How should brands set their prices?

In marketing, the price will directly affect the final sales volume of the product, but the lower the price, the better. The pricing also depends on the specific consumers, the category they are in, etc. The author introduces his views on pricing in thirteen points. Let's take a look.

01

Let's get straight to the point. Pricing is the science that determines the life or death of a brand. Pricing is not a simple cost plus profit. If you set a price that only satisfies you, it will be difficult for consumers to pay. It takes certain skills to impress consumers with price.

02

Most people in China have had the experience of online shopping and shopping in shopping malls. In shopping malls and online shopping platforms, we will find that the discounted products are basically X99 yuan and X98 yuan, such as a coat for 399 yuan, a T-shirt for 29 yuan, and even fruits for 9.9 yuan accurate to one decimal place. Behind this pricing method, psychology is used as a support basis. In psychology, the human brain will naturally group prices. For example, 399 yuan will be divided into the price range of more than 300 yuan, while 29 yuan will be divided into the range of more than 20 yuan. 399 and 400 are only one yuan apart, but in the eyes of consumers, they may be the difference between two ranges. As long as you are a person, you will intuitively group them in this way. If you want to understand this mechanism, you can read Kahneman's "Thinking, Fast and Slow" in detail.

03

In marketing, the price will directly affect the final sales volume of the product, but the lower the price, the better. The price also depends on the specific consumers, the category they are in, etc. In the competition between enterprises and competing products, how to fight a price war is also an enduring topic, and price wars must be fought, but they need to be fought smartly. Apple also fights price wars, but its price war is fought smartly. Anyone who does not fight price wars smartly will end up like "Luo Yonghao". When Luo Yonghao T1 was launched, he insisted on pricing his mobile phone at 3,000 yuan, and criticized that 1,999 was a monkey trick. In the end, he had to face the cruel reality, reduce prices, and set prices according to the principles of psychology.

04

The meaning of pricing: pricing is not simply cost + profit, but requires product category positioning and product positioning first, and then pricing based on the different values ​​generated by the product category. For example, a new beverage costs 6 yuan, and the company wants to make a profit of 4 yuan, so pricing it at 10 yuan seems to be a reasonable choice, but it is not the case from the consumer's perspective. This highlights the importance of positioning. When this beverage is positioned in a high price range, the manufacturer will gain more profits.

For example, if the same beverage is placed on the shelf of a supermarket and compared with a bottle of cola that costs 3 yuan, then it is difficult for the price of 8 yuan to have an advantage; but if it is placed in a coffee shop, compared with a cup of coffee that costs 30 yuan, it may be priced at 15 yuan, which seems very cheap. This is why Yuanqi Forest must first make sugar-free beverages to succeed. Because it is a sugar-free beverage, it can be sold at 5 yuan per bottle at the terminal. If it is also a sugary soda, it is very difficult to sell it at 5 yuan per bottle.

05

The reason for the above situation is that consumers do not know how much a newly launched product is worth. The only way they think the price of this product is high or low is by comparing it with previous products. If a piece of fried chicken is sold at 5 yuan in a street shop, you will think it is expensive, but if it is sold in McDonald's, you will think it is so cheap. Therefore, when mature brand companies price new products, they must first position the product, or carry out category innovation, and then find products that match it, and then seize the consumer market through price advantages or other marketing activities in the same range.

06

The method to find an anchor product for yourself is: first, you need to find the category or product itself that can meet the needs of consumers; second, think about which competitors can meet these needs. Let’s take the beverage mentioned above as an example. If this beverage can meet the needs of consumers for refreshment, then what products on the market have the same needs? We may drink tea to refresh ourselves, or choose coffee, or functional drinks such as Red Bull, which will become competitors for this new beverage. After finding the approximate range of competitors, the brand will have a basic direction for pricing.

Finally, after considering the portability and taste of the beverage, the brand priced the beverage at 8 yuan and placed it next to the 12 yuan canned coffee on the shelf, so that consumers would try the newly launched beverage. This price is actually higher than the original expectation. After a period of sweetness for the new product, the price can be fine-tuned. Sales continue to grow steadily, and word of mouth and voice have also been well promoted. Generally, brands raise prices every year. The reasons for the price increase include raw material and labor costs, but the more important reason is that consumers hope that the products they buy are valuable.

