Pricing Strategy

Pricing strategy not only changes the marketing message, it also helps attract target customers. For example, when Ford introduced the Taurus, it had several pricing options. Ford could have priced the Taurus at $ 12,000, targeting the American family car market. Or Ford could have priced the Taurus at $ 19,000, targeting the upscale sedan market and competing with Audis and BMWs. If the Taurus were priced between $12,000 and $ 19,000, it would be in a dangerous marketing position, priced too high for the American sedan market and not priced high enough to compete with the upscale foreign cars. Ford chose to price the Taurus at $ 12,000 so that it was targeted at the American family sedan buyer.

You must be careful about setting price because once a price has been set, it establishes the product's worth. For example, if Ford raised the Taurus to $ 12,000, its sales would fall dramatically. Consumers have already established that the Taurus is worth $ 12,000.

Earlier you read that there is an emotional reaction involved with most purchases. This reaction is influenced by the image of the product, and the image influenced by price. Imagine these two sales pitches. "Yes, my price is the highest. But that's because it's the best. We have the product for the people who want the best." And, "Why is our price less? We are trying to give you a better value. Our product has all the features of the higher-priced ones." If you are image conscious, which product would you buy? Surprisingly enough, the company with the lower-priced product may need to spend more on advertising and promotion to establish an image than the company with the premium product.

Make certain that your pricing strategy fits your marketing campaign. Do you want to tout your car as the fastest on the road and then have a low price? If you have the fastest car, charge for it. It will make your image more believable. If your price is too low, you may need a strategy to move the price up in stages. For example, Renault set a low price on the Alliance and then stressed the dependability of the Alliance in an advertising campaign featuring George C. Scott. Instead of stressing dependability and low price, Renault should have said that it had added features to make the price range. And then I would have increased the price. After all, Renault would have touted the changes and improvements that make the car more dependable. What good are those changes if Renault wasn't willing to charge for them? The public knows no business can survive without a profit.