Customer Profiling and Segmentation: How to Price like Porsche in 5 Easy Steps
Porsche is currently the most profitable automotive brand in the world. In 2011 they were integrated with Volkswagen to form the Integrated Automotive Group. They are most noteworthy for designing, manufacturing, and marketing sports cars, crossover utility vehicles, and automobile parts worldwide. They also offer services through their operating divisions and subsidiaries, including Porsche Design Group, Porsche Engineering, and Porsche Consulting. But did you know that a lot of Porsche’s success comes down to their profit scraping pricing strategy and customer profiling and segmentation techniques?
First of all, in this article, we argue that customer profiling and segmentation are what fuels Porsche’s pricing power and ongoing profitability. We also explain how Porsche uses customer profiling and segmentation to set optimal price points anchored to value rather than the cost of production. We’ll also provide several customer segment pricing examples.
Finally, you will learn how to price like Porsche in five easy steps.
How Porsche use customer profiling and segmentation to improve their pricing
Porsche’s pricing provides consumers with a frame of reference for the company. They strategically position the brand as a high priced, high quality, exclusive sports car to attract the right customer groups to the brand.
Below listed are some basic customer profiles developed by Porsche to set their prices across products and segments:
- The top gun profile consists of an ambitious and driven individual who cares about being noticed, power and control.
- The elitist profile, includes an individual from old money (blue blood), has the attitude a car is just a vehicle and not an expression of a person’s personality.
- The proud patrons owner profile sees a Porsche as a trophy considering it a reward for hard work with ownership as the main goal not being noticed.
- The Bon Vivants profile consists of thrill seekers and jet-setters with the Porsche as a means of excitement.
- The fantasist profile sees the Porsche as a form of escape and does not care about impressing others.
These customer profiles feature unique customer value drivers present across customer segments to varying degrees.
Porsche uses these value drivers and profiles (listed below) to set price ceilings for their products based on value (as opposed to production costs) for their products.
A large amount of Porsche’s pricing success comes down to their detailed understanding of consumer psychology, including their customer profiling and segmentation techniques. For Porsche, customer profiling and segmentation is vital to strategic price setting and positioning.
People that have or want to buy a Porsche expect to pay a lot of money. Therefore, a low price would put their target market off.
People around the world know that Porsche is not just a car, it’s the definition of success and self-actualisation. Someone who buys a Porsche has likely achieved their personal goals. The high-price they pay for a Porsche is evidence of their success. Porsche has turned prestige pricing into a celebration of individual success and Porsche’s ongoing success and heritage.
The profiles above consist of an elite group of customers that are a mirror image of the brand. Porsche has used customer profiling and segmentation to find customers that personify the brand.
Porsche are looking for a specific group of customers who have demonstrated that they have lived up to the brand. The ease of paying a high price for a Porsche is proof of individual worth and ongoing success.
The price distinguishes a Porsche buyer from the rest. The brand distinguishes a Porsche buyer from other luxury sports car buyers.
Let’s compare a Porsche buyer with a Maserati buyer. It seems like both types of customer groups have money and can buy almost what they want. However, a Porsche buyer buys a Porsche because they want to join an elite club with history and provenance that reflects their own lives. In contrast, a Maserati buyer buys a Maserati because the buyer wants to celebrate a glamorous lifestyle reminiscent of the generation in which we now live.
Five easy steps to price like Porsche
Porsche are at a sophisticated level with their pricing because their customer profiling and segmentation techniques give them so much useful information at a sub-group level. They are confident where they probably fit in the automotive market. So they pay a great deal of attention to what people want and value when they buy into the Porsche brand.
But, if you are not used to pricing and segmenting like Porsche, but want to learn more, listed below are five easy steps to start pricing like Porsche:
1. Identify distinct consumer characteristics in your market segmentation.
Porsche’s pricing and marketing tools are closely aligned. Because they are designed to analyse differences at a subgroup level, not just segment level. Segment level descriptions are too vague for price optimisation to work properly.
2. Leverage and quantity customer drivers.
The Porsche case study above shows value drivers tied to customer profiling and segmentation. Psychological value drivers such as ambition, desire, satisfaction, and security all require quantitative techniques. Similarly these include conjoint analysis, price trials, and experiment. As well as research to quantify the worth of various elements of a product across different segments and micro-segments. You need to understand why and how people buy, to identify the relevant metrics for your pricing structure.
3. Build an effective pricing structure.
Porsche’s pricing structure anchors price to perceived value and desire for status. Design a structure based on the finding from your customer profiling and market segmentation. Identify the right fences (price, buyer, etc.). Above all, pay attention to your customers’ needs and wants at a subgroup level. This will enable your pricing team to set the right price floors and ceilings for your products.
4. Begin to optimise and refine price points.
Select low volume products and a low-risk subgroup of customers. Also, update your price list as required. You may find that you probably need to re-think your approach and price positioning in the market. Porsche uses a prestige pricing strategy for their premium (luxury) segment. Along with sports cars (five segments) and a penetration pricing strategy for their crossover utility vehicles (two segments).
5. Certainly, adjust your offers.
Use offer design techniques to implement segment pricing with minimal enforcement of the segments. Like Porsche, you may find that your customers self-select offers. i.e., different packages, editions, loan repayments, insurances, additional extras, different range of the car. Let customer profiling and segmentation guide offer configuration. Porsche uses segmentation information to put features together in the “premium sports package” or the “luxury edition” and use a single price for that bundle of options.
Building a prestige pricing strategy based on customer profiling and segmentation information pay’s off.
Porsche’s customer segmentation and pricing strategy make them one of the most profitable automobile manufacturers, with a 17% profit margin. The first Porsche 911 campaign alone has seen sales increase year on year since the very first campaign. Even more, the introduction of the Cayenne, Macan, and Panamera has enabled Porsche to extend the brand because the vehicles are better suited for everyday use.
Consequently, Porsche’s approach to pricing is customer focused as opposed to cost-based. Hence they seek to optimise prices based on value, as opposed to their cost structures.
As a result, Porsche offers high-quality products for a premium price with various price points for products across their range. They optimise prices for the product by leveraging their lifestyle brand.
Finally, their brand is certainly made up of numerous customer driver drivers. Most noteworthy heritage and status as well as the typical features and benefits of a sports car. So these value drivers are the source of their pricing power.
Porsche takes time to understand key customer value drivers across segments and subgroups because it improves their strategic price positioning in the market.
So, with better marketing and pricing tools, including customer profiling and segmentation, car makers like Porsche know what types of customers they are going after and why and what they are likely to pay for a new car. They can target a more precise and relevant group of people and can refine this further by targeting only the top 30-40 percent.
Therefore this is a key point. Aligning your pricing, customer profiling, and segmentation to corporate strategy means the business is in a better position to capture the market opportunity. Above all a mass marketing, cost-based pricing approach would miss this. This is because of reduced wastage of advertising budget. Normally that would have been spent targeting people who have no intention of converting, simply because they fit a demographic profile.
Did you know that…
How you set up and recruit strategic pricing analysts is a key determinant of how fast you can accelerate earnings growth. Therefore, with the right pricing team strategy and implementation in place, incremental earnings gains can begin to occur in less than 12 weeks. Furthermore, after 6-12 months, the team is often able to find additional earnings. They identify more complex and previously unrealised revenue and margin opportunities.