Buyers think in terms of value for the money: what they get for what they pay. The seller must “value position” the product or service in 1 of 5 possible positions. Each of these 5 positions has a market.
1. More for More
Specializing in offering the most upscale version and charging a high price. Often, the price far exceeds the actual increment of quality, and prestige is a factor. Examples: Starbucks, Nordstrom’s, Mercedes Benz and Cuban cigars.
2. More for the Same
Companies have been able to attack a “more for more” product or service by claiming comparable quality and performance but priced much lower.
Example: Lexus versus Mercedes.
3. The Same for Less
This is the differentiation strategy for E-commerce sites on the internet and discount stores. Examples: Amazon.com. and Win-Co.
4. Less for Much Less
Some people complain that product or service providers provide more than they require but they still have to pay the higher price. Southwest Airlines, the most profitable airline, charges much less by not serving food, not assigning seats and not using travel agents.
5. More for less
The winning value proposition would be to offer prospects and customers “more for less.” Two examples would be: Wal-Mart and Papa Murphy’s Pizza.
Less for more
A pricing position doomed to fail.
Develop your Total Value Proposition
R. Sherk, 4/04