Positioning with pricing!

High price is often associated with high quality and a good experience. Price is a great tool for sending a signal to various people across the market such as customers, competitors, and collaborators. Price can also help any company in influencing the perception about its products. Here we take an example of LEXUS.

lexus

Lexus is a luxury vehicle division of Toyota. Lexus is a high priced premium car brand which is sold in over 70 countries all over the world. Toyota on the other hand is a mass market brand with no luxury or high priced image and a basic value for money brand. Lexus with its high priced luxury image positions its products for a different segment than Toyota.  The company even offers ultra luxury division of cars competing with other European car makers. Lexus cars are made by engineers of Toyota but still both the brands target different segments by positioning the brands at a different levels. How do they do so? This is all due to the differences in the prices which creates a perception of different quality and the companies have to respond according to the perceptions and the expectations of the customers. Lexus created its image as it is today by following specific marketing strategies. The marketing experts are of a view that the early success of the company was due to the high perceived quality and lower prices than other luxury brands. This perception is what makes a difference. Today Lexus commands a higher price than other rival companies now even charging the ultra luxury segment prices.

Another example for positioning:

tata jaguar

Jaguar Land Rover  company is owned by an Indian company Tata Motors. Tata motors basically sells heavy duty vehicles and small passenger vehicles in India but Tata motors uses high priced Jaguar and Land Rover vehicles for positioning products to a richer segment all over the world. Even apple has used pricing for positioning its product for a different segment. Apple introduced iPhone 5c which is cheaper and looks totally different than other iPhones as it has a plastic body instead of glass and metal, by introducing this phone apple positioned its product for a lower segment.

These companies are using price as a very effective tool for positioning their brands for different customers apart from that these companies are also using price as a great segmentation tool these companies charge different prices from a segment which are price sensitive and different prices from  a segment which has deeper pockets.  I think of all 4P’s price is the most important tool used for positioning as pricing gives a straight idea to customers of what to expect from a brand or a product. Companies use these expectations for positioning their products and brands in the minds of the people effectively as pricing is the easiest of all the 4P’S.

What other companies can you think of apart from Toyota following such strategy?

Do you also think price is the most important positioning tool?

Advertisements

39 thoughts on “Positioning with pricing!

  1. Ive never owned a Toyota or a Lexus but have driven both and agree they are priced and targeted at a different segment. I personally think that a Lexus is a nicer drive than a Toyota, is it because of price or quality, who knows. I would think though if the product did not warrant the difference in price it would not survive in a competitive industry, but do Toyotas and Lexus warrant such a big price difference, possibly not.

    Like

    • Thanks for the comment and yes the prices of Toyota and Lexus have huge difference as Lexus serves the richer segment with a better quality of cars!

      Liked by 1 person

  2. Thanks for your blog. In response to your question, do you think price is the most important positioning tool, I would say it depends on what you’re buying. It also depends on what you consider is good quality and what value you place on a product or service. Price is one thing but people will pay more for something they consider is a quality product or something they place great value on. It also depends what your buying style and tastes are. There are a few people I know who wouldn’t be seen in a Toyota but would happily drive around in a Lexus, but it’s not about the price, it’s more about perceived status. So I guess from a marketing perspective, clever pricing in the right segment says a lot about the product, even before people try it. In the case of buying a Lexus, people come with a preconceived idea of the quality they expect and the value they place on owning this particular brand of car. I guess then it comes down to the price tag, and what they’re willing and able to pay, that forces them to decide on the model. For those people who don’t care what car they drive, they can buy a pretty swish Toyota for a more modest price and still own a quality product.

    Liked by 1 person

    • Somewhat agree with your views 🙂 I think, it also depends on the real income. For instance, people with high income will be more attracted towards products that completely stand out in the market or the ones who have good brand image. People with low income will look for necessities, they will compare the prices and would spend according to their affordability.

      Like

    • Yes i agree with you. Quality and tastes of people plays an important role in buying decisions. as you said that when buying a Lexus people have a preconceived idea of its quality, this preconceived price is somewhat influenced by price!!

      Like

  3. “You get what you pay for”. The old saying seems to hold true in the majority of cases. There is obviously varying degrees of disparity but for the general public, price provides the most obvious indication of quality.

    Price may or may not be the most important positioning tool but it is definitely the easiest to adjust and manipulate. From a general consumer point of view, if you were making a comparison between 2 unknown brands, the assumption is that the higher priced item is of better quality and the vice versa.

