Topics Low Priced Versus High Priced (cloudhosted)
Let’s talk now about how you can differentiate based on price.
So, maybe you’re sitting there thinking “I need to offer the lowest price possible. I’m getting killed on price. The only way I can compete is on price.” I would challenge that a little bit and say “I think the luxury brands are doing alright,” and they have for decades.
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You see, there’s two different ways that you can position yourself on price. As you can imagine, you can either be a high-priced luxury brand or a low-priced brand. Again, there’s no right or wrong. You just have to be very clear as to which side of the fence you’re on.
Let’s take a look at some of those high-priced brands. Those luxury brands and the boutiques. Your Louis Vuitton’s of the world. These brands need to be positioned at a high price point because of the image they portray. That prestige, the allure, the perception that it’s hard to get or it’s rare, and the luxury. You need to have a high price in order to convince customers that it’s worth it, even if it may be isn’t. But it’s positioning. It’s branding.
The opposite side of the spectrum would be low-priced, or cheap. How many of us have been to those dollar stores or those $2 stores that have everything you need but, everything is under a dollar. Obviously, they’re trying to position themselves as so cheap, it’s no-brainer. Impulse buys; you just buy because it’s cheap. “Ah, maybe I’ll use this. Maybe I need it.” There’s no risk.
You see, the lower the price, the lower the risk. The higher the price, the higher the risk. Real or perceived risk.
So it’s very easy to play the low price game, but you really have to sell a lot. The volume has to be there. On the other end of the spectrum, high price; you don’t need a lot to make a lot of money. You really have to be able to demonstrate the value. Why should they pay that much for your product or service?
A perfect example would be this: I was out one day shopping for jackets and shirts. I walked in to the Ralph Lauren store — just looking for shirts. The sales person was so good, she asked me to try on this nice jacket. And it just fits just right. I felt like a million bucks. And, in fact, I almost needed a million bucks. But the jacket was beautiful.
I looked at the price tag and I went, “Whoa!” I turned to her and I said “It’s a bit expensive isn’t it?” Without skipping a beat, she looked me straight in the eye and said, “No, sir. It’s Ralph Lauren.” And like Maslow’s dog, I obediently said “You’re right. It is Ralph Lauren.”
I bought the jacket, a couple of shirts, and a pair of pants. She was great. She didn’t apologize for the price. She demonstrated the value of the price.
So, the key takeaway here is that it really doesn’t matter whether you’re selling something high-priced, luxury, or low-priced. You just need to be really clear about what side of the fence you’re on and demonstrate the value to customers. Why does it cost that? If it’s expensive, explain why. What do they get? What does the brand mean? What’s the brand message?
And if it’s low-priced, a word of caution. Quite often, customers today, even when they pay a low price, still, for some reason, expect high quality service. So just be careful when you play at that game.
Another example; companies that are doing great at low price are budget airlines or low-cost carriers. They’re doing great. They are finding a way to see what is the best way that we can have some profit and they’re giving you no frills; cheapest flight possible, but there’s a market for that.
At the same time, there’s also a market for business class travel and first class travel. Again, there’s no right or wrong. You’ve got different markets, different customers with different expectations. You need to find the market that’s right for you, and more importantly, communicate that message to the customer. What do they get at the price that you’re charging?