Pricing is an art, a strategic behavior that is included in the overall brand strategy, directly related to companies, competitors and consumers. The role of pricing is not only to help companies increase profits, but also to the positioning of brands in the minds of consumers, such as a new brand that they have personally created. Consumers can directly feel whether this is a high-end or mid-end product through price. And reasonable prices also have positive implications for sales channels.
Under normal circumstances, if the gross profit margin of the product does not reach 50% or more, there is no way to play in the micro-business and e-commerce channels. Because, if it is lower than this gross profit margin, there is no way for merchants to bear the high-profit promotion of gameplay and channel costs. Harvard University professor Raymond Corey was the first to introduce pricing strategies into marketing. As early as the 1960s, he first proposed that pricing is extremely important for enterprises. The focus of the entire marketing is on pricing strategies. But unfortunately, at that time, the marketing academia did not pay much attention to the pricing issue. Whenever there was a pricing problem, the academic community generally believed that the problem could be solved indirectly by strengthening the differentiation of products and services.
The main purpose of pricing is to “find the combination of maximizing profit and market share”. The specific methods include new product pricing strategy, product portfolio pricing strategy, discount pricing strategy and psychological pricing strategy.
New product pricing strategy
If it is a new product, there are three pricing methods: high-price pricing, low-price pricing, and median pricing, which are described separately below.
High position pricing
The high-price pricing method refers to putting new products into the market in a high-priced way, so as to obtain more profits at the beginning of the product market life cycle, recover the cost as soon as possible, and then gradually lower the price. This method takes advantage of the early-stage consumer’s new and singular psychology and the less sensitive price, and introduces new products into the market at high prices.
There are many successful cases of this method, such as the ballpoint pen pricing case of the US Renault Company. When Renault invented the ballpoint pen in 1945, the cost was only $0.50, but the company used the psychology of consumers to seek newness and difference, and sold it for $20. When competitors emerged, the company lowered the price to $0.50 each, and its cost has dropped to $0.07 as production has expanded. For example, in 1992, the hula hoop began to appear in the Beijing market. Because of the role of public opinion propaganda, everyone recognizes that hula hoop has a bodybuilding effect. Although the cost of the product is about one yuan, but the price is sold for seven or eight yuan, even if it attracts many early users, they make the hula hoop popular. Don’t underestimate such early-stage users. They generally like to seek new ideas and seek differences. They are generally opinion leaders in various circle of friends, so it is very guiding to lead fashion. The end result is that many small factories make a lot of profits.
The positive significance of adopting the first high and low pricing strategy is: first, improve product value, establish a high quality image and stimulate customers to buy; second, recover the cost as soon as possible to obtain maximum profit; third, master the price adjustment The initiative will leave room for future price reduction strategies. However, the high-priced pricing method also has its unfavorable side. The main manifestation is that high prices are daunting and affect customers’ purchases. At the same time, high prices will attract competitors to enter, thus increasing competition.
The pricing strategy of high first and then low has certain applicable conditions. First of all, there are enough buyers in the market, they are low in price sensitivity, and the price elasticity of demand is small. Secondly, the price of the product is set high, which makes the public feel that this product is a high-end product; again, the product technology is unique. It is difficult for competitors to follow suit; in the end, small-scale production can achieve profitability. Therefore, the pricing strategy is mainly applied to cosmetics, popular clothing shoes and hats, special products and high-end products.
In addition, I am here to talk about the pricing of e-commerce. Under normal circumstances, if the gross profit margin is not 50%, 60% of the goods are not recommended to do micro-business or traditional e-commerce channels, because below this ratio, there is no way to bear platform advertising fees, courier fees, parcel materials fees Many costs such as returning a single loss, most of which are at a loss. In particular, platforms such as Taobao and Tmall must plan four gradient prices for each product before the product is put on the shelf: original price, daily price, activity price, and large event price.
The original price is generally the super high price of the standard, but it is not used. It is precisely because there is the original price, so everyone opens Taobao is a few folds, feels super cheap, and the price after a few fold is the daily price of this product. In addition, sometimes Taobao Xiao Er allows merchants to participate in activities, must give discounts, no discounts, no traffic, so businesses must also prepare an activity price and large event prices, such as “double eleven” “double twelve” activity price. In order to let everyone have a more intuitive feeling, let me give an example. If the original price of a commodity is 100 yuan, then the daily price is 60 yuan after 60% off, and the activity price is 10% off the daily price, which is 54 yuan (60- 60 × 10% = 54 yuan), and the large event price is 20% off the daily price, which is 48 yuan (60-60 × 20% = 48 yuan).
