- HOW TO RESTART OUR ADVERTISING ACTIVITIES?
- THINGS TO REVIEW DURING THE CURRENT CRISIS!
- REMOTE WORK AND ITS IMPACT ON OUR OPERATIONS
- MARKETING IS A BATTLE
- WHY DON'T I TAKE COMMISSION ONLY MANDATES?
- HOW TO MARKET TEST A NEW PRODUCT OR IDEA?
- EXECUTION - WHY DO GOOD STRATEGIES SOMETIMES MISS THE TARGET?
- AN ENTREPRENEURIAL EVENING AND EXCELLENT BUSINESS IDEAS
- HOW TO NETWORK THE RIGHT WAY?
- IS NEGATIVE PUBLICITY ALWAYS NEGATIVE?
- WHAT IS THE SUCCESS RATE FOR START-UPS?
- WHAT SHOULD YOUR MARKETING BUDGET BE?
- PRICING STRATEGY: PRICE SKIMMING!
- PRICING STRATEGY: GIVING YOUR PRODUCT/SERVICE FOR FREE
- SHOULD WE COMPARE OURSELVES?
- WHAT SHOULD WE MEASURE WHEN WE EVALUATE OUR MARKETING EFFORTS?
- WHAT IS THE VALUE OF A CUSTOMER?
- DOES CONTENT MARKETING WORK?
- WHAT IS THE DIFFERENCE BETWEEN A BRAND, BRANDING, A PERSONAL BRAND AND A COMPANY/PRODUCT NAME?
- WHAT IS GROWTH HACKING?
- HOW MANY « P » CAN BE FOUND IN THE MARKETING MIX?
- THE CUSTOMER VALUE CHAIN
- HOW CAN YOU PROTECT YOUR UNIQUE PRODUCT OR SERVICE?
- CONFERENCE ON FINANCING - MAY 2, 2017
- WHAT IS DRIP PRICING?
- WHICH AMOUNT SHOULD YOU CHOOSE FOR YOUR PRICES?
- DETERMINING YOUR HOURLY RATE BASED ON THE VALUE YOU THINK YOU HAVE
- IS LOWERING YOUR PRICES A GOOD IDEA?
- TO OFFER OR NOT TO OFFER FINANCING?
- HOW TO PROTECT YOURSELF AGAINST EXCHANGE RATE RISKS
- WHEN IS A GOOD TIME TO INCREASE YOUR PRICES?
- DEMAND BASED PRICING
- WHAT IS A LOSS LEADER?
- HOW TO ORGANIZE A DRAW THE RIGHT WAY?
- HOW TO HAVE REMOTE EMPLOYEES
- IS IT GOOD TO BE FIRST IN A MARKET?
- THE THREE TYPES OF CUSTOMERS
- EXPORTING TO MEXICO - QUERETARO REGION
- DEFINING BUSINESS SUCCESS
- ARE YOU USING REBATES? WATCH OUT FOR THESE
- IS THE CUSTOMER ALWAYS RIGHT?
- EXPORTS AND QUEBEC COMPANIES
- COWORKING SPACES
- YOUR PLACE OF BUSINESS AND INTERNET
- WHY IS SOCIAL MEDIA IMPORTANT FOR YOUR BUSINESS?
- HOW TO USE FREEBIES
- WHAT IS THE MAGICAL FORMULA FOR HAVING SUCCESS IN BUSINESS?
- DO YOU HAVE EXPERIENCE IN MY FIELD?
- WHEN CAN WE STOP OUR MARKETING?
- WHAT IS A CALL TO ACTION?
- WE ARE ALL SALESPEOPLE; HERE'S HOW TO GET THERE
- HOW CAN MARKETING AND SALES COLLABORATE?
- HOW TO SELL MORE TO YOUR EXISTING CLIENTS
- WHAT IS CROSS-MARKETING?
- WHY SHOULD I SEGMENT?
- WHO IS RESPONSIBLE FOR MANAGING YOUR COMPANY'S IMAGE?
