How Disruptive Pricing Strategies Help Brands Increase Consumer Surplus and Drive Growth

  During an exchange, I encountered two brands with completely opposite market behaviors.
  One is a cutting-edge seasoning brand. In order to create high-quality products, the brand founder invested heavily in product research and development and raw materials, and finally developed a product that has almost no rivals on the market. However, when preparing to go on sale, we found that since the cost of this product was much higher than that of its peers, it would definitely suffer a loss if it was sold according to the current price range in the industry. But in the end, the founder chose to compromise and sell at the most expensive price generally accepted at the moment, losing a few yuan for each bag sold. He thinks that as the sales scale increases, costs may be reduced on a large scale on the production side in the future.
  The other is a cosmetics brand. In order to create high-quality products, every research and development and raw material selection of the company is done regardless of cost or budget, just to make the best single product on the market. If this item is put on the shelves and sold at the high-end price of its peers, it will also suffer losses.
  But the brand did not think so and chose to cover costs with pricing, thus creating the highest price among domestic brands in this category. How high? When I presented it to channel dealers for sale, I thought the team was crazy.
  Looking back now, the above two products are selling well, but one is losing money, while the other not only makes money, but also enhances the brand value.
A thinking trap solidified by price

  Bill Bishop, CEO of Bishop Information Group, once gave an example: Bowden Bond, the founder of a cement company, complained to him that global cement prices were falling every day, there was a surplus of cement on the market, and profits were shrinking. If this situation continues, we will have to lay off employees and close some factories.
  During the conversation, Bill felt that Bowden and his company had fallen into some kind of product trap, and asked: Have you ever thought about developing some new products, some products that can make more money and get out of the predicament?
  Bowden said he spent some time thinking about the problem, trying to find some new ideas, but found nothing.
  At the end of the day, a key issue comes up: price.
  Bowden believes that this business is obvious here, and no one will be willing to buy a bag of cement for more than $4, which is the standard price in the market. In this regard, all cement companies are completely price-constrained, just like the seasoning company.
  It was clear that Bowden’s team was stuck in a fixed incremental mindset, believing that no one would pay more than the industry’s current price for a bag of cement, so they couldn’t think of anything new to try on customers.
  This is a common problem in all industries. Microscopy Story once mentioned: A common practice in the industry is “selling price backwards”. For example, when developing lipstick, first set the final price of the lipstick at 100 yuan based on market conditions, and then work backwards to determine the cost of packaging materials and formula.
  If the product is positioned as a “big-name replacement”, since the selling price is first limited, the corresponding production costs will have to be controlled, and the money ultimately spent on product raw materials and formulas may be quite limited. Product quality is not good enough, which in turn further limits the brand’s upgrade to high-end products, forming a vicious cycle.
The task of brands is to increase consumer surplus

  Fortunately, most brands today have awakened the awareness of quality products. They began to find room for product quality, but in terms of pricing, few brands dared to take that “extraordinary” step.
  Pricing that subverts the brand’s own inertia and even the industry’s inertia is actually a new positioning.
  We know that price positioning is a way to use price as the first intuitive symbol to seize the user’s mind. Such positioning can even represent a category and establish a price category image in the user’s mind.
  Price positioning mainly includes high price positioning, low price positioning, mid price positioning and fixed price positioning.
  For example, many brands will choose Starbucks-style high-price positioning, which requires higher quality and better experience.
  There are also people who are happy with the low price positioning of Xiaomi mobile phones in the early days. With the same product quality and service level, a lower price will attract more users.
  And when we walk on the shelves of large supermarkets, most of those beverages and snacks are priced at the middle price. This kind of price that is free from the average purchasing power range of target users is more stable during the operation process.
  There is also a fixed price positioning, never discounts or price reductions. This is a positioning method adopted by many to enhance brand reputation, and it can quickly build users’ trust in the brand.
  The fear of disruptive pricing is actually a hesitation about the company’s positioning.
  If the product is positioned to be popular, it will be priced at a low price; if it is positioned to be high-quality, it will be priced at a high price. Of course, there is also the positioning of wanting to deliver high-quality products at an affordable price to mass consumers, which requires testing its own supply chain system.
  What I want to say is that at the moment of consumption upgrade, don’t be afraid to set your own price beyond the industry norm. This kind of transcendence will itself become a norm in the new consumption era. What hinders the brand from realizing this kind of normality is actually the inherent thinking of the team, that is, it thinks that this is reducing the remaining space for consumers, so that few consumers pay for it.