2. Low price method
The low-price pricing method is to set the price of new products relatively low, open sales as quickly as possible, and obtain a large market share. After the products stand firm in the market, the price will increase. This strategy is mainly to use the price psychology of consumers to stimulate consumers to buy at low prices, and to establish a cheap and good image in the minds of consumers. For example, the strategy adopted by Kodak in the United States used to compete with Polaroid. At that time, Kodak set the price of the two new cameras at $53.30 and $69.50, respectively, while the price of similar products from Polaroid was $66 and $83. Finally, Kodak successfully prevented Polaroid from further expanding the market.
In the era of the Internet, this low-priced pricing method has been used more and more, such as various subsidies, various free goods. Especially the 360 anti-virus software of the year, when its competitors Jinshan drug tyrants, Rising anti-virus is still very powerful, but genuine software costs money to buy, and 360 is free. Because Internet products have media and traffic attributes that may not exist in traditional products, 360 can get a large amount of installed capacity through anti-virus software for free, and there is traffic with the installed amount. This will allow you to recommend software to consumers. For example, a company that promotes its own software needs can find 360, let users install their software through 360, and install one for each, paying 360. And 360 through anti-virus software and then promote their own 360 browser, the home page is 360’s own search page, the original Baidu to earn part of the money, only earned by 360.
The advantage of the low-price pricing strategy is that the low price is easy for consumers to accept, which is conducive to the rapid opening of the product and increase the market share. At the same time, the low-cost thin profit will not attract a large number of competitors to enter, induce vicious competition, and facilitate the long-term occupation of the market. However, this strategy has a long period of investment recovery, small price adjustment space and low price, which may cause consumers to have mistrust.
The adoption of this method requires some conditions: first, the market demand is flexible, consumers are extremely sensitive to price; secondly, product production has economies of scale, that is, large-scale production can significantly reduce costs; again, low prices will not cause actual and Potential competition; in the end, the company’s business objectives are to pursue long-term benefits rather than short-term benefits. This pricing strategy generally applies to some low-end goods, consumable goods, less professional goods and necessities.
3. Median pricing method
The medium pricing method is a pricing strategy between the high price and low price pricing methods. It is a centered price strategy, which can ensure that the company obtains satisfactory profits and can be accepted by consumers, which is beneficial to both buyers and sellers. . The strategy is small in risk and easy for the parties to accept, which is conducive to the company to achieve the target profit, but this strategy is not prominent, more conservative, the product is difficult to open the market, easy to make enterprises lose the opportunity to occupy the market. This pricing strategy is more common and is used for pricing some production and necessities.
Product portfolio pricing strategy
The product portfolio pricing strategy is simply a strategy of packing several related products together to set prices, such as appropriately raising the price of best sellers, reducing the price of slow-moving products, and expanding the sales of the latter, so that the two sales benefit each other and increase the company’s Total profit, commonly used product combinations are as follows:
1. Product line pricing
Product line pricing is based on the needs of consumers for different grades of the same product line, select and design several different grades of products and price points. For example, Apple’s mobile phone is priced according to the size of the memory capacity. The cost of the 16GB and 64GB versions of the iPhone is less than 12 US dollars (about 78 yuan), but the price difference is 100 US dollars, and 88 US dollars (about RMB 573) is its profit. Therefore, the elimination of 32GB to retain the 16GB version is Apple’s most savvy approach, which makes Apple’s profits increase by several billion dollars each year.
And there is a case in behavioral economics, why put three models in the shop window. Washing machines with similar functions are divided into three types: high, medium and low, and most people choose medium-priced washing machines. For low-end prices, many people will think, no longer need to add some money to buy a good; for high-end prices, consumers will think, there is no need to buy so good, high-and low-priced washing machine production and sales will not be too much, They are used to guide consumers to buy medium-priced washing machines. In fact, the cost of a mid-range price washing machine is similar to that of a low-priced washing machine, but when there is a price reference, the profit is increased.