- HOW TO CHARGE FOR YOUR PRODUCTS / SERVICES?
- HOW TO DEFINE YOUR PRICING STRATEGY: PRICE POSITIONING
- HOW TO DEFINE YOUR PRICING STRATEGY: MARKET PRICING
- WHAT PRICE SHOULD YOU SELL AT? - COST-BASED PRICING
- WHAT IS A PRODUCT?
- HOW TO MARKET YOUR NEW BUSINESS?
- IS BUYING A FRANCHISE A GOOD WAY TO START A BUSINESS?
- HOW SOCIAL MEDIA HAS CHANGED WORD-OF-MOUTH
- HOW SOCIAL MEDIA HAS CHANGED PUBLIC RELATIONS
- WHAT IS BRANDING?
- WHY INCREASING SALES IS NOT THE SOLUTION
- HOW TO SELECT YOUR COMPANY NAME?
- WHY HAVING A WEBSITE IS ONLY THE BEGINNING?
- WHAT IS MARKETING?
- HOW TO MAXIMIZE THE VALUE OF YOUR SOLE PROPRIETORSHIP BUSINESS
- WHY SELLING IN MEXICO?
- LOW COST MARKETING INITIATIVES
- WHY IS PRODUCT DIFFERENCIATION IMPORTANT?
- hOW TO PRESENT OUR COMPANY
- WHAT IS THE DIFFERENCE BETWEEN MARKETING AND PUBLICITY?
- 50% OF YOUR ADVERTISING BUDGET DOES NOT PRODUCE AS MUCH AS THE REST
- RIGHT SELL AND OVER DELIVER
HOW TO DEVELOP YOUR BRAND USING DIFFERENTIATING FACTORS?
Is having a name and a company logo enough to have a brand?
The answer is no. A brand is not found in the logo itself but in what that image represents for us.
A strong brand is a differentiator. It's a way to distance yourself from your competition. But how do you build a strong brand? Unless you have a good amount of money to invest massively in your advertising campaigns and build your image that way, you will have to go through the differentiating factors. Yes, there is a circular argument here -- a strong brand is a differentiator, but to have a strong brand, we must have a differentiator.
Let's continue with our analysis, and hopefully, things will become clearer.
First, why should you have a brand? Why should you go through all those actions? If, like most of us, your market has several competitors, without a differentiating factor (brand or other), the driving factor to a customer's buying decision will be the price. So, if you want to avoid a pricing war, you'd better roll up your sleeves and build your brand.
To illustrate this, let's use jeans as an example. There are many options if you are in the market for buying a new pair of jeans. Private label brands can be found in major retailers like Walmart, Costco, etc. You have stronger brands from specialty stores like Old Navy, Banana Republic, Gap, etc. And you have brands like Levi's, Lee, G-Star or Wrangler. Usually the price of the product, as in our example, varies with type of brand labelling: the cheapest being private labels, the most expensive being strong and recognized brands. However, some exceptions can be found, as jeans companies may want to position themselves into the lower, middle or luxury segment of the market. Also, while there may be some difference in the quality of the fabric and workmanship in the jeans, much of the price difference is attributable to the brand. Some people will pay more to have Levi's branded jeans.
On the other hand, those who do not care about jeans brands, tend to pay as little as possible for the jeans, as long as they fit well, and they like them. So, in the absence of a differentiator, price may be the deciding factor.
Having a differentiating factor takes us out of price wars. What is a differentiating factor? There are several, but to be valid, this factor must be difficult to replicate, otherwise, it is not a differentiating factor.
Let's describe a few of them...
Of all the differentiating factors, the most difficult to obtain and reproduce is the brand. As we said earlier, it is an experience. It is defined as the way your consumer perceives you. It is made up of an image, colors, a slogan, a mission, and several other elements that aim to trigger the desired feeling (the experience) in your customers and in your target market.