  Consumer surplus refers to the difference between the maximum price that consumers are willing to pay to consume a certain amount of a commodity and the actual market price of these commodities.
  For example, when buying a certain domestic cosmetics, the highest price a large number of consumers are willing to pay is 100 yuan, and the more the actual price of this cosmetic is lower than 100 yuan, the easier it is to be sold. But now, if a domestic cosmetic that looks similar sells for 110 yuan, it is very likely that consumers will not consider it. At this time, should we lower the price?
  In fact, price reduction is the stupidest marketing method. China’s traditional manufacturing industry has repeatedly cut prices, and profits have been so low that it is difficult for us to imagine. The profit of a traditional oven is usually less than 5%, and one can only earn 30 yuan.
  This is a direct result of the e-commerce price war. Products have no bargaining power, and manufacturers can only continue to reduce costs. The glass in oven doors becomes thinner and thinner, and in the end, a large number of oven glass explodes. So when new brands want to buy good accessories, it is difficult to buy them because there is no demand for them. The industry has formed a kind of inertia, that is, “if you don’t do it well, you only do it cheaply.” As time goes by, naturally I don’t know how to make good products.
  Because the B-side can only judge the market based on sales volume. If the product sells well as soon as the price is reduced, the B-side will think that what users want is low price. Therefore, what we need to do is to increase consumer surplus rather than cutting prices.
Let consumers feel your special value

