Price Positioning – 3 Strategies For Maximizing Profits

In this article and video I’m going to teach you 3 price positioning strategies you can use to help your customers choose you over your competitors. Let’s get started.

Price Positioning Strategy Vid Tutorial

Price Positioning Strategy #1

price positioningThe first technique we’re going to talk about is being the cheapest in the market.

There’s some pros to this price positioning strategy and there’s also some cons to this as well.

One pro is that if you’re trying to attract a lot of customers, being the least expensive on the market is a great way to do this.

There are some consumers who make most of their buying decisions based off what’s the cheapest product or service on the market is.

If you can slide into this slot in the marketplace it could be advantageous to you as long as your business model supports this type of buyer.

Another pro of being the cheapest is that you can acquire customers sometimes very quickly.

That could be good thing if you have many backend offers to continue to sell your customers later in your marketing campaigns.

The Loss Leader Strategy

price positioningWhat I’ll do in a lot of my businesses, is we’ll actually do what’s called a loss leader in the very beginning.

We’ll take a loss in terms of just acquiring a customer on the front end. We can do this because we know the value of a lead and we know the value of a customer.

We know that eventually we’re going to make up the “loss” on the front end and eventually turn a profit on the customer acquisition.

The loss leader concepts (or being the cheapest on the market for a couple products) is very strategic here.

We can do this because we have a whole suite of additional products and services to continue to offer our customers on the back end. We know that the lifetime value of a customer will continue to rise.

Or to put it in another way, we’ll eventually make the customer profitable.

Costco & The Loss Leader Principle

Grocery stores are infamous for using the loss leader price positioning strategy.

They’ll put certain produce on sale, for example milk or gas. When they sell those they’re not making a profit on this product. They’re the cheapest for a few goods.

price positioningCostco has super cheap gas. They know when you go to Costco to buy gas that they may lose a couple pennies on each gallon of gas.

But Costco know they’re going to make it up because most people buy multiple items when they go to Costco.

A Con Of Being The Cheapest On The Market

pricing psychologyIf you do decide to use the lowest cost price positioning strategy you have to have some deeper pockets in your business.

Or here’s another way of putting this.

If it takes you 60 days to break even on your customer acquisition and then 100 days to turn profitable, you need the cashflow and reserves to be able to sustain this strategy.

It can be extremely profitable but again you really need to know your metrics in your business.

(Don’t know your #’s well in your business? You can start to fix this by reading my article on email marketing metrics.)

Additionally, you need that rock solid strategy in place to ascend your customers through additional backend products and services. If you’re a single product business this strategy will be tough!

Another Major Con Of Being The Cheapest

price positioningHere’s another challenge that comes in, in terms of being the cheapest on the market.

If all you’re doing to differentiate yourself in the market is by being the cheapest, other competitors are eventually going to come in and undercut you.

Business is a competitive sport.

Eventually, your margins are going to erode. This is a problem and can quickly put you out of business.

You need to have a lot of sales volume to make up for the low margins. Or again a really strong backend to really make cheapest on the market work for you.

But again, if you’ve got a real good strategy in place and you can go in and be aggressive, maybe cheapest is the way to go.

Price Positioning Strategy #2

price positioningSo the next price positioning strategy is what we call “middle of the road price positioning”.

Just like the version where we had the cheapest, there’s some pros and cons to the middle of the road strategy here.

So, what are some of the pros of being the middle price?

Well, the pros are that oftentimes you can bake in a bit more margins on the front end point of sale.

If you don’t have deep pockets in your business, this might be a better way to go.

Another pro is there is definitely a segment of the market that will never buy the cheapest option.

Pricing Psychology Of Being Mid Priced

price positioningPricing psychology studies have shown that consumers will often times make pricing decisions irrationally.

There’s definitely a segment of the market that thinks, if it’s the cheapest on the in terms of price, that’s representative of quality.

Now, that’s not always true, but you have to understand this is how a lot of consumers make their decisions.

That’s one of the many reasons Toyota Camry is one of the best selling car out there.

It’s not the cheapest car. Nor is it the most expensive car. It’s middle of the road.