Branding takes time to build and become unique, very personal and very strong, so strong that, for many customers, they are willing to pay a premium for the product that is perceived as the 'right' brand. Think of Mac laptops, Apple-branded products. They have a very particular appearance. Although competitors have attempted to enhance the look of their laptops, by using a special finish - polished steel or other - they are not mistaken for MacBooks.
However, if we take a closer look at the MacBook features, they are not unique. According to Apple's website for MacBook Air version 2019, the device has a 16 GB RAM, a 1 TB hard drive, and an Intel i5 microprocessor. These features are found on many PC laptops. Nevertheless, none of these features makes them MacBooks. The brand is so strong that it inspires passions and loyalty that go beyond the product. Many will say that the connectivity between different Apple products is a factor that justifies the price difference. Others praise the fact that their devices are less vulnerable to virus attack, and so on. But, the reality of having an Apple computer is that it gives the holder a perceived and desired image. This image is cultivated by the company, and it is a collaborative effort between the business and the consumers. If we look at what the image of having an Apple computer was at the very beginnings in comparison with today, there is an evolution that certainly is driven by both the company and, in part, by the users.
Let's take the example of a local business. If I show you this logo, what does it make you think of? For those of you who have recognized the Videotron logo, well done. For those who have had an experience with this company at one time or another, you will likely have an emotion associated with the logo. Did you get good service? Were you happy with the value you got for your money? This emotion is positive. Did you have trouble with a function or an aspect of the business? This emotion is negative.
So, as you can see, branding is much more than recognizing a logo.
Even though the value of the brand is in the eyes of its customers, the design and management of that brand belong to the owners, managers, and employees of the company.
What do you want your business to represent? What is your mission? What values do you want to be recognized for? This self-reflection process is essential. But often, market feedback influences this direction. We can go in one direction and realize that this is not really how we want to be perceived, and what you have offered is too common on the market, or that a change is necessary along the way.
For example, you could launch your business with an aggressive strategy to capture market shares by offering a lower price than your competition, only to realize that, when well-established, your business model is not about volume, but rather about value. So, an adjustment in your pricing strategy becomes necessary. The initial branding message will have to be changed as your focus has also changed. So, an image to drive this new message will have to be developed. Over time, you'll be able to shape the market's perception using feedback (measurement, opinion poll, focus groups, etc.) and the application of corrective communication measures. Along the way, certain feedback elements can be integrated into this evolving image. As you can see, an important element needed in building a strong image is time.
The other (element) is money.
Because communication actions must be taken on a regular basis over time, you need to have deep pockets to work on establishing your brand image. In marketing, the substitute for time is money. So, in a given market, newly-established companies who want to use an image to differentiate themselves, will need to invest an even greater amount of money to achieve this goal - to get there faster, you need to invest more.
One of the ways to reduce the investment amount is to build on competitive advantages that are difficult to copy. Otherwise, you may end up like fragrance companies that rely on large marketing budgets to differentiate a particular product from others in that market. One strategy is the use of well-known ambassadors to promote the product. This strategy is used regularly by several cosmetics or perfume companies. Examples include high-profile names such as Brad Pitt with Channel, Julia Roberts with Lancôme, Cate Blanchett and Chris Pine with Armani (my examples may be a bit dated). The differentiating factor becomes the ability to sign with a strong ambassador to represent your brand in that niche market.
But is this strategy only for large companies? No! Small businesses can build their brand image from the start. With social media, brand building is within everyone's reach. This takes time, consistency and sometimes help too. Producing content for social media, having a voice of your own, being consistent, seeking collaboration with experts in the field, are actions that will bring in followers and serve to develop an understanding of your business. But from the start, it is best to build your brand on a solid foundation by identifying something that sets it apart. Here are some options.
Your product as a differentiating factor
Many companies use their products as a differentiating factor. An example could be the BlackBerry phones in the 2000s. At that time, the BlackBerry differed in several ways - one of them was their physical keyboard which greatly helped with texting. It was a differentiator compared to other phones of this period. Blackberry protected this advantage through patents and innovations that always went a step further and always offered a little more to customers. This allowed a comparatively small company to become well- known and successful for several years. Certainly, that story has since taken an unfavorable turn, but for several years, all those in the market for smartphones knew this brand.
