The Marketing Book 5th Edition

Sales Psychology

Contracts and Terms

Demonstrate Value

Segmentation and Positioning

Create Exit Barriers

Deliver Greater Value

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Courage

Incentives

Negotiating skills

Escalation clauses

Cost-plus formulas

Discount reductions

Sell packages

Show EVC

Build brands

Segment by price sensitivity

Multibrand

Trade-up

Fighter brands

Finance and equipment

Brands and partnerships

Training and development

Operational excellence

Customer intimacy

New products

New marketing concepts

Quick (but tough)

Achieving higher prices

Slow (but easier)

Managing the marketing mix 307

profit or shareholder value goals. Volume, mar-
ket share and customer satisfaction are always
increased by lower prices, but this is often at the
expense of profit and shareholder value.
Strategies to implement higher prices can
be seen in terms of a trade-off between timing
and feasibility (Figure 11.7). On the one hand,
there are some techniques to improve prices
that management can try immediately, but their
feasibility is uncertain. On the other hand, there
are some very straightforward ways of obtain-
ing higher prices, but their deployment can
take many years. The only sure way of achiev-
ing higher prices is by finding ways to deliver
greater value to customers. This may be via
operational excellence, customization, new

marketing concepts or innovative products. For

example, if a company can develop a new

battery that will enable electric cars to operate

with the flexibility of petrol-engine ones, or if a

pharmaceutical company can develop a cure

for cancer, then there will be no problem about

attaining a price premium. Superior perform-

ance and innovation are the only sustainable

means of obtaining better prices. The tech-

niques for implementing price increases are

listed in order of their immediacy.

 Sales psychology. The reluctance of marketing
and salespeople to push for better prices can
be offset by clearer direction, shifting
incentives away from a purely volume focus,
and better training in price negotiations.
 Contracts and terms. Contracts can be reviewed
to include cost escalation terms, cost-plus
formulas and discount reductions.
 Demonstrating value. Salespeople often fail to
optimize prices because they focus on the
features of their product rather than
demonstrating its value to the customer. They
need to emphasize the added values of the
brand, the full range of support services on
offer, and the economic value to the customer.
 Segmentation and positioning. Key is the
recognition that some customers are more
price sensitive than others. Some customers
will accept price increases, others will not –
they need to be treated differently.
Multibrands, such as American Express’ blue,
green, gold and platinum credit cards, and
Mercedes A, C, E and S classes of cars, are
one way of effectively discriminating on price.
Over time, customers who start with cheaper
options can often be traded up to premium
variants. Fighter brands targeted at emerging
price-sensitive segments are another way of
holding market share without bringing down
prices generally. For example, in 2002 BMI, the
British airline, launched BMIBaby, a discount
airline positioned at the growing economy
segment.
 Creating exit barriers. Companies can create
Figure 11.7 How to obtain higher prices barriers to make it difficult to switch to cheap