  Consumers actually have four hidden behavior patterns:
  1. Think it is expensive, and once rejected it;
  2. When the price of the product is reduced, immediately rush to consume;
  3. Once the low price becomes a matter of course, it will feel a bit of a fly in the ointment
  ; Go for something expensive but better.
  That is to say, when the price war reaches a certain level and the price can no longer be lowered, consumers will turn to expensive but high-quality products. This kind of consumer behavior presents a “V”, that is, “V-shaped price curve”.
  Consumer demand for goods is evolving. They don’t ask for “cheap” from beginning to end. As long as they can come up with new usages or ways of playing, and strive to increase the value of the product, even if it is more expensive, they will pay for it.
  We often hear customers say “I have no money”. What this sentence really means is “I will not hesitate to buy things that I think are valuable, but I hope to get as cheap as possible for other things.”
  This is why high-end brands are very popular, as are 10-yuan stores or factory discount stores. Conversely, if a customer does not want to buy a certain product, they often use “no money” as a reason, and the subtext is “I don’t want to spend money on such a thing.” In other words, whether consumers can truly feel the special value of the product determines the success or failure of the company.
  Tatsuo Muramatsu, a Japanese business management consultant, has introduced some cases where consumers can truly feel the special value of goods.
  Like sparking curiosity.
  An American second-hand clothing store has been confused by the fact that customers are not interested in repairing or altering clothes. You know, this part of the business has higher gross profit margins. Once, the boss went to Disneyland to play and saw the employees there were cleaning happily, so he deeply realized that “this is also a kind of performance”.
  After being inspired, the boss wrote a poster of “on-site repair and modification”, and the employees began to repair and modify during business hours. Customers who came to visit saw the employees repairing and remaking clothes. At first, they just wondered “what are they doing”, and then became interested, and then began to make such requests.
  Like telling a story.
  In the past, NHK once broadcast a program called “Project X”. The content of this program is very touching and true stories, telling the unknown background of various products, as well as the sweat and tears that developers have shed.
  After watching this program, customers will feel that the value of the products and services introduced in it has increased significantly. This is a great example of how storylines can increase merchandise value.
  I once exchanged business cards with a F&B consultant who, on the back of his business card, was amazed by the words “I am currently trying to avoid various ‘experiences that brought restaurants down'”. Because I was so impressed, I went online to read his webpage as soon as I got home, which recorded a lot of his failure experiences, and hoped that others would not repeat these mistakes. After reading these contents, I feel that he is more trustworthy.
  For example, establish a hero.
  The so-called “hero” here refers to the figure who attracts the attention of customers. In this way, it is easy to think of “finding a star like Tiger Woods as an image spokesperson”, but for small and medium-sized enterprises, it is actually not feasible. In fact, it is enough to make full use of the characteristics of “localized deep cultivation”.
  Maybe there is a local high school that plays basketball very well, so the sporting goods store can support the high school, such as holding a “high school basketball team support activity”, and use a little promotional money as funds to support the basketball team. Or form a group and go to refuel with customers. In the end, the basketball team that has become a “hero” is bound to become a loyal customer of this store, and their fans will also come… In this way, the effect of fans will gradually expand. Even if other nearby merchants launch promotions, the consumer group created through heroic methods will still stick with you.
  For example, create rarity.
  Things are rare and expensive, and the harder it is to get something, the more customers will grab it.
  Nowadays, there are all kinds of ingredients in supermarkets. Customers are used to buying things grown in greenhouses. Many young people are completely confused about the relationship between fruits and seasons. They think that “you can buy them all year round and eat them anytime” Of course.
  Therefore, if you want a strawberry to sell well, you might as well explain it in detail on the poster: Strawberries fully bathed in the sun! It is only harvested in May every year, picked on the same day and put on the market on the same day! Unparalleled deliciousness! Then, indicate the time of natural harvest next to it. In this way, customers can understand that “it can only be eaten now”, prompting them to buy it immediately.
  In addition, there are other methods:
  first, enhance brand effect and create brand premium.
  The same piece of clothing produced in Yiwu, China, sells for 30 yuan wholesale at a street stall in a township market, but after being labeled with the Antarctic e-commerce logo, it can be sold for 300 yuan.
  Second, the IP effect.
  It is also a cup for drinking water. If the cup has a Pikachu pattern printed on it, it will definitely sell better than other cups.
  Third, look good first, then easy to use.
  Product appearance has become one of the factors that a new generation of consumers consider when shopping. As early as 1995, Hitachi Hitachi Design Center researchers Masahiko Kuroi and Kaori Kashimura found that there is a strong correlation between “beautifully designed” and “feels good to use”, while “beautifully designed” is related to The correlation between “really works well” is weaker.
  Fourth, novelty and personalization.
  Personalization is what young people are pursuing nowadays, and no one likes cookie-cutter products.
  Fifth, visible quality.
  Schlitz Beer, which was once on the verge of bankruptcy, asked advertising master Hopkins to write a copy, “Every bottle of Schlitz beer must be blown with high-temperature pure oxygen before filling to ensure a clear taste.”
  Although high-temperature pure oxygen is a standardized process that every brewery does, it is the only one that visualizes this quality. Within months, Schlitz became the best-selling beer in the United States.
  You see, the quality has actually not changed. There is a big difference between telling consumers to see it and keeping it low-key.
Disruptive Pricing: Throwing Ideas in a Glass

  For raising consumer surplus, we can go back to the case of Starbucks.
  In the early 1990s, the leaders of Starbucks had a vision to sell coffee for $5 a cup. Converted at the exchange rate at that time, it was about RMB 45.
  You know, the idea of ​​$5 for a cup of coffee was simply absurd in the industry at that time. At that time, the average price of a cup of coffee on the market was 50 cents.
  How does Starbucks do it?
  They wrote the $5 price on the cup. Once you have a mug like this in your hand with a high price written on it, you start to think: What do we need to put in this mug so that the price is worth it to the customer?