    If you want to promote an image of your brand, then price is an easy starting point. You just need to back up the price with the implied quality!

    Like

    • Thanks for the comment, when a product is placed higher it can also play with a buyers mind and people tend to agree with the words of the seller about the good quality of the higher priced product.

      Like

  4. Thanks for your blog. I agree segmentation pricing is a smart way to maximize outcomes for the business but equally as important to back it up with the market research to provide you with a detailed understanding of consumers and external environment.

    Like

    • yes, of course i agree with u completely that it is important to back it up with the market research so that company gets a better knowledge of the external environment.

      Like

  5. The position in the market place evolves from the defining characteristics of the product. The primary elements of positioning are: pricing, quality, service, distribution, packaging. All elements of the marketing program can potentially affect the position, it is usually necessary to use a positioning strategy as a focus for developing the marketing program. So LEXUS not only use high price to position the brand.

    Like

    • yes, that what i said said that price is not the only think a company uses but it has an obligation to justify that price by providing equivalent quality.

      Like

  6. One company in a different field that implements a similar strategy of segmentation is Qantas. They obviously provide their Qantas air service to 44 countries, as well as their domestic services around Australia. However they’re secondary brand name Jetstar offers cheaper flights domestically around Australia to cater for a varying segment.

    It would be hard to say pricing is definitely the most important positioning tool. What one individual or consumer group think of pricing may be completely different to what a different individual or group thinks.

    To a certain extent it does play a massive role in consumers decisions. This even applies to someone in a comfortable to good economical position; as they in many circumstances will still value the price of something just as highly as that of someone in a lesser economical position- but for different reasons.

    As you mention the price of something is designed to be an indicator of its value, or worth. Someone who wants a more luxurious experience will perceive a higher priced service as something worth paying for, as it will offer more benefits. While someone who wants the service at the cheapest price will place that as high importance for the complete opposite reason, looking to save as much money as possible.

    Liked by 1 person

    • thanks for your comment and answering my question, Qantas is a great example of a company using strategy like Toyota.

      Like

  7. I think price is secondary to quality. The quality of the product must come first – customers will be prepared to pay a higher price if the quality is actual, not perceived. If the customer begins to have quality issues with the product, they will immediately start to question why should they pay the higher price – are the other benefits worth the lower quality, higher price?
    I’ve worked in manufacturing for many years and I’ve always found customers will be willing to pay the higher price (although it has to be a fair price) if the quality and service is high. However, as soon as the product we are supplying starts causing problems with their manufacturing process, it doesn’t matter if our service is outstanding, the customer will ask why they are paying a ‘premium’.
    Good article – thanks for posting.

    Like

    • Thanks for your comment, and i completely agree with you that high price doesn’t mean high quality and people will not buy if the product is not of good quality, but price does gives an indication to the customers about the quality and experience that they might get. companies must follow with good quality after high price to be successful.

      Like

  8. I don’t really understand about cars but I agree with you: both Toyota and Lexus are targeting different customers based on their prices. In terms of the quality, I don’t think Toyota and Lexus’s are much different. I still see Toyota as a high quality car brand and it is more for family type cars while Lexus is a luxurious type car. I think what make Toyota and Lexus are different is the “package”. Lexus’ design interior and external appear to be more luxurious and sophisticated than Toyota. However, when you actually comparing similar car between Toyota and Lexus, they are almost the same but Lexus price’s is more expensive.

    http://www.autotrader.com/research/article/car-reviews/225342/2014-toyota-highlander-vs-2014-lexus-rx-whats-the-difference.jsp
    http://www.toyotaofnaperville.com/clp-toyota-avalon-vs-lexus-es350.

    Knowing your target customers and market first is important to determine the price you will set for your products. Customers will expect to get higher quality products when they pay higher price. When people buy Lexus cars, they are expected to get high quality car but when people buy Toyota cars, they will look at the functionality of the car (e.g. fuel efficiency, family car, etc)

    Liked by 1 person

  9. This strategy is being used by many companies e.g. L’Oreal which under brand names of Lancome, Maybelline, Vichy and garnier is catering to all the segments of market. Lancome and Vichy are luxury brands while Maybelline and Garnier are mass products.
    Companies by doing so capture the huge market of mass products and don’t loose their premium products consumers segment as well.

