4P theory is the cornerstone of marketing. 4P is Product, Price, and? Channel (Place),? Promotion. But our understanding of 4P is “partial”, and everyone generally fails in the “price” subject.
For example, during the epidemic, Haidilao and Xibei were scolded for rising prices, and then quickly apologized and lowered prices. Big brands have been so “ignorant”, not to mention many small brands?
Pricing can be said to be the biggest blind spot for marketers. How to increase the price without turning over? Is the historical low price in the live broadcast caused by the operator’s incompetence or the trend? Why is low price the most advanced strategy?
Behind these problems is the secret of price.
If consumers have a steelyard in their hearts, what is the scale?
Everyone knows that pricing first looks at cost.
For example, the consulting industry is a high-fee industry, whether it is management consulting, brand consulting, or financial consulting, psychological consulting, because the cost of consulting services is time.
Take brand consulting as an example. A few years ago, I did a brand consulting for a satellite TV. The annual fee was 3.6 million yuan, which was only the medium price of the industry at the time; the training courses of domestic top brand consulting companies, a cycle of about 100,000 yuan /Person, because the cost of time is compressed, a lecturer can sell a time to hundreds of students; if it can be sold to more people, the price of the service can be reduced, such as opening an online class, such as my public account For paid members, as long as 99 yuan, you can get extra content for the coming year, and short-term brand consulting services.
There are three prices mentioned in this text: 3.6 million, 100,000 and 99 yuan. In contrast, 99 yuan naturally looks very cheap. The purpose of this text “game” is to tell everyone an important fact: the price does not depend on the cost, but on how the user defines the value of this product.
Interestingly, value is a vague word. Most people can’t understand where value is, so price has become the most convenient and direct tool for measuring value. So, what is the price?
Price = quantification of value
On the other hand, if a consumer wants to measure the price, he is actually measuring the value. How to measure the value? How do we know whether a pair of shoes is good or bad? How do I know if this bottle of drink is healthy or unhealthy? The only way to measure value in our hearts is to compare.
You think the boy is 1.8 meters tall, but it is not worth mentioning on the international basketball court; you think driving a BMW is very arrogant, but it may not be as good as a taxi on Dubai Street. The price level is not an absolute number, but a vague feeling of user psychology.
Therefore, the primary principle of pricing is to establish consumer price anchors. That is, consumers compare your product with whoever will control your price.
Price anchor: find the price sight
The opening environment of the product
If you are a mug maker, how do you make this mug more expensive?
We have said that the price level is generated in the comparison. If you want to sell a high price, the core method is to make your mug and more expensive products together. For example, what is your cup for? Is it water or tea? Coffee? You will find that the prices of coffee cups and tea cups are generally higher than those of water cups. Take the coffee cup as an example. What is instant coffee and ear coffee? Or ground coffee? Different coffee cups can also have different price gradients.
This is the first important factor for users to price their products-the product’s opening environment. Opening environment refers not only to the environment in which the product is used, but also the environment in which the product is sold.
For example, in a supermarket, your mugs are usually sold together with other cups. In this environment, the “worth” of the product can only be 20 pieces. But if your mug is placed with coffee beans, household appliances, or sold in a chain coffee shop, then the product value is different. The same cup can be sold for 100-300 yuan, which is the hint of the environment to people .
Having said this, we understand one thing: Why have many business owners failed to launch high-end products? In many cases, it’s not because your products are not marketable, maybe because your low-end products and high-end products are sold together, or simply because your store environment is not tasteful.
This is the anchor point in the environment: what products appear with, what your product is worth.
“Time difference” in price
Let’s take Teacher Tony as an example. Once a girl chooses a star stylist at the barber shop, she is more likely to buy more expensive hair dyes and lotions. Because of these “extra” costs, it looks cheaper.
This is a kind of “time difference” in price. Your first consumer price determines your perception of all subsequent prices.
The price anchor in time is very effective, and companies can use this psychological effect to sell more additional products and services. If you are a brand owner, you can consider your product or service. Is there any link that can be strengthened? That link is the new point of profit growth.
This is the anchor point in the order: the order in which the consumer looks at the price determines his price perception.
When the product is divided into three price levels, which one do you generally choose?
Most people will not choose expensive or cheap, they will only choose the mid-range. We have said that ordinary people simply do not understand the value of commodities, and we can generally only use prices to roughly judge the value of commodities. Therefore, in our eyes, the cheapest ones cannot be bought, because the cheap ones are often of poor quality; the most expensive ones cannot be bought, because the most expensive ones tend to be “injustice” behavior; the one with the middle price becomes the best, At least it looks like this.
This is the impact of price anchors on human consumption psychology. In front of consumption decisions, almost everyone is a “moderate”.
This phenomenon is common in our daily life. For example, when selecting digital products, we will not choose the top configuration or the low configuration. We will choose the configuration that is sufficient; when we handle the mobile phone business, we will not book a luxury package , Will not set ordinary packages, only luxury packages. When consumers face shopping decisions, their status is at a loss, and they often fall into “decision-making paralysis”, which is what we commonly call selection phobia. Faced with a 10-page menu, they did not know which dish to order.
