It is easy to justify a price reduction when a crisis strikes.
However, marketers will have to ensure a relative price position versus the main competitors is maintained.Also, such strategy will have to be thoroughly analyzed from a financial point of view, as it will affect growth ratios and profitability. All decisions must be taken understanding the full risk and reward.
If competitors cut prices to a different level or simply not at all, a gap in consumer perception is created. This, independently of whether a brand is a “challenger” or a “leader”, will have to be taken into account.
If competitors cut prices to a different level or simply not at all, a gap in consumer perception is created. This, independently of whether a brand is a “challenger” or a “leader”, will have to be taken into account.
When it comes to setting the price point, you will need to take special consideration on price “anchors”, those price points consumers are conditioned to accept as reasonable for certain types of products and services. Established anchors have a very, very strong effect on your prospects first reactions to the pricing of your product. A common technique is to use face-value of coins or bills –for example a chocolate bar for 1€, an ipod for 100€.
Managing “bumps” - price levels that let people know the grade of product they're getting- will also be key. Car manufacturers do that extremely well. Launch a model of a premium brand on the medium price range and you will attire a new target buying its aspiration.
Regarding promotions, impact on the product baseline (cannibalization) should be considered. In times of crisis, loyal consumers perceive promo actions as a “thank you message” to consumers from the brand. Consumers from the competition will perceive your promotions as the emotional impulse to purchasing, allowing to “digress”, and “not focus” on the product price.
“I normally do not buy packaged salads because they
are too expensive. But, I buy them when them when they
cut the price”. Consumer insight
are too expensive. But, I buy them when them when they
cut the price”. Consumer insight
Also, it is in these times, that promotions leveraging monetary savings will be most efficient. In this sense, lowering unit price, offering more of the same product for free or providing refunds or rebates on subsequent purchases of the same or other products can help stimulate sales.
“A promotion is like new money in your pocket that you
can use to buy something else". Consumer insight
can use to buy something else". Consumer insight
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