  Finally, Starbucks completely differentiated itself from its competitors through packaging. They realized that in order for people to be willing to spend $5 for a cup of coffee, they needed to create a completely different consumer experience and provide something better and beyond the norm. .
  There are quite a lot of products in China that can break through the current category price, and BeBeBus, which is a stroller, is one of them. BeBeBus’ cribs are 4,180 yuan and strollers are 4,980 yuan, which are 2-3 times the price of peers.
  Prior to this, cribs and strollers at such a price had been occupied by foreign brands. So, in the current mother and baby market, why can BeBeBus sell the stroller for 4980 yuan?
  From the outside, BeBeBus also threw a lot of ideas into the “cup”.
  First of all, BeBeBus has to figure out what customers need. At present, the maternal and child market is undergoing intergenerational changes in consumer groups, and young parents of “post-90s” and “post-95s” have become the main consumers. The growth environment of this group of people is far different from that of the previous generation. They can afford high-end products and are not so deeply impressed by the stereotypes of mid- to low-end domestic brands. They not only look for impressive looks but also calmness when consuming. Compare quality.
  The more such market groups there are, the smaller the influence of external marketing and speech skills will be, and the more conducive to the development of the brand that will make ingenious products in a down-to-earth manner.
  According to the needs of this group of people, the first step BeBeBus made was to break the industry inertia of the stroller manufacturing industry.
  The survey shows that when purchasing maternal and infant products, 74.8% and 39.5% of maternal and infant families attach importance to product quality and materials respectively, while only 33.0% attach importance to price.

  This means that most mother and baby families would rather spend more money to buy high-quality mother and baby products with guaranteed quality.
  After breaking the price limit, BeBeBus has made new breakthroughs in the quality of the product itself. For example, in order to improve the safety of baby strollers, BeBeBus did not choose the traditional three or two tube solutions in the industry, but chose to use injection molding large backrests.
  In terms of design implementation, due to the limitations of traditional supply chain solutions, BeBeBus also chooses to cooperate with high-quality supply chains in the industry and even cross-border supply chains to complete.
  It is said that BeBeBus chose to break out of the vertical supply chain of strollers and child safety seats, and instead cooperated with the automotive-grade supply chain to produce its strollers and child safety seats.
  Another one is that in addition to the functional premium, there is also an experience premium. A female friend around me said that looking good is one of the most wonderful experiences. Don’t believe me, you look good and try it.
  This means: any function will extend the experience, but not all experiences are worth the user’s payment. We often talk about functionality first and then experience, but this is actually putting the cart before the horse.
  Design the experience first, and then deduce the functions in turn, so that the functions will not become the designer’s arrogance.
  How is the experience designed? We need to trust the less complex parts of human nature. For this generation of new mothers, “parenting” provides them with new topics and scenarios to share on social media.
  Young mothers born in the 1990s and 1995s are more willing to share their new identities and lives as new mothers, rather than just showing off their babies more beautifully. Moreover, most of them are well-educated, have high aesthetic awareness, and have higher requirements for product design, appearance, and packaging.
  Pregnancy and childbirth of this group of people do not seem to affect the quality of life. They still pursue shopping, drinking afternoon tea, and pay attention to product quality and aesthetics in exquisite social activities. To this end, BeBeBus’s product design and R&D team employees account for nearly 50% of the company’s total employees, and they pay more attention to the appearance of the products.
  In terms of the overall design concept, BeBeBus chose to drive a very high multi-color logo. Fashion based on safety is a necessity.
  Various cases have proven that new consumer brands have entered an era of high-end products. They can enhance consumers’ perception of the value of products and services (functions, experiences) through marketing, and increase consumer surplus.

error: Content is protected !!