    Liked by 1 person

  10. Nice blog askanboj, I particularly liked the example of TATA with Jaguar and Land Rover because I had always associated TATA with low-cost cars and software development. In a previous blog about segmentation, it was discussed the case of two organizations that differentiate their products through segmenting in separate brands, aiming to target different markets. The Volkswagen Group is the owner of brands such as Škoda (Check Republic), SEAT (Spain), Volkswagen (Germany), Audi (Germany), Porsche (Germany), Bugatti (France), Lamborghini (Italy) and Bentley (UK). In this case, it is possible to find prices from Skoda, and moving all the way to Lamborghini or Bentley. The strategy of separate brands is that well managed that it is even hard to associate some of the marks with the umbrella brand. In addition, it was detailed explain in a previous blog written by Mrugendra, the example of BMW´s Group with Rolls-Royce as one of its subsidiaries. They, as same as Toyota-Lexus, use price to differentiate their vehicles in different markets.

    Regards,

    Liked by 1 person

    • thanks for such a good comment and letting us know about the Volkswagen group and other examples. i agree with you on the point of strategy of separate brands that common people cannot even associate one brand with another the excellent example of this is again, TATA.

      Like

  11. HI

    Such as the Lexus brand story as well as Honda’s Acura and Nissan’s Infiniti.
    Infiniti (Infiniti) is Nissan’s luxury car brand, born in 1989 in North America. With a unique avant-garde design, excellent performance and attentive customer service quickly became the world’s Infiniti luxury car market, the most important brand.
    Every now have a clear brand positioning, like Samsung phones that have different levels of price as well as low-end as well as into the high-end of the middle. Mobile phones and cars are the same price will design different products to different consumers to choose their products.

    Like

  12. Pricing is certainly an important means by which to position a product and many people do tend to associate a higher price with better quality – but the product does then need to live up to that quality expectation or very quickly people will feel ripped off and the brand will essentially take a nose dive. There has to be enough “quality” for a product to maintain its position in the market – that is where the long standing reputation of the product comes from. So while price is an important positioning strategy – one that might well be a bit easier to manipulate than other positioning strategies – I don’t think it is the only strategy companies should rely on.

    Like

  13. i still prefer to use the old saying ‘ you got what you pay for’. Price is not only how much the customer paying for in still stand what the customer use in the future. The price is different from the same product with a different brand. That indicates the products with high price is cost much when manufactures produce it. if the customer purchase the product with high price they would enjoy the good product compared with the customer purchasing the lowing price products. In some extent, price decides what kind of products that customers could enjoy.

    Like

  14. Perception of having good quality does not always come with high pricing strategy, its not always true, other segments of the company also play a part in forming the perception, companies which are having high fixed cost or capital investment, if such companies are charging a premium for any of its product than they must deliver a high value product or else the customer may gets disappointed and the company may soon crash whereas companies with high variable cost and low investment if such companies are charging premium then definately the consumer should be cautious as the motive of the company may be gaining short term profit. When purchasing something this is usually a subconcious strategy going on in my mind.

    Like

    • yes, i agree with you, that companies must provide value for the price they charge but still companies also charge some extra money for their luxury brand image as done by Lexus. companies make few changes in the brands giving a luxuries feel and charge much more than what they should. and yes Lexus offers quality but charges far high price depending on its brand tag.

      Like

  15. Nice Blog…! I think price can be considered as one of the important positioning strategy, as most of the customers would always think that high priced products are of better quality. But ideally the most important could be a company offering unique features or benefits in a product that consumers are unable to find in other competing products.

    Like

  16. Nice blog !! A very good comparison of brands.
    Maruti suzuki from India is another good brand that used its product strategy and is now catering to the needs of customers of all segments.
    They have luxury cars that can be bought by the rich people and then they have cars at affordable prices which can be easily bought by the low income group people. Thus their pricing and product strategy gained them a good market share.

    Like

  17. I think price is defintely a very important ingredient when positioning a product and providing consumers with an expectation about the quality of the product. CUB is another example of a company that uses proce to position their product for differnet segments i.e. Carlton Draught, VB and Melbourne Bitter are priced cheaper to appear to the masses whilst other brands such as Peroni, Pilsner Urquell and Grolsch are priced at a premium and positioned for the higher end market of beer consumers.