2. Optional product pricing
Optional product pricing is provided with the main product, along with optional items or accessories, such as I buy a laptop, usually also buy a matching model computer bag in this store or online store.
3. Affiliated product pricing method
Selling the main product at a lower price to attract customers, selling alternatives and affiliated products at higher prices to increase profits. For example, in the past, Kodak introduced a special camera for use with Kodak film, which was cheap and good, and the sales were very good. As a result, the sales volume of Kodak film was greatly increased, although the price of the film was more expensive than that of other brands.
Once, I went to the northeast skiing house to check the price, only 90 yuan a night, I did not hesitate to book, the results went after I found out that eating a home cooking is more than 200 yuan, because the hotel lived compared Partial, the surrounding has not eaten, can only eat at that house, so very helpless. In addition, bottled water, printers are also such a pricing strategy, bottled water machine I can send free, but you can only order water here.
4. By-product pricing method
For many industries, in the process of producing the main product, there are often by-products. These by-products are valuable for some other industries and can also be used for sales. The more the income of such by-products, the easier it is for the company to The price of the main product is set lower to be more competitive in the market.
5. Bundle pricing method
A variety of products are grouped together to be priced below the total price at the time of sale. For example, in the mall, you often see toothpaste and toothbrush or two different color toothbrushes bundled together for sale.
Marketing scholar Thomas J. Nagle pointed out the important value of pricing in marketing: “Good pricing begins with analyzing consumer demand and price perception.” It can be seen that marketing pricing is inseparable from the study of consumer price perception. As we all know, perceived value = perceived utility ÷ perceived price, consumers will buy the products they think are the most perceptive value. It should be pointed out that price reduction is not the only option to reduce perceived price. The key lies in how companies manage customer price psychology.
Fun pricing through psychology
Although the price is only a number, it can evoke a complex set of emotions. The behavior of setting prices is ugly on the surface, but in the process, we turn our inner desires into a digital language that everyone can see. Product pricing is a very important marketing element, and even companies that specialize in pricing strategies. Studying the price psychology of consumers is an important guarantee for the successful profit of enterprises. The psychological price propensity of consumers is divided into five categories:
1. Preference for honesty
That is to pursue the purchase of cheap goods as the main goal, such as buying goods with similar content, which is cheaper to buy which, especially online shopping, it is easier to compare, as long as the price, order soon.
2. Self-esteem and prosperous psychological tendency
That is to say, the purchase psychology with the main goal of pursuing glory, such as buying a car, especially a high-end car, is often opened to others.
3. Realistic psychological inclination
That is to buy psychology with the main goal of pursuing the use value of products and economic benefits.
4. Seeking the same psychological tendency
In order to follow and imitate others and chase fashion, the main goal of purchasing psychology, such as college students buy Apple mobile phones, some students think that others have, I have to have, so college students buy a lot of iPhone through mortgage.
5. Psychological tendencies of seeking new and seeking differences
That is to say, the purchase psychology is mainly pursued by pursuing rare products such as fashionable styles and unique shapes. For example, many people are particularly keen on buying Nike limited edition basketball shoes.
According to the above psychological needs, the commonly used psychological pricing strategies are as follows:
(1) Mantissa pricing strategy
This method has been popular since the 1980s, which is based on the price mantissa. For example, 299 yuan feels more than 200 pieces. In fact, it is already 300 yuan, and the browsing habits of ordinary people. It is read from left to right, and then stored in short time for the price comparison, so the mantissa pricing has certain advantages, especially in the era of e-commerce, sorted by price, less than 1 yuan may make the goods ranked higher.
Then why should I continue to “fire leftovers” here? Because this method is not suitable for all situations, the way of selling only 998 will give people a cheap feeling, even cheating. This strategy is more suitable for cheap goods, such as daily necessities. Why do you have to end with the auspicious numbers 6, 8, and 9? If you can make some adjustments, let’s feel that 19.8 is changed to 19.7. Which number will make people feel more comfortable?
(2) Integer pricing strategy
Integer pricing is the opposite of mantissa pricing. Some companies deliberately set the price of a product as an integer to show the quality of the product. Integer pricing is often used for more expensive durable goods or gifts, as well as products that consumers don’t know well. For high-priced products with higher prices, customers pay more attention to quality, and often use the price as one of the standards to measure product quality. It is easy to produce the feeling of “one price per share”, so integer pricing is more conducive to sales.