As a qualified merchant, we must not only provide goods to consumers, but also help him make decisions. Normally, the three options are the best decision accelerators.
This is the anchor point in the price mix: consumers will only choose products whose prices are centered.
Value determines the price ceiling
We have said that price = quantification of value. Then this sentence is translated as follows: how big your value is, how high your price can be set. For example, how do you view the user value of station B?
You can say that the value of station B is to watch many interesting videos; but I can also say that the value of station B is to provide pastime and entertainment.
You can say that the value of station B is to make friends and find a lot of friends; but I can also say that the value of station B is to find a sense of belonging.
You can say that the value of station B is to share interesting content; but I can also say that the value of station B is to provide social currency and create the spiritual text of contemporary young people.
You see, I just adjusted the text expression. Station B seems more valuable to you.
For a product, the fluctuation range of its value is the fluctuation range of its price. Therefore, we will say: cost determines the price bottom line, and value determines the price ceiling.
Each product must find its own value anchor before pricing, thereby anchoring its price range. For example, the same cake dessert, different values have very different prices:
If it’s afternoon tea, then the cake will satisfy your own tongue and mouth, and the price may be 35 yuan.
If it is a birthday cake, then the cake represents your heart, your heart can not appear too cheap? So it’s reasonable to have a birthday cake.
What if it is a proposal? There is a cake in the Black Swan Cake Shop. The number on the price tag is enough to buy a half suite in Beijing. It is expensive because the merchant wants this piece of cake to represent the weight of love.
Enterprises must learn to give products a suitable value point in order to reasonably price products. All great brands are masters of value description, such as Coca-Cola, Nike, Apple.
When discussing future product classifications with customers, we talked about a female app called “Make it early”. Its value anchor is very interesting. In its product system, fitness is called beauty time, meditation is called flow time, and learning English is called survival time… rationally, it turns the knowledge category into a soul chicken soup in time to manage sugar coating. For female users In general, this bowl of chicken soup is more fragrant than plain boiled water, so as to effectively increase users’ willingness to pay.
This is the anchor point in value: tap the value of the product to find the upper price limit of the product.
The product’s opening environment, user’s contact sequence, price combination method, and product’s psychological value all determine the final price of the product.
Price increase: How to increase the price without turning over?
During the epidemic, Haidilao and Xibei were scolded for rising prices. The product sells a little more expensive, why can’t consumers accept it? Consumers hate “expensive” things? of course not.
The price increase of Haidilao and Xibei was diss not because of the price increase itself, but because the price increase reason was not established. It is said that the cost increased during the epidemic, but why do others only increase your price? What’s more, there are companies like fellow chickens who hold high the banner of not raising prices.
So, how to increase the price so as not to overturn? Remember one principle: all price increases must first change the product/service. To put it simply, it is not possible to directly raise the price by sitting on the ground. It is necessary to adjust the products and services to become different products in order to increase the price.
There are several common ways to change a product or service: change the packaging, change the size, introduce new flavors/services, combine products, and often change the price.
One is to change the packaging. The most typical case is a dairy product company, Tran Su and Jin Dian Pure Milk launched the “Dream Lid” packaging. This kind of packaging does not require a straw, and can be opened directly without drinking. However, the retail price of the fantasy lid packaging can be sold at 9.5 yuan/bottle, while the price of Tetra Pak packaging with the same composition is only 7.5 yuan/bottle.
The second is to change the size. Launching a mini version of a product, or a product in a large package, is a promotional method and a method of raising prices. For example, if a beverage, 500mL/bottle sells for 3 yuan, 1L/bottle sells for 5 yuan. Buying 1L of beverage saves 1 yuan than buying 2 bottles of 500mL/drink, but in fact, the cost of the two sizes of beverages may not be as much, but the enterprise guides you to buy a seemingly cost-effective product with a higher price.
The third is to launch new flavors/services. New products are launched, consumers are
It is difficult to estimate because there is no way to compare. New flavors of yogurt, new mobile phones, new season clothing…Although all the new things are the most difficult to open the market, but also the easiest to make profits.
The fourth is combined products. For example, we often see packaged sales, mobile data packages, McDonald’s burger packages, SPA packages… Packages are everywhere. Because the package contains multiple products, it is difficult for consumers to accurately estimate. Moreover, consumers can only calculate the package price based on the retail price of each item in the package. They cannot calculate the package price based on the overall cost.
Fifth, change prices frequently. The most skilled use of this is Coke. In various stores, the price of Coke often changes. There are a combined price of four bottles, a holiday promotion price, a buy one get one free price… In short, the price of Coke is vague in our hearts, it seems to be about 3 yuan per can, but you always get no To its exact price.
Catering companies like Xibei and Haidilao can try to reconstruct some dishes and services if they want to raise prices smoothly. For example, the main combination of new packages to replace the original package; the development of several new dishes, as hot dishes; use of dishes + gifts + shopping coupons to do price promotion…
The psychological mechanism of the price increase lies in: you have to try to blur the price anchor point of consumers on the original goods, so that your products look different.
