blog: pricing strategy

Price, Shmice!!!

I recently went head-to-head with my toughest critic to argue that A.C.C.E.P.T. decision criteria accurately summarize the values that purchasers use, knowingly or unknowingly, in making a purchase decision, regardless of whether they are a consumer, a business or a procurement agency.

A quick refresher on the criteria:

> Achievement: will this purchase help me to achieve my goals??
> Convenience: how easy is it to buy this product/ service?
> Comfort: can I use this with peace of mind?
> Esteem: will my decision be respected?
> Pleasure: can I derive pleasure from the outcome?
> Trust: can I trust that my expectations will be met?

The first comment hurled back at me was “PRICE!!! How can you possibly represent purchase decision criteria and exclude price?”

So with my back up against the wall I had to explain how price is a value indicator that is relative to all of the above. How if 2 identical products at the same price from the same country of manufacture were offered and one had a designer label on it and a sticker that showed it was discounted to the same price as the one without the label, then price would not be relevant to the decision and you would choose the discounted product. How if you have $10 to spend you will apply all these decision criteria in order to maximize the value you derive from the $10, and it is still $10 so cost is not issue, satisfying your values is the issue. How products that help you to achieve very little are the most price-sensitive and those that help to achieve a lot are the least price-sensitive (a truth that can be applied to any of these criteria). How low-income families will minimize cost on low quality food and invest significant portions of their income on entertainment products to maximize pleasure. How even this particular critic only purchased Heinz Ketchup and not a cheaper brand because that is what they learned to trust from early childhood.

It was a tough exchange and brought up some good points, such as longevity of the product (warranties, reliability etc.), which I parked under Achievement, and culture (tradition, religion, pop values), which I parked under Trust and Esteem.

There are words that can be added as sub-categories or used in place to mean the same thing like objectives, respect, flexibility, location, and satisfaction. I created these labels as a memorable acronym. But the function of these criteria is not to constrain the customer, but to determine, through analysis, where their values lie in reference to a marketer’s products or services, based on what they want to achieve, respect, trust, enjoy, in comfort and convenience. And I use them to build a compelling marketing program to align the brand, product and service values to key customer segments in the market.

Buyers frequently make the wrong choices:

– They expect to achieve more than the product can deliver (the 6 HP snow-blower in a 3 foot drift).
– They experience delays and frustrations with services that are not convenient. (Almost any Telco.)
– They make choices that do not suit their personality or appearance. (The Wrong Designer Dress at the Oscars, what was she
– They choose a product that they cannot easily use (Ikea, keep working on user-friendly self-build manuals).
– They expect pleasure from the packaging and are disappointed by the reality of the experience (Most diet frozen meals).
– They assume trust when they choose the lowest price (Municipal tenders on anything).

But they are lured to all these decisions by the promise of satisfying their expectations. The application of the A.C.C.E.P.T. decision criteria is to align your product or service offering to these customer segment values, then communicate and deliver to the customer, in order to satisfy their expectations. Price elasticity could be more accurately gauged as the margin by which a product would exceed or trail the customer’s values. Prices are relative and, as buyers, we often assume too much based on price. But once expectations fail to materialize we learn from our mistakes.

Some of the resistance I experienced in this exchange might have been because no one likes to be psychoanalyzed. Our unique values are programmed into our subconscious like a lens shutter. Blink, fits, blink, doesn’t fit. Even in a long-term evaluation designed to eliminate all possible irregularities and biases, decisions are still made based on expectation of achievement, convenience, esteem and trust. When a competent bidder that has the best product at the best price, still doesn’t get the sale, they should review the trust, or esteem criteria, because therein might lie the weakness. Customers are risk-averse, which is why it is so hard to break in with new products unless you cover all the bases of the A.C.C.E.P.T. decision criteria. Putting such programs together depend on a strong understanding of the market segments you need to penetrate and then defining your marketing program to encompass all of these criteria. If you rate some of the outstanding performers like the iPod, you will observe how successfully this product meets all of these criteria, and it’s not cheap.

I did not lose the argument, or my wife, in the process of this discussion, but I would like to invite comment from other sources.



Written By |Marketing Strategy|Comments Off on Price, Shmice!!!
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