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In terminal training classes, many students ask the teacher: "Teacher, many merchants now sell products at low prices through promotions. If we don't adjust our prices, we end up being passive. What should we do?" Let's start by understanding the following cases!

High prices beating low prices is the norm

Once a salesperson asked the boss: "There is a small factory in the market with very low prices, hard to deal with. What should we do?"

The boss asked back: "Since this factory is so powerful, why is it always a small factory while we are a big factory?"

In reality, low prices usually only play the role of "troublemaker" in the market, causing more harm than good.

In confrontational competition, high prices are often disturbed by low prices, even to the point of fear, but low prices ultimately always lose to high prices, and even suffer a crushing defeat in front of high prices.

We often find that the products with the worst sales in the market are usually also the ones with the lowest prices. Unless there is an absolute cost advantage (such as Galanz) and product structure advantage (such as Shuanghui), low price is no longer a conventional competitive means, but a strategic competitive means. In conventional price competition, low prices are often seen by experienced marketers as the "life-saving straw" for the desperate, and often the last straw that breaks the camel's back.

Price level is not a pure pricing issue, but the core issue of marketing.

Marketing guru Kotler said: "You don't sell products through price, you sell price itself."

Teacher Jin Huanmin said: "Selling is selling products through price; marketing is selling price through products."

Price and the marketing activities around supporting price constitute the marketing system. Low price or high price is actually the difference between selling and marketing.

We often see that low price determines that the core element of marketing can only be price, because low price cannot support other marketing activities. High price determines that its marketing activities can be rich and diverse, which is determined by the policy space created by price.

High price beating low price is the norm in the market; low price beating high price is an exception. Of course, strategic price wars during industry concentration are exceptions. Marketing is about selling price. Only by learning to sell price can one understand the true meaning of marketing. The public's "common sense" about price is precisely the misunderstanding from a professional marketing perspective.

The incompetence of low prices

Whatever the price, corresponding marketing activities are needed to prove the reasonableness and legitimacy of the price, and to gain price recognition (whether it is worth the price). But this is precisely a misunderstanding for many people. Many people understand that high prices need marketing activities to support, while low prices do not, because low price itself is proof.

We often see that "bare price" launches basically fail. The so-called "bare price" means the price is at the bottom, with no marketing expenses beyond that. Products launched at "bare price" hardly have any impact on consumers, except possibly causing some stir in the channel at the beginning.

Consumers' purchases must be based on their recognition of the product. This recognition comes from packaging, price, consumption experience (such as tasting, trial), market promotion, brand communication, etc. After product launch, besides packaging and price recognition, other forms of recognition require certain marketing support.

Price recognition has two concepts: one is the price itself, i.e., the level of price, which does not generate purchase behavior; the other is the association between price and value, i.e., whether the product is worth the price, which is the difference between price and value.

Low price itself only generates the first kind of recognition, not the second. The second kind of recognition is generated after consumption experience and market promotion.

Price recognition does not originate from the price itself, but from marketing activities that prove its value. And marketing activities require marketing policy support, which does not fall from the sky.

Some people think that big companies have good marketing policies because they have more resources; this is a misunderstanding. The initial policy investment is merely an advance of resources, not free use, and must be repaid through reserved price space and future sales.

The correct pricing mindset is: When launching a new product, the price should be slightly higher, and then the profit space is advanced to carry out marketing activities, using marketing activities to support consumers' recognition of the price. The so-called marketing is selling price, roughly meaning this.

Of course, we cannot infer from this that the higher the price, the better, but we need to balance price and marketing expenses. Because the higher the price, the more effort you need to invest to ensure price recognition.

Except for special cases where strategic cost leads to strategic low prices, we can find a basic phenomenon: price is proportional to the enterprise's marketing capability. Of course, it is hard to infer whether it is because low price leads to loss of marketing capability, or because low marketing capability leads to not daring to set high prices.

In most cases, price and marketing capability are mutually causal: because marketing capability is low, they have to set low prices; because prices are low, they lack expense support and thus show low marketing capability.

Some enterprises have low prices but do large marketing activities initially. In the early days, this approach might work quickly and possibly succeed. However, now the market threshold is already high, and this "short, flat, fast" approach no longer works.

Doing market requires continuous investment; without long-term policy support, it is difficult. Many people cannot stay calm in the face of short-term low prices from competitors, lose their composure, and are lured into the water. The normal market phenomenon is: low prices come and go, while high prices remain unmoved.

The vitality behind high prices

Market activity attracts consumers' attention more easily than price. Low-price products are often silent, while high-price products are often active.

In the terminal market, there is a very special phenomenon: Best-selling products are often not the lowest-priced, nor the most well-known brands, but the most active products in market performance.

In the terminal market, there is a "brand similarity" phenomenon, meaning that brands entering terminal displays are basically those recognized by the market. There is even a "brand coverage" phenomenon, where commercial brands (such as Walmart) "cover" manufacturer brands (such as P&G), meaning that as long as the terminal recognizes it, consumers will basically recognize it too.

In the terminal market, products are abundant, and brand recognition is generally high. Whoever performs actively is more likely to attract consumer attention. Consumer attention is one of the key factors in consumer purchase.

