & systematically optimizing Price positioning of its Window products in line with the overall image objectives & communication, the company manages to increase its average price index by over 1.5% whilst improving its price perception by more than 3% … achieving an overall 3%ROS improvement and a growth rate 7% above market...