Another example could be, Tesla cars. Differentiating factors here: they are electric, they offer a unique design, avant-garde features, and they have a charismatic leader at the head of the company (Elon Musk). If you don't know the brand, you must live on another planet. The main difference between BlackBerry and Tesla in terms of product use as a differentiating factor is in their use of innovations as a means of protection. In the case of Tesla, these innovations are an integral part of the car's design, but their protection is less important, given the huge barrier to entry in this market. Few companies can replicate Tesla's ideas; the price to do so is prohibitive. In fact, several technologies have been shared by the company to facilitate the creation of competitors and democratize electric vehicles. While other car brands are adding electric or hybrid options to their product line, they are, as yet, far from competing with Tesla.
Like BlackBerry, if your business creates an innovative product or service, protecting it from counterfeits is important. But be aware that as soon as your product goes on sale, your competitors will be able to buy it and understand what you are doing. A patent may offer some protection, but if you face bigger competitors, battles can be costly, long and difficult. One way to stay ahead of the game is to schedule regular product improvements (see article: How to Protect Your Unique Product or Service). So, your competitors will be able to copy what you have done, but you will have something better to offer your customers and you'll be a step ahead of the competition You will be the innovator. The differentiating factor here, and one that's difficult to reproduce - being an innovative company.
Many of us who operate a small business, do not develop products or services, rather, we resell existing ones. If so, we can negotiate exclusivity with our suppliers. This agreement is often based on sales volume, but if you know your market well and are established, you should be able to negotiate something that gives you an advantage. This then becomes your differentiating factor. You have found a product for your market, you've negotiated conditions and you have signed an exclusivity agreement. Of course, you are not the only one doing this, but in your market, you are different from competitors who may not able to do the same.
Service as a differentiating factor
Whether the company is a manufacturer or a service provider, the concept of service as a differentiating factor goes beyond operation. It has been used for years and even more so today, with the Internet and its impact on the end-user/people aspect of the marketing mix. More than ever before, consumers have a voice, and it can contribute to developing that differentiating factor of your business. Conversely, it can also be used to highlight significant problems in your products, services or operations. This can occur on the Web, on rating sites or as comments on your social media presence. It is important to treat your clients as 'ambassadors' of your brand, as regards your differentiation strategy. Service is a good way to reach that goal.
An example of Internet impact on the evolution of service as a differentiating factor is evident in the changes in the customer service function of many businesses. Not so long ago, and even today for some, if you were dissatisfied with your purchase, the return, exchange or refund procedure was difficult and long. Sometimes you had to go back to the store, wait in line for a sullen clerk to question you about the reason for the return or exchange and to inform you of the applicable conditions, the store policy. If you were lucky, your money was refunded. Sometimes you received a voucher or an exchange for a similar product. But most of the time, there was not much the customer could do about it. You were stuck with your purchase. The company's reputation was relatively unscathed. We could tell our relatives and friends about bad service, but this had a limited impact on the company.
Today, some merchants have a 100% customer satisfaction policy, no questions asked. You don't like the product? Return it for an unconditional refund. In some cases, you can do this from the comfort of your home and even the return shipping costs are paid. These companies consider it more profitable to just reimburse the customer, rather than incur the expense of an elaborate customer service center and running the risk of negative feedback online.
This kind of policy can bring abusive behavior from certain customers. A contact who works for a delivery company told me that some people bought new shoes to wear only once and returned them the next day in exchange for another pair, day after day. Despite this abuse, some companies find it more beneficial to have people shopping online and being satisfied with their experience than to make the necessary efforts to catch those abusing the system. This is no worse than shoplifting problems affecting (brick and mortar) retail businesses.
