How A Value Based Positioning Strategy Can Help Improve Your Brand’s Success ✔️
Brand positioning is a process aimed at identifying how your customers perceive your brand. More than selling products, you’re selling the culture and values surrounding your business. You’re selling your aesthetic. So, positioning your brand correctly is vital. What many brands might get confused about is how the positioning is less about the technical aspects and features of your product. It’s about how customers perceive your narrative as a brand. In this article, we’ll be focusing on the value-based positioning strategy, which is one way you can control how your customers see and identify with your brand.
Table of Contents:
How A Value Based Positioning Strategy Can Help Improve Perception
Pricing and positioning run much deeper than one might think. It isn’t as simple as reducing prices so people will buy more. In fact, discounting practices can do more harm than good – by reducing customers’ perceived value of your product.
This is the main lesson we want to drive home. Companies need to learn how to drive up value without cutting margins or damaging brand identity. A well-designed value-based strategy addresses this issue.
Before we get into the details of the framework, it’s important to understand the concept of customer price perception in relation to your product offers.
Customer Price Perception
Customers, more often than not, don’t respond to price changes the way a business expects them to. This is because price perception is often more important than the price itself.
Most companies want to be perceived as having lower prices than competitors, except luxury brands – which cultivate elitism through higher pricing. What it comes down to is whether or not your pricing strategy reflects your brand positioning and marketing.
For example, it wouldn’t make sense if Apple’s marketed itself as a budget tech company while keeping its premium price points. Their positioning adequately reflects their offerings – luxury, high quality, premium, and innovative technology. Customers buy into the lifestyle peg that goes along with their branding.
Adding Value To Improve Perception – Value Based Positioning Strategy
Improving customer price perception is often a tricky task – but there are several moves your business can make. Examples might include simple pricing strategies such as ending price digits in 9 rather than rounding up to make customers think that prices are cheaper than competitors.
Other, slightly more complex strategies include offering free premium services alongside your product or service, which makes customers feel like they are getting much more for the price. For example, consider offering a free year of tech support when customers purchase a new computer unit.
Tactics should be tailored to the nature of your business. Retail stores or groceries that are higher-end might want to include a wide variety of high-quality products, regardless of the price. Meanwhile, the same shops on the lower end of the market will want to include budget, private-label, or generic products.
Determining the correct tactic to use involves gaining a deeper understanding of your customer’s perceptions, as well as checking what pricing tactics your close competitors employ. Surveys, interviews, and focus groups are a good way to gain insight.
In summary, rather than focusing on adjusting prices, invest time in understanding what your company needs based on what customers think. Target the supercharging of sales rather than simply discounting.
Creating A Value Based Positioning Strategy Framework
Once you have identified the need for a value-based strategy, it’s time to build your positioning framework. We’ve identified some crucial steps you should take that can help you get on the right track.
Identify Target Market And Customer Needs
The first step is to properly identify your target market and customer needs. If this is something you have done before, it may be time to reassess and determine whether your previously identified segment and needs are still relevant. As your business grows, your positioning may need to evolve as well.
Once you have identified a relevant target market and their needs, dig into what their values are. What qualities do they look for in a company, and how can you reflect them? This information will be the basis for many important decisions in the next steps of your business.
Position Your Brand
Knowing your customer’s values alongside your own values can help you position yourself in your market. Ask what it is you want your business to reflect and be associated with. What should be on your customer’s minds when they think about your brand?
This will help you establish where you need to be in the market so that customers turn to your company first. Building your brand essence should capture thoughts, feelings, and emotions that your customers should immediately associate with your brand.
Having this foundation will also set the tone for your marketing. It will help you keep things consistent and in line with your brand and customer values.
Integrate Your Marketing Strategy
Your marketing strategy is one of the most crucial aspects of your product or service’s success. This is the first thing most of your customers will see. And in a commercially saturated world, first impressions are everything.
Most of the time, impressions are all the chance you have to make an impact. Take video commercials for example. They only have mere seconds to grab viewers’ attention. The same thing goes with billboards when people drive by or click-through online ads as they scroll through.
Your marketing strategy should reflect the functional, economic and psychological benefits of your offering, as well as drive an emotional impact of what the customer can gain from consuming your brand.
