Secret Marketer: A poorly managed pricing structure makes a marketer’s job more difficult

Marketers are charged with driving volume, but it is all in vain if the ‘price’ part is poorly managed.

I recently spent the weekend away with Mrs Secret. We decided to break the journey at a cheap and cheerful hotel just north of London. We arrived quite late so decided to have dinner in the informal but adequate dining room. Mrs Secret and I both opted for steak with a portion of calamari (scampi for Mrs Secret) on the side, which at a mere £2.95 extra seemed like great value.

The steak was £12 as I recall, but when the meals were served my steak came with only two calamari rings and my wife had two pieces of scampi, which at £1.47 each suddenly seemed expensive.

Most people would agree that marketing is an ‘art’, it is a ‘creative humanity’. But pricing strategy is where a true marketer knows their onions – here it is most definitely a science. Why didn’t the restaurant charge an extra £5 or £8 for a decent-sized portion? Serving only two small pieces of the ocean in batter just encourages the diner to disintermediate and brings attention to how expensive they are, and how much margin the restaurant is charging.

For some marketers, pricing is not part of their remit. It certainly isn’t mine at the moment, though it has been in the past. Those of you who do deal with it have my utmost respect. I recall talking to a product marketer who used to pull out his hair when the sales team would give away warranties and insurance for free to secure a main sale. Such giveaways completely belittle the value of those added value products. In fact, for many computer hardware manufacturers, such as suppliers of printers and copiers, the product itself is often sold at cost as companies know they will make their money on the ancillaries – ink, paper and software.

So who works this all out? Is it trial and error or carefully researched decision-making? The challenge lies in the fact that you can destroy a category if you get this wrong.

I always thought that cruise holidays were the most exclusive product in the travel marketer’s portfolio. But have you ever seen a cruise holiday advert that had an element of price discount in the headline? Look at sofas and home furnishings. Such price-focussed marketing cheapens the perception of these products. How can you build a brand and consumer loyalty when there is only one ‘P’ of the 4Ps in the game?

Business can be boiled down to a ‘price x volume’ equation. We, as marketers, are charged with driving volume, but it is all in vain if the ‘price’ part is poorly managed.

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  1. David Ward 24 Aug 2015

    I agree. Marketers need to educate themselves about contribution, pricing, costs, profitability, etc. and link this to what we know about customers, branding and product portfolios. Only then can we have intelligent conversations with the FD. When we can discuss product and customer profitability with confidence, our voices will be heard more strongly in the boardroom.

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