Why is having a 100% customer satisfaction policy a differentiating factor? Because it's very hard to do. It carries with it risks and significant changes to operations, as well as the costs associated with implementing such a policy. Not all companies can do it. One of the strategies used by big retailers is to share the risk of returns with the manufacturers. When you have a large market share like Walmart or Amazon, and all the manufacturers in the world scramble for shelf space or an online presence on your website. Big retailers have negotiating power. They can impose financial incentives or customer satisfaction guarantee as part of their supplier agreement.
But, you don't have to be big to have this kind of conversation with your suppliers. If you are reselling a product or service, you can certainly ask what the retailer support programs are. Not all programs can result in a 100% satisfaction guarantee. Instead, you might have ideas about something unique to offer as a service to your customers. As a retailer, I negotiated training courses with a ceramic sealant supplier on the proper use of their product. Training your customers can be a way to use service as a differentiating factor. Not a good idea? Home improvement retailer, Rona has a section on its website called, The Workshop, the online version of what they used to offer for several years in their stores on weekends - information on how to use the products they sell as renovation ideas.
As a small company, you must be original. This is another way to stand out (differentiate) from your competitors. Giving more to your customers is also an effective way to turn them into ambassadors for your brand and your business.
Distribution as a differentiating factor
With the high standards imposed by companies like Amazon, distribution (the "place" component of the marketing mix) is one of the elements that has seen the most change in recent years. Even if Amazon is an online sales platform, the agreements that it negotiates with its suppliers for the delivery of products and the management of returns have become the industry benchmark. The same goes for drop shipping companies that use a similar delivery model. However, having access to products or services in a quick, efficient and standard way is no easy task. And the more the company grows, the more complex this dimension becomes. For this reason, many companies use this aspect of their operations as a differentiating factor.
For manufacturing companies, what is your distribution strategy? Do you sell directly to the end-users? Do you use an intermediary? Are you using multiple intermediaries (manufacturers, wholesalers, retailers, customers), as in the retail food sector? Do you use all or some of these options?
Depending on your answer, here are some of the elements that are involved in performing an optimal distribution:
As you can see, the above elements are complex, and all of them can be deemed differentiating factors.
The situation does not get easier when talking about service companies. Even if there is no movement of physical goods, there is a need for service standardization from one region to another. One of the best examples is McDonald's® even though it is not a service company, the service component is very strong. For example, eating a hamburger in Toronto or Paris should be the same experience for taste, speed, atmosphere, packaging, service, etc.
Service company, KPMG is another example. It has a presence in several countries and has over 200,000 employees. One of the many things it must have is standardization of its services across all the regions. One of the ways to achieve this is by having independent business units. Others should include: encouraging personnel mobility, having strong training programs, having established standards, and having rigorous quality controls. These should be the cornerstones of the company.
But how can we use the "distribution" element to stand apart from our competitors when we are small? Most of the examples mentioned above are mainly for medium to large businesses.
If you are small, creativity is what will set you apart. Are you a photographer? Having the photos you just took for a client, on a cloud account accessible to the customer within a few hours is certainly difficult, but possible. It is also a good idea to interact directly with the client to determine which photos to choose and edit - the technology is available.
Do you sell products? Having a free delivery policy with the purchase of a certain quantity within a certain territory is a strategy that I have used with a retail-store client, with good results. There is also the delivery time; offer your customers 'next day' delivery, if the order is placed before a certain time (you'll need to verify this service beforehand with your local delivery company). Of course, you need to have adequate inventory and a good delivery system. Another idea is to have a live video feed of the customer order preparation; it does require certain planning of your operations. Or you can do a recording and send a link by email or text. Finally, there is what you put in the package: one of my customers always found a small 'gift' included in the package, with a hand-signed card thanking the customer for the purchase.
There are lots of ideas to help you stand out but not all of them apply to all businesses. For example, if you are in the renovation industry, sending a box of nails as a gift with an order of 2x4 would probably not have the desired effect! But the idea is to differentiate yourself through these actions and distance yourself from your competitors who are unable/unwilling to do so.
