More on pricing: Rick Short of Indium Corp. posts Dangerous Editorial where he rants about a CEO publicly complaining about too many vendors and price pressures in his industry.
While the focus of his rant is the poor signal that this CEO is giving to his customers and competition, this also relates to our recent discussions of published pricing. Rick’s concern is that this information becomes a signal for a price war…something published pricing also can do.
As a marketer, he reacts this way:
“In essence, only the savvy low-cost producer (and there is only ever ONE of those) can ever win a price war. That arena ia almost NEVER the place to steer things. Focusing on YOUR key points of DIFFERENTIATION is the only way to help your customer choose you.”
Are we trapped? If we publish pricing on our websites, our prospects are happy and more likely to buy. But if we do, we risk them making a commodity decision and thus forcing a price war. Different marketplaces and different brands may be affected to different degrees, but this may be one of the strongest challenges of the pricing issue.
Dave, I’m going to have to think about this one, although my initial reaction is this. The reason for a price war is not a published price. There are many causes, and here are two. A company in trouble has a “fire” sale trying to stay in business by turning a lot of dollars. A large company trying to garner a larger market share. Growing up “price wars” were a big part of the gas station business, and it was usually the Majors against some Independent. The prices were posted, but they weren’t the cause of the “war.” It related to the two items above.Wow! This could turn into a whole post in itself.
Dave, I’m going to have to think about this one, although my initial reaction is this. The reason for a price war is not a published price. There are many causes, and here are two. A company in trouble has a “fire” sale trying to stay in business by turning a lot of dollars. A large company trying to garner a larger market share. Growing up “price wars” were a big part of the gas station business, and it was usually the Majors against some Independent. The prices were posted, but they weren’t the cause of the “war.” It related to the two items above.Wow! This could turn into a whole post in itself.
There are two problems with the flow of logic here. The first is that we are dealing in generalizations vs. specifics when it comes to what product, and the second is what L.H. said: “The reason for a price war is not a published price.”You conclude “But if we do (“published pricing”), we risk them making a commodity decision and thus forcing a price war.” If the product truly is a commodity (or parts of it are), buyers will always view their buying decision that way. The challenge for vendors is to accurately and effectively portray (communicate visually and verbally) through their websites, their “points of differentiation”.Dave, in your PDF you said “Google Rules”, while still spending thousands (I think ThomasNet worked out to be about $7K per year) on various directories. Why not drop IQS and ThomasNet for one or more years, and invest those budget funds (and more if needed) into a “useability study” (http://www.useit.com/alertbox/20030825.html) focused on good representative user’s (http://www.useit.com/alertbox/20030120.html) reactions to various forms of published pricing (like “ranges” (or examples) of prices based on various quality features, overall customization, delivery dates, quantity purchases, etc.) Either find website examples of these types of “published pricing/quality attributes/customer service” in other product lines, or hire a website designer to study and portray your product’s features/benefits as they relate to your product’s “points of differentiation”. Yes, this is a “project”, but there is NO EASY WAY to accomplish this challenge properly, and have it be effective for YOUR SPECIFIC PRODUCT LINE.Jacob Nielsen says: “..the Web’s strength comes from narrowly targeted sites that provide users with highly specialized information that they need or care about passionately.” He goes on to say: “Rather than hunt for sites to explore and use in depth (like vertical directories), users now hunt for specific answers (problem solving products/services that give, at least, a range (or examples) of pricing possibilities).” Here are some links to Jacob Nielsen info that all B2B marketers should read:http://www.useit.com/alertbox/20040426.htmlhttp://www.useit.com/alertbox/prices.htmlhttp://www.useit.com/alertbox/b2b.html
There are two problems with the flow of logic here. The first is that we are dealing in generalizations vs. specifics when it comes to what product, and the second is what L.H. said: “The reason for a price war is not a published price.”You conclude “But if we do (“published pricing”), we risk them making a commodity decision and thus forcing a price war.” If the product truly is a commodity (or parts of it are), buyers will always view their buying decision that way. The challenge for vendors is to accurately and effectively portray (communicate visually and verbally) through their websites, their “points of differentiation”.Dave, in your PDF you said “Google Rules”, while still spending thousands (I think ThomasNet worked out to be about $7K per year) on various directories. Why not drop IQS and ThomasNet for one or more years, and invest those budget funds (and more if needed) into a “useability study” (http://www.useit.com/alertbox/20030825.html) focused on good representative user’s (http://www.useit.com/alertbox/20030120.html) reactions to various forms of published pricing (like “ranges” (or examples) of prices based on various quality features, overall customization, delivery dates, quantity purchases, etc.) Either find website examples of these types of “published pricing/quality attributes/customer service” in other product lines, or hire a website designer to study and portray your product’s features/benefits as they relate to your product’s “points of differentiation”. Yes, this is a “project”, but there is NO EASY WAY to accomplish this challenge properly, and have it be effective for YOUR SPECIFIC PRODUCT LINE.Jacob Nielsen says: “..the Web’s strength comes from narrowly targeted sites that provide users with highly specialized information that they need or care about passionately.” He goes on to say: “Rather than hunt for sites to explore and use in depth (like vertical directories), users now hunt for specific answers (problem solving products/services that give, at least, a range (or examples) of pricing possibilities).” Here are some links to Jacob Nielsen info that all B2B marketers should read:http://www.useit.com/alertbox/20040426.htmlhttp://www.useit.com/alertbox/prices.htmlhttp://www.useit.com/alertbox/b2b.html
Thanks Larry and Anon. There is much more to a price war than published pricing. I guess it is a question of how pricing is used. A published price for a stripped down model with a 13-day warranty is definitely a clue that pricing is driving behavior (by the seller and shopper).And about a usability study: You are right, of course. It is a real project, too. That’s a whole undercurrent of this blog…spend money or time.
Thanks Larry and Anon. There is much more to a price war than published pricing. I guess it is a question of how pricing is used. A published price for a stripped down model with a 13-day warranty is definitely a clue that pricing is driving behavior (by the seller and shopper).And about a usability study: You are right, of course. It is a real project, too. That’s a whole undercurrent of this blog…spend money or time.
The key point of my posting is that a CEO issues a rare, impassioned public statement that low prices are pervasive throughout his industry.I feel that, when someone of this stature forces this issue to the top of the pile, it becomes THE issue.This is very different than the scenario wherein companies post prices online.While the latter case can be a very strategic part of a marketing program, the former will likely simply encourage both the customer, as well as any weak competition, to see just how low the prices can be pushed.This isn’t about “published prices”, it is about a panicked CEO exclaiming that the sky is falling – and the potential consequences that may arise if some people believe him.
The key point of my posting is that a CEO issues a rare, impassioned public statement that low prices are pervasive throughout his industry.I feel that, when someone of this stature forces this issue to the top of the pile, it becomes THE issue.This is very different than the scenario wherein companies post prices online.While the latter case can be a very strategic part of a marketing program, the former will likely simply encourage both the customer, as well as any weak competition, to see just how low the prices can be pushed.This isn’t about “published prices”, it is about a panicked CEO exclaiming that the sky is falling – and the potential consequences that may arise if some people believe him.
Thanks Rick, your are right that I’m going a little apples-n-oranges here. I guess the real point I was making is that transparency of the marketplace (online or off) is a signal to both the competitors and customers about pricing.
Thanks Rick, your are right that I’m going a little apples-n-oranges here. I guess the real point I was making is that transparency of the marketplace (online or off) is a signal to both the competitors and customers about pricing.