Magazine article Marketing


Magazine article Marketing


Article excerpt

Fair pricing may be an alien concept, but when consumers become accustomed to it, it will create goodwill for your brand.

Pricing is one of the most difficult tasks in marketing - one that will often pit your best instincts against your worst. As you ponder your new pricing strategy, you might well sense the presence of those whispering figures on your shoulder, with the halo and the horns.

The good guy is sitting there saying: 'Think of the brand. Play it straight, be clear and consistent and make respectable margins. But do not dupe these good customers with complex tariffs or three-for-two deals that end up costing them more.'

The other one retorts: 'Fine for him to say, but you've got quarterly targets to hit. If you keep it simple, they will take their bargain-seeking noses elsewhere, and pretty soon there won't be a brand left to manage.'

In a well-intentioned move toward good-guy pricing, Ron Johnson, recently appointed chief executive of US department-store chain JC Penney, declared an end to the duality that had defined its approach over recent years.

Here was a store in which fewer than 1% of items were sold at full price - because it was, as everyone knew, an 'anchor' from which to discount. So a garment might be listed at dollars 39.99, but would actually sell at dollars 29.99, through a combination of special deals and coupons. It was complex, confusing and costly to promote - but it worked.

Johnson revolutionised that by switching to 'everyday fair and square prices'. So the garment would now be dollars 30 from the outset - and the price would fall only in a clearance sale.

Consumers punished the stores with an eye-watering 19% drop in sales. Analysts shook their heads and rivals rubbed their hands at the naivety of the approach.

Johnson admits as much, but vows to keep going and to communicate better, believing straightforward decency will prevail in the long run.

Let's hope so, because it isn't always pretty when the other little guy gets the ear. For an example of that, look no further than 'cookie pricing', the trap that millions fall into when booking travel online.

You check out the price of a flight and find it at, say, pounds 163. You then look around a bit, and come back to the site an hour later, only to find that the price has gone up to pounds 175. You curse your poor timing, reasoning that it rose because there was a blip in demand in that one silly hour. …

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