Looking for a one-word answer? If only! As you might have guessed: It all depends. When considering price integration, it’s important to remember that products and services must meet minimal standards based on each specific circumstance. Simultaneously, risks need to be taken as you strive for an exceptional customer experience. As you develop your own strategy for price integration, consider the following questions:
- What are the differences between a good quality meal at a reasonable price vs. an expensive gourmet meal with special ambiance?
- When it comes to gas, for how much of a savings and to what distance are you willing to go out of your way to purchase cheaper gas rather than utilizing your local station?
- How much do you buy on impulse vs. shopping for specific needs and taking time to search/compare prices before purchasing?
- How important are image, brand, and experience in your purchase decisions?
- Do you prefer being unique or do you tend to buy the same old thing? (i.e. Do you stick with what you know—say, hamburgers or pizza—as opposed to trying new things?)
- Provided the quality meets acceptable standards, do you value quantity or quality?
These questions illustrate how varying factors take precedence in different situations. Therefore, it’s essential to have a comprehensive grasp on what it is you’re offering while also fully understanding what your consumer views as important.
Before we move on, let’s define some key terms:
- Value is the perception of the utility relative to the cost.
- Price is the amount of money per unit or total that a consumer spends.
- Quality of an item refers to the actual craftsmanship or durability of the item or service.
- Quantity, of course, is how many of an item you get for the price.
- Cost is not exactly the same as price. Cost can also refer to the amount of effort involved to obtain the product/service or the “opportunity cost” of missing out on some other deal or experience by buying your product.
Here are a few key things to consider when it comes to price integration:
- Don’t try to be all things to all people—you will probably fail at most of them. In some places, for example, customers view the most important aspects of ordering a cup of coffee to be speed, quality, and freshness. In other places, customers value the conversation that comes with the service.
- Product definitions keep changing. Airlines add new fees, restaurants bundle meal offerings, and warrantees get updated in both price and characteristics. One of the most critical aspects of pricing, often considered from more of a cost perspective, is the product or service offering itself.
- What is your competition doing and what do your customers expect? For example, warehouse clubs thrive by selling multiple units at lower prices per unit while other industries (think candy bars and airfare) raise prices by creating the ever-shrinking product/offering. Another factor to consider is shipping fees—free shipping is virtually expected with most online purchases.
- Logistics, sourcing, and distribution efficiencies are critical factors in your marketing efforts. They may be used to reduce costs for you and lower prices for your customers. For example, sharing resources like Amazon, Uber, Air B&B, and Grub hub can eliminate complexity and create efficiencies . Similarly, shipping times, delivery methods, using direct shipping, etc., can affect consumer perceptions and satisfaction.
- Ultimately, the CONSUMER determines the effectiveness of your offerings and whether or not your offering has the characteristics they’re seeking.
Discussing price integration can often feel a little like asking the age-old question, “What came first: the chicken or the egg?” However, when factored in together, value, price, quantity, and quality will determine what the weakest link is in any price integration strategy. Each aspect deserves singular attention at specific times, in various circumstances. But try to avoid exclusive focus on any single element for too long—it may be devastating to your business. Knowing your strengths is great, but not recognizing your weaknesses can ruin you. In order to succeed, it’s crucial to identify what you do best and how you can effectively make your product/service stand out from the rest.
Interested in a FREE business consultation? Email or call and we’ll set up a time to discuss the strengths and weaknesses of your price integration strategy.
bshlenksy@startupconnection.net 914-632-6977
With a PhD from the Sloan School of Management at M.I.T., Dr. Bert Shlensky prides himself on his customized approach to help each client address their specific business needs. He’s mentored a few thousand clients at Score and his own practice, grew Sure Fit products from $50 million dollars to $150 million in, was President of WestPoint Pepperell’s Apparel Fabrics Business, and headed the $400 million Culet Shirt Group. He knows how to take a business to the next level and can help you lead your company to greater profitability and success. Visit StartupConnection.net today!