However, mantissa pricing and integer pricing are not absolute. The products with mantissa pricing are not necessarily cheap goods. The products with integer pricing are not necessarily high-end products, but also must be divided into specific scenarios. I specifically checked the iPhone of Apple’s official website, and the price is also the mantissa pricing strategy: for example, iPhone7Plus is priced at 6388 yuan.
(3) Reputation pricing strategy
Prestige pricing is aimed at consumers’ psychology of “cheap and no good goods, high quality and high quality”, and high prices for products that have a certain reputation in the minds of consumers and have a high reputation. Many high-end brand-name products and scarce products, such as luxury cars, high-end watches, designer fashion, celebrity calligraphy and painting, jewelry and antiques, etc., enjoy high prestige value in the minds of consumers. People who buy these products often don’t care about the price of the product, but the most concerned about whether the product can show its identity and status. The higher the general price, the greater the degree of psychological satisfaction.
For example, in the price war of color TVs more than a decade ago, domestic color TVs generally cut prices sharply, and Haier not only did not cut prices, but also improved. At that time, the sales of Haier TV increased, which largely utilized consumers. The brand-name psychology makes everyone feel that Haier’s products are indeed worth the money. For example, the price of high-calcium milk, high-iron milk, and low-fat milk of the same specifications is much higher than that of ordinary milk, but their actual cost difference may not be large. Why is this? This is determined by the positioning of the products that are sold to health-conscious consumers who are willing to pay more for health.
The prices of fashion, cosmetics, micro-shaping, weight loss meal replacement and other commodities far outweigh the cost, and some even cost dozens of times or even hundreds of times. Actually, this is also a kind of psychological pricing, which is considered by the consumers to be worth paying. Product value is priced. Cosmetics pursues beauty and youth; fashion pursues fashion, distinctive personality and novelty, etc. These are all material costs that cannot be measured. The price level is based on the consumer’s “appropriate sense of value”.
In addition, if high-end positioning products are to sell low-priced products, it is necessary to separate the brands and register another brand to hit the market. Otherwise, there will be big problems, and Parker pens have suffered such failures. The company launched a cheap pen below $3 to expand its market share. This move not only damaged the image of the “king of the pen”, but also reduced the market share of Parker’s high-end gold pen to only 50% of its competitors. It can be seen that customers often judge the quality of products and brands through price. Therefore, when pricing products, they must consider the price impression and price psychology that customers hold on different products, and coordinate pricing with different product positioning and brand image.
(4) Recruiting pricing strategy
This pricing is a very low price for certain goods, with the aim of attracting consumers’ attention. For example, when we go shopping, we often see a label “10 yuan” in front of many shops in the streets. Of course, this “start” word is very small, this way will make passers-by think that the goods in this store are very cheap, in fact, not necessarily. The purpose of this strategy is to attract consumers to purchase other goods when they purchase the goods, thereby driving the sale of other goods. Of course, we can also do the opposite and set the price high to attract attention.
For example, how does Carrefour and Wal-Mart use the recruitment strategy? Both of them are playing the lowest price. Carrefour adheres to the strategy of “lower middle school and lower high school”, while Wal-Mart is the so-called “overall low price”. Carrefour does not set the price of all goods to be low, but the combination of high and low. As for which products are low prices and which are high prices, Carrefour is determined on the basis of sufficient market research. In particular, Carrefour classifies goods into four categories according to their attributes: sensitive goods, non-sensitive goods, private label goods, and imported goods. Four different strategies are adopted for the pricing of four different attributes: sensitive goods, ultra-low prices, non-sensitive commodity contribution prices, private label commodity rights, and high prices for imported goods. The ultimate goal is to integrate sales and maximize profits to the best balance. Therefore, we can understand why Taobao merchants sometimes dared to do “9.9”, there is a very rich connotation, called “coming to come”, since it is here, just buy something, anyway, all mail.
(5) Comparison pricing strategy
The comparative pricing strategy is based on the so-called isolated effect. The isolation effect suggests that a commodity that appears next to a higher-priced alternative will be more attractive than it appears alone.
