Product
Price Policy vs Marketing: The Krapfen Case
08/04/2010
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Lately around me I have seen people and companies acting strangely about the way they try to marketize their products, doing choices on price policies that in my opinion are contradictory to the economic environment that this crisis managed to create.

kraffen.png

Every morning before heading work, I stop by a pastry just around the office’s corner and I buy a Krapfen for the price of 90c, and this happen regularly during working days since last May, meaning that for almost a year I have been a good customer… but tomorrow morning it will be last day of being a good and affectionate customer… the reason is because they increased the price of 20c, making the Krapfen 1.10€.
This made me think about how price changes are going to change customer behavior and relation.

First of all I want to clarify that I’m not on a daily budget and I’m not a penny-pinching person, but my customer behavior changed because of the reason that they gave me for the price increase, that I consider totally Bull$hit. The reason is “We have noticed that the competitors had higher prices for all the products and so we decided to increase our prices as well“… and as a Marketing professional i have to say that this move is really bad and almost suicidal, especially regarding Fast Consuming Products.

– Ask more and give the same: Every single time that a company increase the price for a product, the customer expect something more for the price that he is paying. Service, assistance, better product… but giving nothing is not a great incentive for the customer to stay with your company.

– Decrease the Competitive Advantage: The lower price is a great and important incentive that customers are always considering when choosing a product. If you rise the product price, you lower your competitive advantage.

– More production and less total costs: If the price is low, and if this is attached with a good marketing campaign, can be used as a strong point to attract new clients. When more clients arrives, more production is needed, meaning that the overall production cost per item goes down, and in the long term you gain more.

– The coin habit: When you set a price policy you have also to consider the customer behavior, and how much effort the customer wants to spend to make the payment. FOr example if something costs 100€ it is willing to take some more time to pay, looking at the price and the type of buying, he wants to think and be sure about the expense. For an expense of 90c he picks the first coin from the pocket and wants to make the payment in the shortest way possible. Since today i was giving 1€, and they were giving 10c change, it was quick, now I have to pick up the coins and count the right amount of coins. The process is longer and can be annoying after a while.

– The bull$hit reason: I have to say that as a customer I’m offended about a rise justified only by the business oner’s greed.

This is just a quick consideration about something i just experienced, and that is important how to understand how the customer can be affected by price increases, so my suggestion is to think a lot before increase a price and always find a good reason for it, or customers can get angry and leave you.

About author

Edoardo Piccolotto

Dad, husband, MBA graduate, I work as a Web Marketer on an Ecommerce Company, where I implement strategic decisions by using data and lean-organization methodologies.

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