$137.8B U.S. ad spend for top 200 advertisers
It works like this: You set a ridiculously high price on whatever you are selling and then give absolutely everyone a discount. You offer coupons, senior citizen discounts (unless you’re a government worker in Seattle and then perhaps you can offer just a senior discount), or student and military discounts, volume discounts, free shipping, children’s pricing, reduced rates for AAA members, a Thursday special, or … you get the picture.
You have no expectation that anyone will pay full price. Ever. And you really don’t want them to because you can develop loyalty by making them feel as if they got a bargain. In fact, AARP has built an entire industry on convincing seniors that their card gives them the power of the discount.
Of course the Internet has created savvier consumers. Groupon and Hotwire and many others have now made it clear that there are a lot of ways to get that discount.
In the b-to-b world, the price and the stakes are much higher. Do you offer discounts to that new customer to get his business, or do you reward the loyalty of longtime customers? Does setting a high price that you can later discount make you look like a premium brand, or does it simply scare away prospective customers? Merely offering a fair deal at a fair price seems like a great policy, but discounts provide great marketing opportunities.
And then there’s the GEICO approach. This is where you offer to help customers compare prices with your competitors: “Just talk to us and if we can’t offer you the best price, we’ll tell you who can.” They take a quick look at the field of customers and pull out the cream of the crop for themselves. Then, to add an evil twist, they inundate their competitors with the worst of the worst. The irony is that both their customers and those who are turned away are impressed with their amazing altruism. What a great company!
But seriously, we all know that pricing as a promotional tool is just a single aspect of pricing strategy, which in turn is just one piece of an integrated marketing strategy. We understand how to implement skim pricing or penetration pricing. We apply bundling and tie-in sales. We carefully study pricing for substitute products versus complementary products versus loss leaders. We position price-induced sampling. We steer clear of discriminatory pricing and predatory pricing, while modeling purchase behavior, segmenting by buyer identification, by purchase location, by time of purchase, by purchase quantity, by product design, and on and on.
Internally, we implement incentives for selling value versus volume. We assiduously strive for internal and external cost efficiencies yet always keep our eyes peeled for temporary cost advantages.
In the end, we all know that the best path is refreshingly simple: We have faith that ours is the best product. Marketers who can proudly announce that their product is truly better than their competitors’ product needn’t fear that they will alienate their customers with gimmicks. We won’t win over people who are dazzled by “If You Have A Pulse” discounts. Slow and steady wins the race and in the b-to-b world, trust between vendor and customer is critical.Ginger Shimp is marketing director for SAP America (www.sap.com). The views and opinions expressed here are her own and not necessarily those of SAP. She can be reached at firstname.lastname@example.org.