“If you have to ask how much it costs, you probably can’t afford it”
– JP Morgan
According to Google books, the origin of this quote is a conversation JP Morgan had with a neighbor regarding the purchase of a yacht. The quote has been made famous by Henry Royce, when applying it to the purchase of his Rolls Royce automobiles.
From a marketing communications perspective, the concept is actually quite compelling – a message that rings loud and clear to your prospective customers. If you must know the price before purchasing, then it is probably too luxurious for you. A purchase decision that falls into this type of classification is clearly high end, something that only the wealthy need consider. As a business strategy, if you are selling a high end product, this type of positioning could be just right.
Pricing plays a critical role in your messaging and marketing communications surrounding not only the quality of your goods or services, but also on your focus on customer satisfaction. Do you deliver consistently superior results that your customers can justify spending more for your product? If so, then you should be charging more, and your customers will pay more, helping you to preserve your brand integrity. It is all part of a consistent message that you, as a marketer, need to convey to each of your current and future customers.
Alternatively, if your product is “me too” (non-differentiated) or if you are the low price leader, then you have no claim to charge a premium and shouldn’t. If you do, your customers will be confused, and will likely not justify the higher price, preferring instead to purchase from your competitors.
BMW is an excellent case study on how to leverage pricing as part of their messaging. Back in the 1970s, the brand was not considered premium, akin to the likes of Volkswagen. In the 1980s, however, they made a decision to dramatically increase prices across all products at a time when their marketing communications shifted towards positioning the brand as premium. It worked.
I had an interesting experience with the AAA club of Southern California about a month ago. I inquired about purchasing their premium service, which included expanded towing coverage. They refused to sell me the service, stating that I must first purchase their standard service for a year and not use it before having the “privilege” of purchasing the premium service, for more money. Needless to say I was infuriated. Here I thought they were eager to offer expanded, higher margin services. They, on the other hand, see themselves as a “country club” of sorts, where I have to pay my “dues” for a year before being considered for an upgrade, like they are doing me a favor. Talk about a confusing messaging strategy!
How does AAA get away with it? Well, it turns out they have a bit of a monopoly in the Southern California market, so there really isn’t a viable competitor. Clearly, not only is their pricing calculated incorrectly, but their view on customer service is that of a monopolistic organization, such as the US Post Office. In other words, it isn’t a priority. Even to a customer of 31 years!
To conclude, pricing plays a critical role in your marketing communications – the story you want to tell. Are you customer friendly? Are you premium? Or, are you a generic product with no differentiation other than price? Pick your story and be sure to set your pricing to support that message.
Gordon Benzie is a marketing adviser and business plan writer that specializes in preparing and executing upon business plans and marketing strategies. Gordon can be found on Google+.