So there’s a lot of pricing psychology that’s baked in within the middle of the road. Often times consumers equate middle of the road pricing as a good blend of affordability and value.

Of course this isn’t always true in practice. There have been many crappy products sold at middle of the road pricing.

But, the thing to remember is that buyers come in with all kinds of preconceived biases when it comes to price.

You can use these preexisting biases to your advantage if you position your price properly.

Dare I say irrational?

Welcome to the world of price positioning and consumer psychology!

Cons Of Being The Middle Of The Road

buyer personaNow, what are some of the cons of being in the middle of the road?

Well, first of all, you’re not attracting necessarily the best buyers with the most economic impact.

Sure you’re charging more on the front end.

But, are you also attracting buyers who either can’t afford or won’t be purchasing upgraded packages and services later?

This is where you have to really pay attention how customers interact with your business over the course of their lifetime.

So a couple of different ways to be thinking about this.

But again, there’s been many businesses that have priced themselves squarely in the middle and have done major volume and major revenue. So pros and cons of being in the middle of the road.

Price Positioning Strategy #3

price positioningSo the last pricing strategy we want to talk about is my favorite.

And that’s pricing your product or service at the top of the market.

So here’s the pros of pricing yourself at the top of the market.

You’re attracting oftentimes the best buyers out there.

These are people who through their actions have proven to spend on a quality good or service.

Now, again, consumer psychology is a weird thing.

There have been plenty of businesses who’ve priced their product or service at the highest tier but they’re putting out garbage products.

I don’t want you to do that!

You want to make sure that you’re really putting out a quality product or service that reflects that price.

But being at the top is just brilliant in terms of positioning. Again it’s irrational, but many consumers equate price with quality.

Additionally, you’re attracting great customers on the top there as well.

Plus, you have more potential baked in profit margins as well at the point of initial sale.

Cons Of Being The Highest Priced

price positioningNow, what are some of the cons?

Well, you’ll most likely have to spend a little bit more on some of the imagery that you use for your marketing.

You’re also going to have to spend more on branding overall.

You’re going to have to spend more on the customer experience.

Every touch point that your prospect or customer has with your brand, you want to make sure that it reflects being the top of the market.

Whether that be, contact with the customer service and how polite, helpful, and accommodating they are.

How Your Branding Strategy Must Change

price strategyThe imagery that you use, the fonts that you use, the designs that you use, the box that your product or service comes in. All these have to reflect luxury and a top of the market experience.

For example, if you’re selling cars, how are your salespeople dressed? If you’re top of market your sales people and the showroom better look NICE!

Things you want to be thinking about. So when you price your product at the top of the market you may have to spend a little bit more money  in the beginning. But, it’s well worth it.

Price Positioning Important Final Points

And so there we have it. Three different pricing strategies that you can use to position your product or service.

Now, there isn’t one right and there isn’t one wrong. There’ve been plenty of brands and businesses that have positioned at all of these levels.

Walmart and Amazon, oftentimes they’re positioning themselves as the cheapest. Mega huge businesses and very profitable.

And these are some of the biggest businesses in the world succeeding at the lowest price.

Middle of the road. This is your Toyota Camrys. They’re positioned right in the middle. Again, Toyota Camry, one of the best selling cars of all time.

At the highest level of price positioning we have Armani, Tiffany, Mercedes Benz, Porsche. Huge brands at the top of the market.

So all these different ways of price positioning your product or service.

What Is The Best Starting Point For Price Positioning?

pricing strategySo what if you’re still trying to figure out what’s best for you?

Well, I recommend you 1st develop an incredible brand story & a unique selling proposition. Customers connect with stories & uniqueness.

That will allow you to start your price positioning higher. Which again is my favorite price positioning.

You can always move down from there.

Never forget, you’ll let real sales #’s and customer actions be your ultimate guide.

There will always be an optimal price point generates the most sales and revenue. Your job is to figure to dive deep and test to figure that out.

In future articles and videos we’ll explore how to test pricing but in the meantime today’s guide should give you an incredible launch point.

Do you have questions about price positioning? I’d love to hear about what you’ve tried, what’s worked for you in the past and what hasn’t worked. Please leave a comment below to continue the discussion.

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