People and their relationship to your business as a differentiating factor
With the Internet and social media, the concept of relationship has taken on a whole new dimension. When someone has a bad experience with our business, they have a platform and an audience; their voice can be heard even more effectively than before. That being said, I came across this article that demystified the importance of having a perfect score on review websites. In fact, having between 3.5 and 4.5 stars would be advantageous, provided you have several reviews. Click here for the article.
Of course, what I am telling you is not surprising; we all know that treating our customers and potential customers well is essential. This extends to all points of contact with your company. What do you do with candidates who have applied for a job or a contract with you, but did not get it? I must admit, I'm at fault for not doing this. But a simple email follow-up, thanking them for their time and wishing them the best of luck with their job search, can leave a lasting impression, even if they did not get the job!
This same courtesy should also go to your suppliers. We often neglect them, thinking that as we pay them, they are happy. But great relationships are built with small details (messages, cards, or others on special occasions). These can go far in the way we reach people or companies.
What about your social media followers? Do you respond to comments? Do you participate in conversations? Too often, our goal on social media is to make ourselves known, but once the main actions are done (creating a company page and publishing content), we neglect the interaction. Certainly, not all interactions will go towards creating customers. But keep in mind that all interactions are visible to everyone; they will be read and evaluated by potential customers. So, when writing your answers, have not only your interlocutor in mind but also all those who might read your comments. The same thing with those who share your publications with their group; do you say, "thank you"? Thanks to them, you benefit from the increased visibility within their network that can lead to other customers.
You see, all contact points are potential ambassadors for your business. The better your relationship with these people is, the better the chances are that they will speak well of you.
Why is this a differentiating factor? Because it is difficult to achieve. There are only 24 hours in a day and often those hours are fully occupied, so we must cut somewhere. But have a system in place: a series of thank you emails, cards for your partners, and others. This can be done in your downtime. If you have employees, they can be trained during these periods to get involved. It's all about adding value.
And what about relationships with clients and potential clients? We already looked at this briefly, assuming that we were all on the same page. But what about difficult cases? Those who are outside the norm? Potential customers, who cannot afford our services? Those who pay late? Those who constantly push the parameters of the business relationship?
We are all probably very efficient for the vast majority of those happy buyers who always pay on time. But what about the others?
As is the case for other strategies, preparation and experience are your allies. A well-written agreement, with well-established (terms and conditions) payment dates and the consequences of non-payment, clearly listed helps greatly. But you must be careful, too much information is like not having any. If your agreement has 25 pages, chances are that all the scenarios are there, but your client will not read them, which amounts to not having a clear agreement.
I have a very good friend who does major real estate acquisitions and the letters of intent are two pages or less. So, having an agreement of more than five pages for a consulting mandate is probably too much and could be shortened. Having a good, well-thought-out agreement is a competitive advantage. Not all take the time to do it.
Once all these steps are done, if you still have clients not paying you, what do you do? Is your relationship going bad right away? Or do you try to look for amicable solutions? Often, offering an alternative payment schedule can take some of the pressure off the customer and also, the "communication" goodwill that you may gain might be worth the extra efforts. You will be seen as a human and an accommodating company that cares about its customers - a good reputation to have. What happens if the client continues to abuse the situation? I don't think this intermediate step will make matters worse If you were to have problems with this client, being empathetic and proposing solutions would not have changed much. For those, there are collection agencies, small claims court or a good lawyer.
What about the customers who openly tell you they can't afford your services, but need them? Do you just ignore them, or do you try to come up with a win-win solution? Payment is not always measured in dollars. There may be other things that can benefit your company and maybe lowering your prices could be an option or, putting this customer in the promotional activity box.
Every day, we interact with the people around us. The way we do it leaves an impression; it should be a good one.
