Messages Quantifying Added Value in Pricing #175

■ The Essence of Marketing

I define marketing as
“creating a mechanism that sells naturally.”
It means creating a state where you are chosen without having to sell hard.

To achieve this, the most important thing is


“having customers recognize your company's unique value and ‘desire’ that value.”

It involves analyzing that value from multiple perspectives and strategically proposing it in a way that customers can accept. I believe this is the essence of marketing.

■ What is the Marketing Mix (4P)?

A representative framework located at the final stage of the marketing process is the Marketing Mix.
It is also called the 4Ps after the initials of each strategy.

1. Product Strategy (Product)
Function, design, quality, variety, features, brand, size/weight, packaging, etc.

2. Price Strategy (Price)
Selling price, discount/sale price, payment terms, transaction terms, return conditions, etc.

3. Place Strategy (Place)
Sales channel format, inventory management, shipping system, agency system, location, store format, etc.

4. Promotion Strategy (Promotion)
Sales promotion, public relations, advertising, etc.

The 4Ps do not exist independently of each other.

For example, within the price strategy,
• Product design philosophy
• Form of distribution
• Direction of promotion
are incorporated.

Consistency is key.

If only the price is low but you claim to be a luxury brand, it creates a sense of discomfort.
If the price is high but distribution is centered on discount stores, the brand value will be damaged.

Only when everything is consistent does it become a “mechanism that sells naturally.”

■ What is Pricing?

The price set by a company exists somewhere between:
Lower limit: A price too low to generate profit
Upper limit: A price too high to generate demand.

The activity of balancing the value provided by the company with the value desired by the customer is Pricing.

Pricing refers to the
entire process of quantifying the added value of a product or service and converting it into the targeted profit.

It is not just “setting a price.”
Let's organize the representative methods.

(1) Cost-Plus Pricing
A method of adding a certain profit to the cost.
Pros
• Ensures profit if it sells
Cons
• Whether the market accepts it is another matter
• Product-out thinking that favors the seller
It is effective for monopolistic products or made-to-order products.

(2) Demand-Based Pricing (Value-Based Pricing)
A method of setting prices based on the value perceived by the customer.
Ignore the company's costs for a moment and start with
“How much will the customer pay?”

It is ideal, but it is a method with a high degree of difficulty in value design.

(3) Competition-Oriented Pricing
A method of setting prices by comparing with competitors.
It is often seen in red ocean markets.
However, there are points to note:
• Excessive price competition
• Decline in profit margins
• Ignoring customer value
The way you fight changes depending on your position (leader, challenger, follower, nicher).

(4) Psychological Pricing
People do not judge prices based solely on rationality.
Representative examples:
• Three-tier pricing (Pine-Bamboo-Plum) (making them choose the middle)
• “Today only,” “Limited edition”
• Prestige pricing (psychology of buying at a luxury store)
• 1,980 yen (fractional pricing)
• Uniform pricing (100-yen shop)
• Stealth price increases (adjusting content volume)
Price is also a message to the psyche.

■ Three Perspectives on Thinking About Pricing

There are several important angles to strategic pricing.

① Positioning
Competitive Status
Leader/Challenger/Follower/Nicher
Price Range
Luxury/General/Low-priced
※ Clarify where your company stands.

② Customer Value
How your company is evaluated based on elements that customers feel are “important.”
A concept close to USP or value proposition.

③ Technical Value
The objective quality of the product/service itself.
What is important here is the point that
Technical Value ≠ Customer Value.

No matter how technically superior it is, if it is not recognized as value by the customer, the price cannot be raised.

Conversely, there are also:
• Segments that will buy even at high prices
• Brands whose value increases precisely because of the high price.

■ Increasing Customer Value

Price does not necessarily mean it will sell if you lower it.
Conversely, it does not necessarily mean it will not sell if you raise it.
Depending on the target customer and the method, price can build a brand, but it also carries the risk of destroying it.

The point is to increase customer value.
Customer value refers to the “value” or “benefits/satisfaction gained” that a customer feels when paying for or using a product or service.
It refers to a comprehensive evaluation that includes not just price and specs, but also experiences that exceed customer expectations.

If you continue to sell cheaply with a focus on sales, you may lower that customer value by being seen as “cheap and low quality.”

Conversely, if branding is successful, customer value increases, and it becomes possible to raise prices without “damaging the value of a luxury brand.”

■ Price is not a "number" but a "message"

Price is not merely a selling price.
It is a message that expresses the
differentiated value of that product or service in numbers
.

Pricing is the act of
integrating internal and external factors, such as:
• Company strengths
• Competitive landscape
• Customer psychology
• Brand strategy

to
design an optimal revenue structure.

How you decide on pricing will significantly change the future of your company.
Rather than asking "How much should we sell it for?"

we should ask, "What kind of value are we expressing, and at what price?"
From that perspective, I believe it is necessary to re-examine our company's pricing.