The better you can portray this throughout your marketing and branding, the more consistent and effective your marketing will be. Consistency will help define the foundations of your values.
Conclusion: Value Based Positioning Strategy
In conclusion, a value-based positioning strategy can help elevate your brand to the level of success you are aiming for. Consistent and effective marketing and integration of your brand and customer values will help you achieve your targeted positioning. Likewise, a well-thought-out pricing strategy will further strengthen your brand’s framework. So, it’s best to invest your time and resources wisely in order to succeed in your positioning goals.
How Harley Brought A Dying Brand & Value Based Price Positioning Strategy Back To Life 📈
Is your price positioning strategy working to build your brand or killing it?
Most senior executives do not know exactly where their product’s price is positioned in the competitive market. And over time this leads to serious brand issues and ongoing revenue and margin loss.
Great products and prices don’t guarantee success. It requires meticulous planning. Knowing all the situations and results from data analysis will give a clear insight into the best price positioning strategy to use.
If customers don’t know what they’re paying for, and pricing managers don’t know what they’re charging for, it’s almost impossible for companies to identify their pricing and positioning against the competitors.
A price-benefit positioning map drawn from a simple statistical analysis provides insights into the relationship between prices and benefits and tracks how competitive positions change over time.
Pricing teams can use the tool to compare their pricing against rivals, dissect competitors’ strategies, and predict a market’s future. By creating an accurate map of the competitive landscape, companies can also get everyone in the organisation on the same page.
In this article, we will show you how to create a price positioning map to determine how your products stand against competitors.
We’ll teach you how to price position your products. We’ll share insights into how Harley turned around their business and brand using clever price positioning strategy. And we will give you some tips on how to apply strategic price positioning in your business.
But first, let’s look at why both big and small businesses need to perfect their price positioning strategy – and what happens when companies don’t think price positioning is important enough. Yes, even big brands like Harley Davidson have learned the hard way… losing millions of hard-earned profit dollars in the process.
Harley-Davidson’s price positioning strategy
A good case example of positioning by price and quality is the Harley-Davidson price positioning strategy. Harley is a brand most people know. It’s a brand that doesn’t need the panoply of wall-to-wall advertising and in-your-face marketing. Instead, its brand recognition comes from a quiet, kind of a behind-the-scenes effort to sell a product more directly on its merits, in its own time and in its own way. Or it did before 2004…
For example, in 2002, Harleys’ positioning map showed that most of Harley-Davidson’s models earned large premiums compared with rival products. Customers paid 38% more, on average, for Harleys than they did for foreign motorbikes even though the Japanese Big Four offered 8% to 12% more engine power.
By accounting the impact on prices of all physical features and attributes, the price premium they received was most probably the result of the intangible secondary benefits the company offered its customers. This included things like the image created by membership in the Harley Owners Group (HOG) and apparel from Harley-Davidson’s MotorClothes.
For many years, Harley attained its cult status, especially among the baby boomer generation – and mostly based on the secondary benefits they offered their customers. These benefits helped Harley-Davidson create its well-known brand image and story – i.e., that people who buy Harleys are adventurous, rule breakers, free spirits and sort of old school macho types.
Losing Market Share
However, in 2004, things changed for Harley and they realised they were losing market share. What’s more, Harley’s positioning map highlighted that their brand was in decline, and its price positioning strategy was driving down profits.
In short, the price of a Harley was still higher than that of equivalent Japanese motorbikes, but it no longer commanded the highest price premiums in the market. People no longer thought the brand was as cool as it once was. New American rivals, such as Victory and Big Dog were cooler. What’s more, they were also earning a 41% premium over Harley-Davidson for the same level of engine capacity.
Floundering position in the price positioning strategy
The market leader was floundering, possibly because its image was no longer appetising or outdated to the more hipster crowd of potential customers. It was assumed that both Generation X and Generation Y consumers were seeing the Harley as their father’s motorbike and that many people actually despised its bad-boy macho image.
Victory and Big Dog (newcomers to the industry) seized this fractured time for Harley as a new revenue opportunity for them. They took advantage of a desire for a “New American Bike.” They knew people didn’t like Harley-Davidson’s “Easy Rider” image as much as they once did, seeing how people perceived the Harley Owners Group and Harley’s MotorClothes as old-fashioned.