Reputation as a differentiating factor
What about reputation? A business's reputation is not only online. If I asked you; which engineering firm would you recommend for a major project? For some, depending on where you are reading this from, the name SNC Lavalin might come to mind (perhaps another firm, depending on your region). And you didn't have to do any research online. However, SNC Lavalin's history is not without its flaws. With this little exercise, we can see two things: the reputation of a company is not only online. Furthermore, it does not need to be perfect to be recommendable.
For the small business, reputation will go mainly through the Internet, unless it has been established for several years and word-of-mouth has done its work. For others, they will have to foster comments on the various review websites: "Google My Business" is one, Facebook allows reviews, sites like Yelp and Yellow Pages also. We saw earlier that having a good amount of comments is more important than having only excellent comments. However, you must reply to comments, whether positive or negative. But be careful what you say; your answer will be read by people who want to do business with you. If you are criticized and the comment is justified and constructive, you can thank the person by saying that this situation highlighted an operational problem and that you have resolved this flaw. You can re-invite the person to try the product or service with an incentive. For others, it may be appropriate to point out the limits of the product or service. And finally, there are always those eternal unsatisfied. Courtesy is always important but it must be delivered in such a way as to make readers understand that there is not much to do in this situation, such as: "We are sorry that you did not enjoy your experience with us. We hope you will be able to find what you are looking for. Good luck with your search".
Other elements that can be used for reputation are the number of years you have been in business, your portfolio, your realizations, your education/specialization, your honors/achievements.
Price as a differentiating factor
Establishing our pricing strategy is a complex and a constant activity; today's price is not necessarily the price of tomorrow, nor is it the price we will use during the holidays, the price when we launch a new arrival, when we have overstock or when our waiting line is full.
Another aspect of the pricing strategy concerns positioning. Often, the positioning can be better illustrated by the extremes: the luxury market or the low-cost market. However, using the price variable requires other elements that help differentiate. Here we see a somewhat circular argument; price as a differentiator will require other elements to be realized.
On the one hand, we have the 'luxury' or 'high-end' market. A few examples to illustrate this pricing strategy: Mercedes Benz cars, Rolex watches, Louis Vuitton bags, and Apple products, to name just a few. If you recognize any of these brands, you know their pricing is in the high end. However, to have this positioning, it is not enough to simply increase our prices above that of the market. If there is no particular value associated with a high price point, why would people pay more? So, closely linked to a higher price, is the concept of value-added. And this is where the conversation gets interesting.
Let's take Apple products to illustrate this. In the early days, Apple computers were the first to use iconic language. At that time, computers using Windows required some knowledge of DOS to be able to turn on the device. There was, therefore, a technological advantage that could justify the difference in price; paying a little more for a simpler operating system than DOS was a proposition that interested some users. ( i.e. ease of use)
Subsequently, Macs got more modern and their differentiating factor was in its processor. It was better suited for graphics applications and the device became the tool of choice for graphic designers, photographers and other professionals in the visual world.
Of course, Apple devices are beautiful. The quality of the aesthetic is one of the differentiating factors of the company. Over the years, Apple produced laptops and desktop computers that were quite unique in appearance, which certainly helped differentiate Mac computers from other brands.
Somewhere in this evolution, there was the feeling of David (Apple) against Goliath (PCs). Many people were willing to pay more to encourage a smaller company with a higher production cost because it had not reached the economies of scale of their giant competitors.
Today, this elite image prevails - the element of exclusivity associated with their products, that having a Mac computer or an Apple phone means being part of a select club. Whether these are enduring values of the strategies mentioned above, or because they want to be associated with the image that new users convey, Apple customers, continue to pay more to join 'the club'.
As you can see, having a high price and having people who are willing to pay more is not a function of merely raising our price. There are tangible and/or perceived elements that are the basis for accepting this price difference. Hence the concept of differentiation to fetch or command a higher price.
At the other extreme is the economic pricing strategy. Here, the differentiation factor is completely different, yet strongly present. Essentially, it answers the question: How do we sell for less than our competitors?