07

When learning pricing techniques, you must remember that consumers do not like your products to be really cheap. If your products are really cheap, they will not have the urge to consume. Consumers do not buy for cheapness, but for the hope of getting a bargain. Pricing techniques include bait, bundling, free, etc. 360 has been successful by relying on the free strategy.

08

Bait method is actually a method that is used more frequently. As the name implies, the brand will first throw a bait to consumers, which is a product with unreasonable pricing, to stimulate consumers to buy other products that they promote. Relatively speaking, the bait method is more suitable for selling services rather than physical products. Japan once had an e-sports game magazine that sold very well, but with the development of the Internet, people prefer to subscribe to e-magazines. However, in the view of magazines, paper magazines can get more advertising fees, so they hope to promote the sales of paper magazines in some way.

The price of a full-year subscription to a paper magazine is 2,700 yen, while the price of an e-magazine subscription is 1,500 yen. At this time, they made a decision to launch a 3,500 yen bound volume, and after subscription, they would launch a hardcover bound volume to consumers every six months. But in fact, for a monthly magazine, a six-month bound volume is not very meaningful. Except for loyal fans who will support it by subscribing to an e-magazine + a bound volume, most people will not subscribe to this product. However, the promotion of the hardcover bound volume allowed more people to see the texture and irreplaceability of paper magazines. At the same time, the price of the monthly magazine was cheaper, and finally the sales of paper magazines increased by 15%.

09

Bundling is also called bundled sales. The core of bundled sales is to reduce the sensitivity of single high-priced products and make consumers feel that they have bought more goods with less money through the combination. Basically, all mobile phone packages adopt the bundled sales method. Whether you are a user of China Mobile, China Unicom or China Telecom, a monthly package of 99 yuan includes 1,000 text messages, 1,000 minutes of domestic calls and 10G of data. Everyone must be very familiar with such packages.

Through this complex combination, operators reduce consumers' ability to judge individual services. Consumers may not need long talk time, or seldom send text messages, but after seeing such a package combination, they will only consider whether the price is acceptable, rather than whether they actually need this service.

10

Free method. Many people may think that they have never encountered a merchant using this method, but I believe that everyone has enjoyed this service, that is, free shipping. The process of people's consumption is actually a process of choice, choosing the right product, choosing a lower price, and choosing an affordable combination. These are all based on the fact that consumers have to pay some costs. When the product is free, will consumers still make a choice? They must take it all in their pockets.

11

To win the price war, the first method is to take the initiative. In the category and product positioning stage, find the difference between your own products and your competitors' products, and avoid consumers from directly comparing products in the same category through differentiated pricing. This is vividly reflected in the sales of shampoo brands. You can see various types of shampoos on the market, such as oil control, anti-dandruff, black, nourishing, etc., and different products have different positioning. And because there are so many functions, different brands can also find their own areas of expertise to make a name for themselves, for example, when it comes to anti-dandruff, you will think of Head & Shoulders.

12

The second method is to resolve direct conflicts. If a competitor declares war directly by lowering prices, we can also resolve the offensive through other means. For example, 14-day no-reason refunds, package products that can be combined at will, etc. For example, if you are both selling English courses, and your competitor's price is lower than yours, and if you continue to lower the price, the profit will be too low, then you can deal with it through product modularization.

The original 5999 package course can be divided into 1999 oral training + 1999 reading comprehension + 1999 listening training, allowing consumers to choose the part they need to strengthen, which is easier for consumers to accept, and the total price is not reduced.

13

Pricing is a psychological game between brands and consumers. To do pricing well, it is not as simple as marking a price. The first thing to do is to innovate in the concept of category and product positioning, then anchor the price, set the price, conduct sales tests, and increase the price at the right time. Pricing cannot be arbitrary. Remember, it is a science.

Author: Liu Yichun

Source: WeChat public account "Liu Yichun's Brand Business Innovation (ID: shangyeyiguohui)"