Then, they created highly customised products to trump Harley’s. A new brand of rider changed riding a motorcycle from just being cool to an activity of self-expression.
But Harley didn’t take this competition sitting down. They came back fighting to build a new marketing and pricing strategy that many businesses from tools and furniture can learn from.
In large part, they made a revival stemming from a hard-eyed comparison of the competition’s strengths. In particular, they saw that their competitors were really good at learning and adapting quickly to change. Whereas, they were not.
They then re-set the business to focus on improving their agility to learn and turn ideas around. They sort to quickly turn out new products with high-tech innovations. But with their own unique tradition and a powerful mystique.
The company’s conclusion to its success stems from turning left when the competition turns right. ‘Let’s be the alternative and do the things they can’t do’. And that became the strategy in everything Harley’s did and still do.
Building a competitive advantage in the price positioning strategy
Most companies have to build fresh competitive advantages and obliterate others’ advantages faster than they used to. As innovation pervades the value chain, they must migrate quickly from one competitive position to another. Creating new ones, depreciating old ones, and matching rivals.
This process can be confusing and unstable. Pricing management needs new tools to help them systematically analyse their own and other players’ competitive positions in hyper-competitive markets. A costly mistake could lose their position and may not recover.
Drawing positioning maps for the price positioning strategy
Basically, a price-benefit positioning map displays the relationship between the main benefit that a product provides to consumers and the prices of all the products in a specific market. There are 3 steps in creating that map:
Determine the market.
To draw a significant map, you need to identify the frontiers of the market that you’re interested in. There are 3 ways on how to do it:
- Recognize the consumer needs that you want to understand. Make an overview of all the products and services that satisfy those needs. In this way, you’re not sidetracked by new entrants and technologies or unusual offerings taking care of those needs.
- Select the location (country or region) that you want to study. If competitors, customers or products are used differently across borders, limiting the geographic scope of the analysis is better.
- Plan if you want to monitor the whole market for a product or only a specific segment. Also, if you choose to explore the retail or wholesale market. And if you’re going to keep an eye on brands and products. Changing these sets of analysis will enable you to create different maps.
Select the price and know the main benefit.
After selecting the market that you want to focus on, identify the extent of your analysis of prices. By doing so, you have already chosen whether to study retail or wholesale prices.
However, you must also consider other pricing variables. Compare initial prices or prices that include life cycle costs, prices with or without transaction costs, and the prices of unbundled or bundled offers. While gathering data, don’t forget to be consistent about the price definition you use.
It is not easy to identify the primary benefit (the benefit that explains the largest amount of variance in prices). A product provides various benefits such as durability, serviceability, aesthetics, basic functions, ease of use, additional features, etc. Customers usually place value on the features of the product, not the companies.
Thus, the success of strategies depends on it. In recognizing that value, you need to create a list of the benefits provided by various products or brands in the market and collect data on how customers view those benefits.
Mark the positions and indicate the line that best fits the points on the map.
The next step after identifying the main benefit is to draw a positioning map. Mark the positions of every company’s product or brand based on its price and level of the main benefit. The map will show the relative positions of competitors on a common scale in the marketplace.
Lastly, mark the line that best fits the points on the map. The line displays how much customers are supposed to pay on average to obtain different levels of the main benefit. Furthermore, the slope of the line shows how much more a customer is expected to pay for a higher level of the main benefit.
Implications Of Value Based Positioning Strategy
- Segmenting your customers’ base would depend on who values your product the most. Are you going to charge a high price to a smaller segment or target the mass market with a lower-priced product? Your segmentation will determine your competitive position.
- Finding your competitive edge will be based on whether your product is better or worse than your competitor at meeting consumers’ immediate needs. If it’s better, your prices should go upward. If they are worse, then your prices should go downward.
- By bundling other products or services to the main sale, you’re giving up a little bit on each product. In effect, consumers can choose what’s the best fit for them. So, it’s a good way to get a competitive position.
- Harley is a good example of a company that responds to competition positively. They took it as a challenge, resetting the business to focus on improving their agility to learn and turn ideas around. In addition, using high-technology in innovating new products with their own unique tradition and powerful mystique.
Conclusion: Value Based Positioning Strategy
- If your product is better, find the competitive price difference and price upward. If yours isn’t good, you may need to price downward. As your competitors’ prices change, your price should price accordingly. Nothing is static.