In China's current business ecosystem, being noticed requires expenses. Manufacturers pay fees, and merchants give you the opportunity for terminal performance. Currently, the most common terminal performance methods are promotions and marketing activities, which all require money. The various fees charged by terminals are actually the result of manufacturers competing for terminal performance. Manufacturers are willing to spend this money, proving that terminal performance is effective.

Besides attracting consumer attention, another effect of terminal activity is to let consumers "get a bargain." Cheap is different from "getting a bargain." When consumers ask "Can you make it cheaper?", do not misunderstand that as long as the price is a little lower, consumers will buy.

In fact, this sentence conveys two meanings: first, they recognize the product and price, and have purchase intention, so they want to "bargain"; second, they hope for a "discount" on this price basis, and the discount can increase their purchase determination. The "discount" expressed by consumers is often misunderstood as "cheap," but in fact, discount is "getting a bargain."

Letting consumers "get a bargain" actually means the enterprise has two pricing steps: one is explicit pricing, usually with a higher price; the other is implicit pricing, lowering the transaction price. This process gives consumers the feeling of "getting a bargain."

If there is only one pricing step, consumers will not have the feeling of "getting a bargain." The various promotions and marketing activities at the terminal, aside from the theme, are actually to make consumers feel they are "getting a bargain." Those themes are just to have a "just cause."

The driving force of high prices

When launching a new product, price is a means of cognition. After the product establishes brand awareness, price becomes a competitive means.

New products launched with strong communication are rare; most new products are launched quietly. When a new product is launched, consumers lack consumption experience, so how can they judge the product? You know, if consumers cannot make a judgment, it is difficult for them to make a purchase decision.

An old Chinese saying goes, "You get what you pay for," not "You pay for what you get." For those without consumption experience, price is a label of quality, not the other way around.

The price of a new product launch is often not for sales, but for positioning the product. The information conveyed by a high price is itself a positioning.

Of course, high price does not necessarily directly make consumers feel high quality, but low price easily gives consumers the impression of low quality.

For channel dealers, what they care most about is not so much price as price space, i.e., profit.

In actual sales, we see that the most price-sensitive are not consumers, but channel dealers and salespeople. Channel dealers are more sensitive to profit than to price. When a channel dealer asks for a lower price, he actually does not intend to sell at a low price, but to obtain higher gross profit.

Some channel dealers with strong operational capabilities, after obtaining low-priced products, may do some marketing and promotion activities themselves when selling at high prices. Channel dealers with poor marketing capabilities, if they sell at the same price after obtaining low-priced goods, usually later ask the manufacturer for more policies.

In channel sales, manufacturers not only set ex-factory prices, but also set a price system, which is the gross profit space. If the price is too low, it means the channel's gross profit space is small; if the gross profit space is small, it means the channel's enthusiasm for recommendation is low. If it is a well-known product, some people may buy it actively even without recommendation; if it is a non-well-known product, lack of gross profit space means losing the opportunity to be recommended.

For non-well-known products to sell well, besides the manufacturer's promotion pull, the most important is the channel's active recommendation. If it cannot become the channel dealer's "first recommended product," the possibility of non-well-known products selling well is very small.

High open low go, or low open high go?

Marketing has a basic rule: high-price launch, first difficult then easy; low-price launch, first easy then difficult.

Price-sensitive consumers are easily tempted by low prices. Since they can be tempted by your low price, they can also be easily tempted by other low prices. Therefore, price-sensitive consumers have low loyalty. On the contrary, price-insensitive consumers are hard to tempt, but once moved, they are very loyal. So, low-price consumers are hard to accumulate, mainly because of low loyalty. High-price consumers can be accumulated and repeat purchases.

Market growth lies in continuously accumulating valuable consumer groups.

In a highly competitive environment, only a few brands have the ability to raise prices, such as luxury goods. In most cases, the price trend is "high open low go." A few people expect to open the market with low prices and then raise prices; this is a very idealistic idea, and most do not work.

High open low go actually conforms to consumer psychology principles. According to consumption patterns, only about 5% are early consumers, who are not sensitive to price but only sensitive to new things.

Price itself is not positioning, but price determines the consumer group, and the consumer group determines positioning, so price itself also has positioning significance.

Now IT products basically adopt the "high open low go" strategy. The "high open" price is to screen consumers, letting these consumers screened by price position the product.

Price positioning is to form a certain symbol. If this symbol is sought after by the public, then in the process of price "low go," more consumers can be mobilized to buy, especially those who did not have purchasing power when the price was "high open."

Positioning the product with "high open" price, and expanding the consumer group with "low go" price. This is the operational essence of "high open low go."

In summary: In many retail stores, price positioning is limited to using low prices to attract customers, low-price promotions, and low-price strategies. If an enterprise develops to a certain extent, low-price strategies will hinder the enterprise's development and affect consumers' demand expectations. In addition, low-price strategies only attract a part of the consumer group. Therefore, if the enterprise wants to develop and grow, it must expand the consumer group, grasp market dynamics and consumer needs, be market-oriented, position the consumer group, and re-formulate and adjust price strategies. Finally, the enterprise can break through limitations and continue to develop.

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