For some companies, the differentiation will come from the business model. What comes to mind are the Dollaramas of this world. Among other things, there are two factors at play: the range of products and how to buy these products to allow the price point at around $ 1.
For the product range, one needs to think about the type of products. Dollarama could not sell appliances because it could never get close to $ 1 (several products are just over $ 1 now) without going outside the box - payment at $1 a day for 2 years, for example. But it would imply setting up a financing option, which is something the company may not want. Also, the products that are sold in stores must have a long shelf life, allowing for large quantity purchasing to have a better price. Finally, they would avoid fashionable products (with certain exceptions) to allow for easier stock management. Having a fashion product means that once the craze stops, that product value is lost. Certain elements in stores can be marketed in this direction, but certainly not all the products. So here, the differentiating factors are financial health, business model and sound inventory management.
Another example of 'economic' positioning can be illustrated by Éconofitness gyms. This chain was able to carve out a place in the ultra-competitive world of fitness centers by offering an annual subscription at $ 120, or $ 10 per month. This price was well below what was available on the market. There was a craze and people signed up in large numbers. The result? As of January 25, 2020, there were 71 gyms on their website!
But this example is also one of flexibility in our differentiating factor and with the positioning of our brand. From the start we see that price was an important differentiation but it became less so as the company consolidated its market position. One can see the prices steadily increasing over time. The initial price of $ 10 / month is still available, but only for weekends, with the other options being more expensive.
Having prices lower than our competition is a strategy that is widely used. Some analysts believe that this is what Uber is doing to grab market share away from existing taxi drivers. To execute this strategy, one of the differentiating factors is the financial health of the company, because the products/services may be sold at low prices, if not at a loss. But beware, some laws regulate price dumping and unfair competition.
A similar strategy is used by some video-game or application software companies that offer their product for free and then offer paid features. Or they may stop the initial free period after a certain time. It should be noted - sometimes free is synonymous with advertising or "branding"; the company uses your network to sell itself (it puts its logo on the free version), to sell things it does or to resell third-party products/services. The differentiating factor is, in this case, the number of subscribers that can be monetized (think of Facebook and other free online presence).
Now that we understand the price differentiation mechanism a little better, how can we use this strategy when we are small?
In either case, be it 'high end' or 'economy' pricing strategy, the mechanisms are the same as for large companies. If you choose to offer a 'premium' product/service, the strategy is to present it well and justify your price with elements that are important to your customers. This notion is important because you could work very hard to obtain a factor only to discover that it is not valued by your customers. Good communication with your customers is essential. What if you start your business and you don't have customers yet? Look at what the big companies are doing in your field and see what you could incorporate into your operations to make a difference. Another option is to do opinion polls in the group you are targeting. These activities may cost you a few dollars, but you will be able to see if your strategy has a future.
If you are going towards lower prices, then you need to focus on how to buy and manage your inventory well and look at what you can cut down in your profit margin. But this strategy is riskier than pricing in the luxury category. If there are big companies in your field, it is extremely difficult, if not impossible, to begin a price war with them since they have a larger purchasing power and greater financial resources than yours. One of the ways to get around the problem is to apply this strategy with one product rather than your entire range. You could stand out without attracting too much attention from the big players. This strategy is what we know as a 'loss leader'. We sell a product at a super aggressive price, to attract clients into our sales channel and subsequently recover our loss by their additional purchases made at regular prices by the customers.
However, by reducing your risk, you also reduce the attention that your strategy may gather. But sometimes it is better to make less noise and still have a business once this strategy is carried out. This strategy is used by supermarkets with their weekly flyers. They have deep discounts on several important items of your grocery cart, with the rest at regular prices.
In this article, we saw how to make your business stand out from the rest. Then, of course, there are other elements: how to brand your business; how to make a logo; the meaning of colors; what tone to use on social media. There are many others. But the purpose of this article is to put a solid foundation in your branding process by highlighting one or more differentiating factors on which to build your image.
Stéphane Elmaleh-Riel, B.Ed., MBA