- If you regularly have to discount to sell your product, you’ve either overstocked the product with features that people don’t want to pay for. Or, you’re trying to sell it to the wrong type of customer.
- There’s no answer that fits all situations when it comes to a competitive position. But what’s important is that you “create a model that fits with how people want to buy your product.”
- Despite Harley’s losing market share in 2004, they fought and built a new marketing and pricing strategy to get back on track.
Value Based Price Positioning Strategy: How Do Customers Perceive Your Price? 🧴
What message does price give to a potential customer? Why is there variation in prices? The answer is price positioning.
For instance, in Australia, the average price for a 170-gram yoghurt is 2 AUD. For sure, you can find yoghurts sold for less than that amount in some parts of the country and certainly more expensive in a reputable store.
Thinking about the goods you buy; you will know whether the specific product is viewed as cheap or expensive.
Many customers have a theoretical range of prices that help them formulate the position of the price of a product. Perceiving price as value for money depends on various factors such as: age, product knowledge, income, and experience of purchasing similar products.
Therefore, price positioning is vital in helping to persuade customers to buy a product.
If you have a discount supermarket chain like Aldi or Lidl, you’ll always try to keep your prices low as much as possible. Certainly, cheaper than rivals like Waitrose and Marks & Spencer.
On the contrary, if your product is positioned to be a luxury product, pricing it too low will damage your brand’s reputation. Your pricing should align with product and brand positioning in the market.
In this article, we talk about price positioning and the three price positions to choose from. In addition, we tackle the effective positioning and differentiation strategies that businesses can utilise to position and differentiate your product/service in the marketplace. This allows your customers to view your product as having value and worth the price they’re paying for.
What is price positioning?
Price positioning is the act of setting a price on a particular product/service that is within a specific price range. The price positioning shows where a product is positioned as regards to its competitors in a particular market as well as to the customer’s perception.
With price positioning, you will know whether the product is viewed as cheap (low-priced) or expensive high-priced). Price positioning is significant to businesses that are trying to persuade customers to buy a certain product/service.
Examples of Price Positioning
Take, for instance, the Dollarama, Canada’s largest retailer that sells items for four dollars or less. With this tactic, they want shoppers to think that buying there is economical. The business positions itself as having the cheapest price on the market.
Other examples are Hermès handbags or Rolex watches. Undoubtedly, the handiwork of these products dictates a higher price. Thus, these items belong to the luxury market, completely concentrating on advertising, branding and quality.
These products also promote a price premium that rules over the costs of other features. Also, part of the premium is to create a “cost of ownership” that provides an upper-class status to the owner. Definitely, some consumers want to be in that circle.
Another famous example is the supermarkets that are providing discounts for some basic, everyday purchased items. They offer discounts to products that typically go into a family grocery cart. This creates an impression that they are the cheaper option.
However, in reality, other products in that same cart actually compensate for the very low price. This is called the loss leader pricing strategy.
What are the 3 price positions?
Generally, there are three price positioning moves to choose from that will help you to position your product/service based on the dictates of business planning and strategy:
- Penetration Pricing – is the favoured alternative when a business is trying to attract a new customer and convince them to try the new offering by initially providing a lower price. In doing so, it helps a new product/service enter the market and entice customers away from rivals. The aim of a price penetration strategy is to convince customers to try a new product and create a market share with the expectation of keeping the new customers when prices go back to normal levels.
Some examples of penetration pricing include: online news website providing a one-month subscription-based service for free or an offer from a bank giving a free checking account for 6 months.
- Skimming Pricing – is the opposite of penetration pricing. In price skimming, a business sets the initial price high and then lowers it over time. During the new product launch, when companies skim, they sell to customers with a high willingness-to-pay. As the demand of the first customers slows down, the company lowers the price to attract another tier of customers.
Oftentimes, price skimming is used when a new product penetrates the market. The purpose is to gain as much profit as possible while consumer demand is high and rivals have not entered the market yet.
A popular example of price skimming is the initial release of the Apple iPhone back on Sept. 5, 2007. It was offered initially for $599. Naturally, Apple fans rushed to buy the iPhone. Then, two months after it was launched, Apple lowered the price from $599 to $399 to gain more customers. However, the big reduction in price was too much too soon for the early adopters. Remember, skimming as a market entry strategy will work only if you have a dominant position just like Apple as the iPhone is unique. (Lesson learned from Apple’s case: bring your price down slowly.)
