The term price positioning, describes the process of adapting your price towards the position you want your products and services to represent in the market. It is a marketing strategy in which you attempt to create a “position” for your brand in the minds of your target customers that according to the price is consistent to your positioning. When choosing the price you should therefore consider the following criteria:
- Compelling to the target customers
- Differentiated from competitors
- Brands can be positioned on different attributes such as functional benefits, emotional benefits, self-expressive benefits, heritage, personality and sensory assets.
A different position and a different pricing result in the targeting of a different consumer segment. Price being a strong constrainer to demand, it must be chosen wisely what position in the market your choosing to take, if you product is worth this price and if it can compete with other products in this price range. It is therefore highly important to asses your competitors position, first before making a decision on pricing, as if the value your offering to your clients to this price point of so lesser value then of your competitors – you will have encounter issues in the long-term.
One way to position your company, in comparison to your competition is by using a price matrix. Below you can see how in the hospitality industry hotels may decide to differentiate themselves.
Knowing you are positioning, there are many different strategies that will allow you to position your products and services according to your chosen position. Some of which are are market led pricpricing strategy, price lining strategy, undercut strategy, skim strategy, surround strategy and flexible pricing etc.