A French store specializing in toys bought two kinds of “little deer”, the shape and price are the same, but the color is different, and few people are interested in the cabinet. The store owner came up with an idea: making the difference. He raised the price of one of the deer from 30 yuan to 50 yuan, and the other price was unchanged. Putting these two kinds of toys with distinctive spreads on the same counter, the deer that paid the price soon sold out. In contrast, consumers can create price illusions, or make higher prices higher, or lower prices, or miscalculate the price gap.
Take the advertising industry, we generally give Party A a proposal to give high, medium and low prices, and deliberately make the low-end and mid-range price packages very unreasonable, try to guide the high-end price package, if it is just a package, one Price, many times, is easy to stalemate during the negotiation process, very embarrassing. Starbucks has a medium cup, a large cup of coffee, that is, there is no small cup, it is also this pricing strategy.
(6) Illusion pricing strategy
The illusion pricing is to let consumers have a psychological illusion about the price. Carrefour and Wal-Mart supermarkets often see the promotion of “100 yuan to buy 110 yuan goods”. On the surface, there is no difference between this kind of scheme and the 10% discount. It is 10% of the profit, but careful analysis will find the beauty of the 100 yuan purchase of 110 yuan merchandise. 10% off, the intuitive feeling for consumers is to cut prices, then the “cheap is not good” psychology will affect consumers’ purchase decisions, and “100 yuan to buy 110 yuan goods” makes consumers feel their monetary value Being improved.
In fact, there are many ways to pricing strategies, such as custom pricing, small measurement pricing, unified pricing, serial pricing, and intention pricing. Because of the length of the relationship, I will finally give a case of a small measurement pricing strategy. For example, because the old branch flower halogen is an oil-halogen process and does not add any additives, the shrinkage of the finished product will be particularly serious. If it is priced according to the price of the catty, it looks particularly expensive, so it is priced according to the two from the beginning. In addition to the price perception is better, and a pound for the average young person has no concept, but also can not finish, after two prices, we will also specifically indicate that a product is suitable for several people to eat.
There is a discipline called psychophysics that specializes in the relationship between subjective feelings and physical things. As early as the 19th century, psychophysicists found that people were very sensitive to relative differences and less sensitive to absolute values. For example, two glasses of water, which cup is hotter, everyone knows, but let people guess how much water temperature is, you can’t guess. The price is the same. The price is actually a relative psychological feeling for the consumer. In fact, it is cheaper to beautify it. However, beautification is not a lie, there is no moral bottom line, the product is shoddy, it is not long-lasting. of.
How to do discount activities correctly
The general psychology of consumers is to buy things that are cheap and good, but they are afraid that they will be pitted and hope to be treated specially. Therefore, discounts have become a common selling method used by businesses. However, consumers are already “immunized” against the popular 7 or 8 percent. They always feel that the actual selling price of the goods is 7 or 8 percent, so they tend to expect lower discounts, or wait for the authenticity of the discount to be confirmed, so the discount pricing The strategy is very knowledgeable.
For goods with high demand elasticity, discount sales tend to stimulate customers’ desire to purchase and prompt them to make purchasing decisions. For example, before I watched the free video of iQiyi all the year round, the advertisement was annoying, but I can accept it. Suddenly, Iqiyi was doing activities, 50% off membership, and I did not hesitate to buy it for a year. In fact, think about it, usually go to work every day to go back and forth to 100 yuan, and the price of more than 100 yuan video members make me feel expensive. Therefore, people’s consumption psychology is very wonderful. Many people spend a few hundred yuan to buy clothes and feel cheap, but it is expensive to spend 50 yuan to buy a book. For commodities with high demand elasticity, the discount pricing strategy is more useful.
Discount sales are a specific form of marketing promotion. Discount promotion refers to the promotion behavior that marketers use to encourage consumers or intermediaries to purchase through various short-term incentives. This kind of promotion means a significant effect in the short-term promotion, but because it has the meaning of demeaning products, it can only be used as an auxiliary promotion means. Moreover, it must be used skillfully and cannot be used frequently. Frequent use will only attract price-sensitive consumers, and abandoning value-approved consumers will lead to a vicious circle.
The author of this article is the former CEO of “Eating and Drinking Network”, the founder of the case talk show “Sorghum Brain Cell”, who is good at advertising marketing planning and has 17 years of experience in the Internet industry.