- Neutral Pricing – is the most common strategy and preferred option when the market has fierce competition and little differentiation among competing offers. Prices are set so that customers are somewhat indifferent between your product and your rival’s product after considering all features and benefits, including price.
In other words, neutral pricing is just maintaining the status quo. You are not attempting to either gain or lose market share. Well, not all customers will be indifferent because some will like your product better, others will prefer your competitor’s.
For example, Sony televisions, are regularly priced above competitor levels. Since they provide such excellent value, the market still considers the price as neutral.
Effective Value Based Price Positioning Strategy & Differentiation Strategies
Businesses should be able to position and differentiate their product from what their rivals offer. The consumer should view your product as having value and is worth the price. In order to achieve these goals, companies have several techniques that they can utilise.
Knowing Target Market Demographics
Products are created to entice a specific demographic segment. Demographics include age, gender, income, level of education, and language.
For instance, check the profile of people who buy luxury cars. Normally, they have higher incomes, thus, you wouldn’t try to sell them regular cars to this demographic.
A strategy that appropriately targets a market segment has a set of conditions associated with it:
- value to the consumer,
- powerful position against competitors,
- more effective communications
- Customer retention and acquisition.
For most customers, pricing is a major consideration. If a business can persuade customers that they will get more value for their money, they will purchase the product.
A lower price strategy may entail compromises in the quality of the product or to lower the range of offerings. For instance, a car manufacturer will offer a low price but will use fabric upholstery instead of leather. However, the customer still needs to believe that he is getting good value for his money even though a product is low-priced.
Consumers perceive expensive products as high-quality and are worth the price. Therefore, to create this perception to the customers, the business should focus its advertising on the best features and benefits of its products compared to its competitors.
Limited Distribution Strategy
Companies can build the impression of better value by limiting the distribution of their products. Just like golf equipment, manufacturers have other models of clubs and balls that are only available in pro shops. Golfers have the perception that the products are of higher quality because they’re not readily available in stores like Target or Walmart. Thus, customers are willing to pay more for this exclusive set of gold clubs.
When two products have the same features, quality and price, a business should look for ways to differentiate his product from the competitors. For example, focusing on something that provides an advantage in the customers’ mind. Such as highlighting better customer service, faster delivery times, or a wider selection of colours and sizes in marketing and advertising.
Effective positioning and differentiation techniques begin with an analysis and understanding of the customer’s preferences, and the power of the competition. Also, marketing campaigns should focus on quality or price. And of course, the purpose should be to reach the target market.
Implications Of Value Based Positioning Strategy
- A different position and pricing will lead to targeting a different consumer group. Select price effectively based on what position you’re choosing to take in the market. Therefore, it is very important to evaluate your rivals’ position first before deciding on pricing.
- Pricing and brand equity are both important as other differentiators. Price also conveys a quality message. Thus, it can impact the notional place your brand takes in the minds of your target customers.
- Consistency is key and businesses can implement several pricing strategies and tactics to keep that level of consistency. Price position provides the product with a distinctive selling proposition, consequently, making that product stand out from its competitors. In addition, a price position is also perfect when a company can charge a high price and ward off the competition.
Conclusion: Value Based Positioning Strategy
Price positioning has a strong impact in most markets on how the brand is perceived. Some businesses underprice or overprice because they don’t exactly know what they are conveying to their customers because their brand’s promise is not clear.
The bottom line is, it’s all about how customers perceive the brand and their willingness to pay now and in the future. However, working on branding and positioning requires tracking the changes in customers’ willingness-to-pay over time. For instance, every three or six months.
Value Based Price Positioning Strategy For Service-Oriented Businesses
Service businesses have inherently different structures and strategies than product-oriented ones. This may sound like a no-brainer, but it’s important to consider the implications of these differences. Using strategies meant for the other type of business could have serious repercussions on your profitability and success. In this article, we’ll be focusing primarily on the pricing and positioning strategies for services. This overview should give you a more comprehensive understanding of your type of business and what it needs to remain competitive and successful.