    Price doesn’t always correspond to quality though. I’m sure we’ve al had the unpleasant expereicne of paying a high price tag for something only to find the quality to be poor. Conversely, occassionally we stumple accross a little gem with a cheap price tag but bucket loads of quality. A recent example of this is Aldi who won several awards at the Sydney International Wine competition- the blind tasting saw Aldi wines that sell for as little as $7 make the top 100:
    http://www.goodfood.com.au/good-food/drink/a-corker-for-aldi-as-its-wines-shine-at-2014-sydney-international-wine-competition-20141126-11u3wc.html

    Liked by 1 person

    • wow!!! that’s a great comment !! yes price is not always associated with good quality but high reputed companies have to provide some sort of quality to keep up with their reputation but maybe not equivalent to what they charge for.

      Like

  18. Price can be an effective positioning tool, but I don’t know that it is the most important. I think you need to consider all elements to effectively position a product.

    The product, in particular the packaging, are important in the following example of a company selling the same or similar product under different brand names. The packaging suggests a certain level of quality, allowing the company to charge more.

    SPC Ardmona owns a number of brands that have similar products
    1. Peaches – They offer tinned peaches under their SPC brand, along with a tub of peaches under Goulburn Valley. One would assume these peaches come from the same manufacturing plant in Shepparton Victoria. However these two products are packaged differently and are priced very differently. The SPC peaches come in a tin – you cannot see exactly the quality but you are only paying $3.36 for an 800g tin (that’s $4.42per kg). However the Goulburn Valley peaches come in a clear tub where you can see what you are getting. For this privilege you can pay double per kg ($8.40 per kg).

    2. Jam – SPC Ardmona have two jam brands, the old school IXL along with the new comer, Henry Jones. Again the unit price is double for the new brand which has a clear and more contemporary label ($1.87 per 100g) as opposed to IXL (0.73 cents per 100g) which is colourful but traditional.

    If SPC Ardmona packaged the products almost the same under different brand names then they could not charge double the price per unit. However with different packaging they are able to offer to similar products are different price points.

    Liked by 2 people

  19. Interesting topic. To answer your 1st question, another company using similar strategy like Toyota is Nissan, who branded their high end car as Infiniti. Toyota and Nissan are both Japanese car companies and they use similar branding and pricing strategy to promote their high end products, however Lexus is much more recognized than Infiniti. Why? I reckon the main reason is Lexus is more reliable and has better quality, according to lots of car reviews. So to answer the 2nd question, I would say pricing is important, but quality and branding are more important.

    Liked by 1 person

  20. I would like share two examples. Mini Cooper under BMW and Smart under Mercedes-Benz. These two have something in common, that is, to attract their young segment and provides more fashionable design than their traditional ones. Prices of these of Mini Cooper and Smart are not very low, and their qualities are similar to Toyota and Honda, with smaller space. But people will buy them because they think they are derived from luxury brands. Therefore the key is the brand, not only price and quality.

    Liked by 1 person

  21. I agree with your blog in saying that price is the most important positioning tool. The price (in luxury items in particular) is what will segment the market.

    Toyota or Range Rover? Most people would rather a Range Rover, and not because it has better craftsmanship or can go faster. The price set for the objects is what determines the nature. For example, the purpose of the Range Rover is its exclusivity and to be portrayed as “rich” or “important”.

    If the car wasn’t such a high price, the car would lose its value to the consumers and no longer be as special.

    Like

  22. In my opinion price is the first big indicator of quality of goods, while this doesn’t necessarily make logical sense it really shows the importance of the pricing strategy . it is only after doing research on the product you want to buy and alternatives that you start to develop your kind of market value for product. But it is always price that first implies quality, funny thing is my wife purchased a Burberry hand bag and her logic was for the high price was that it was quality and will last a lot longer than a cheaper brand, yet I believe it will last longer because it is better looked after because it does cost more money. sorry just a side thought not totally related to the article.

    Like

  23. Good Blog! I think in car industry generally higher the price means the car will have more advanced features and latest technology Luxury brands generally target high end of the market and the cost of their cars will high. By entering the high end of the market they can spend more money on R&D to develop new technologies and features and this translate to the cost of the car.

    Like

  24. It’s interesting as Lexus is known as high quality luxury car, but some of that quality does come out to the Toyota cars. Used toyotas are known as the most reliable used cars and their long standing quality draws people to them for a long term investment

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s