Low price: the most advanced business strategy
Because of the epidemic, the live broadcast brought exceptional excitement. However, the pit fee + product share + historical low price = merchants cannot make money through the head anchor to bring goods. But this means that live streaming is just drinking thirst to quench thirst? Is it the incompetence of the marketing department?
Most of the time, historical low prices in live broadcasts sell not products but fame.
If a merchant wants to sell products and open the market, he needs to invest advertising and marketing expenses. The online celebrity live broadcast channel is not only a sales channel, but also a publicity channel. Let’s take Teacher Luo Yonghao’s first live show as an example. For all selected brands, their revenue composition is like this:
Total revenue = Luo Yonghao endorsement + PR communication + brand exposure + user interaction + product browsing + product sales
It seems that companies are “selling” goods, but they are actually making money. Therefore, low prices are often a publicity strategy rather than a sales strategy.
Let us give another example. In 2012, Liu Qiangdong claimed on Weibo: “JD.com’s home appliances will have zero gross profit in three years…From today, all JD.com’s home appliances are guaranteed to be at least 10% cheaper than Gome and Suning chain stores…” At that time, e-commerce platforms such as Yixun and Dangdang also joined the price war of e-commerce.
Everyone should know that the e-commerce at that time was still in a rash stage, and the Chinese did not have the habit of buying home appliances online. This round of war completely inspired the consumption habits of the Chinese to buy electrical appliances online. At that time, Jingdong was to Suning and Gome, which was equivalent to the young man Lang’s initiative to contract the social elder brother, and he obtained invisible benefits through price provocation.
Therefore, low price = marketing strategy, you can use low prices in exchange for value.
When we talk about low prices, many people associate it with the low end. Everyone thinks that low prices mean that companies have to lose money and shout, but we change the word low price to another way, maybe everyone will understand it more easily.
The accurate expression of low prices is cost leadership.
Cost leadership does not mean that a company dared to cut meat, a posture of “being a life-and-death bearish, do it if you don’t agree”. Cost leadership means: I have a lower price than everyone, but I can still make money.
Let’s take Costco as an example. This is arguably the most famous low-price brand in the world. In fact, Xiaomi’s pricing strategy is based on Costco’s business philosophy. Costco has a strict operating standard: the gross profit margin of all commodities cannot exceed 14% (the gross profit margin of general supermarkets is about 15%-25%). Once this number is higher, it must be reported to the CEO. It sounds a little weird at first, there are “non-blood-thirsty” businesses in the world? But it is such a tightly controlled merchant, let’s see if it makes money? (The figures are from the company’s financial report)
Single store sales: Costco is about $170 million, and Walmart is about $43 million.
Single store profit: Costco is about US$3 million and Walmart is about US$1.5 million.
Net profit margin: Costco is 2.2%, Wal-Mart is about 1.3%.
So, how does Costco do it?
In the selection of products, not more and more, as long as less and better. Because there are few types of goods, the sales of single products are large. Costco can easily get cheaper purchase prices from suppliers.
Large package sales: similar to China’s wholesale. With fewer types, large packages, and low prices, products will be sold out quickly, saving shelf space and accelerating the flow of funds, and Costco will save some operating costs.
Warehousing and integration: that is, selling and stocking are in one place, which saves money.
Sell your own brand: just buy from the factory, and then Costco sells it under the OEM, so that the middleman does not make the difference.
Membership: 300 yuan for an electric fan, the membership price is 290 yuan, the real price may be 295 yuan, because Costco also earned 5 yuan in membership fees.
This series of business methods finally formed Costco’s cost leadership, and at a lower price, it got higher profits.
So, those Taobao brands who cut their meat and make low prices can wake up! Only low prices do not win the market, and only low prices and money can win the market.
Looking at low prices from the perspective of “cost leadership”, we understand that low prices are not a simple pricing strategy. They are actually a competitive strategy for enterprises.
Ask a brain question: If one day, there is only a lot of e-commerce left, Xiaomi in the mobile phone industry, and Costco in the supermarket, will they continue to keep prices low?
Most definitely. Because low prices are not only against current competitors, but also against future competitors!
Therefore, low prices are a moat for large enterprises. Because of the low price and the industrial chain behind the low price, no one can easily get involved in the business of large enterprises. For example, in the dairy industry, Yili and Mengniu are all giants, but they are still protecting their territory with low prices and constantly building their own moat.
Low price = competitive strategy, use the cost to build a business moat.
Price is determined by value, not cost.
The first principle of pricing is to establish consumer price anchors. Consumers will compare your product with whoever will control your price.
The opening environment of the product, the user’s contact sequence, the price combination method, and the psychological value of the product can all become a price anchor, which affects the user’s judgment on the price.
For price increases, all price increases must change products/services before users can accept them.
For low prices, low prices can be used as a marketing method. At the same time, low prices are also a competitive strategy to build a moat through cost leadership.