Important Differences In Structure And Pricing and Positioning Strategies For Services
Service-oriented businesses in essence provide services to customers rather than a physical product. This typically involves some form of specialised expertise and a strong emphasis on customer service. Any physical product is usually supplementary to the service. For example, a financial service may include written reports. Legal services may include the cost of the paperwork.
Service businesses require different strategies than product-oriented businesses for these very reasons. Pricing and positioning for services differ greatly since they can’t be based on the cost of production. Marketing strategies will also look very different.
The first thing you need to consider before delving into strategies is identifying what type of service business you fall under.
What Type Of Service Are You In?
There are hundreds of types of service businesses in the market today. To help you define which category your business falls under, you can evaluate how the service is rendered, and what you need to render the service. You may find that you need machinery and other equipment, or that your service is purely delivered through professional expertise.
Though we won’t cover everything, this is a general list of categories to help you find your position in the industry:
As the name suggests, people-oriented services involve a direct exchange of skills or information from person to person. There are those who offer professional services, such as lawyers, management or financial consultants, or accountants.
Then there are those who offer labour. Skilled services include appliance repair, plumbing, catering, and the like. Unskilled services can include janitorial services, security guards, even garden care.
Equipment-oriented services include businesses that are entirely automated, like vending machines, and those semi-operated by workers, like theatres, taxi services, airlines, etc. Similar to people-oriented businesses, these can be further distinguished into unskilled and skilled operators.
How Can We Remain Competitive?
Maintaining competitive advantages in service-oriented businesses is quite different from product-oriented businesses. It’s crucial to know the following aspects in order to stay ahead of your competition:
Opportunities For Scale
Products have the benefit of a uniform method of production that can be uncoupled. Services are more often than not delivered by one unit of people, making it much harder to scale. Despite being harder, there are still opportunities for your service business to do so.
Depending on the business, you can still add more products to the business while keeping maintenance and labour costs low. It’s much easier to scale up service businesses that are equipment-oriented. Some examples include bigger planes for airlines that allow nearly double the passenger capacity.
People-based services businesses are more likely difficult to scale, but there are still options. Arguably the most accessible and successful way to scale up a people-oriented service business is to ramp up advertising. Using advertising well can make it an incredibly efficient competitive tool.
Technology is a great way to gain a competitive edge over competitors. Equipment-oriented services can make use of proprietary technology, which is a technology unique to your system. This gives you an advantage over other companies that may not have the equipment to optimise their offering.
People-oriented businesses can also benefit from technology. The use of big data, advanced analytics, and other programs can allow professional services to create products that automate simple repetitive tasks. This makes for a faster turnover and a higher success rate with clients.
One similarity between product and service-oriented businesses is that differentiation can put you ahead of the game. Both businesses can stand out from the crowd with unique product or service offerings that no other competitor has.
Pricing and Positioning Strategies For Services
Pricing and positioning strategies for services can often be trickier. This is because pricing is more often than not based on abstract definitions of value. Equipment-oriented services are a little easier to price, since – like products – you can factor in production costs and use it as a basis.
For professional services, pricing is largely dependent on value. Likewise, value is subject to the perception of customers. Value-based pricing is one of the most common pricing strategies in this scenario.
The way you position and market your service is essential in managing how your customers perceive the worth of your offering. Pricing needs to be on par with your branding.
If you market yourself as a high-quality firm or business, yet your price is too low, customers can be wary of your legitimacy. If the price is too high, while setting your position too low, your customers won’t be encouraged to spend.
Hiring a competent pricing team can be a turning point for your business. Pricing teams can help you figure out exactly what price point your service should sit at. They also have valuable and specific expertise about pricing systems and psychological aspects you should consider – which your regular accountants may not have.
Likewise, pricing teams can help you figure out how to manage and maximise your margins. As we have said previously, a service business can be hard to scale. Pricing teams can help you determine and navigate the right strategy for your business.
Bottomline: Value Based Positioning Strategy
Service-oriented businesses have very different strategies that you must be aware of. This will help you break away from habits that may not be beneficial or relevant to your service offering. Likewise, it’s important to determine the right pricing management strategies for your business in order to maximise your profits. Pricing teams can help you find the right price points for your service offering and help you make a name for your brand.
For a comprehensive view on maximising growth in your company,
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