The common analytical modeling methods used in pricing, model a product’s value as a sum of the values of its attributes. Different customers value the attributes differently but in general they are willing to trade one for the other as long as the products in the choice set have the same total value.
There are indeed innumerable products and each has numerous attributes. But all the attributes across all products fall into just two categories:
- Price – that adds negative value to the customers
- Everything else that adds positive value to the customers
What if we removed all attributes but price?
What if we asked the customers to rate the products based purely on price?
The product that customers rate the highest will be the Price leader . It probably varies across segments but it is hard to tell the segments with price as the only attribute.
Again What if?
What if we removed price as an attribute from the model?
What if we asked the customers to rate the options based purely on the non-price attributes?
The product that customers rate the highest is the Price-Less leader. The leadership most likely varies across segments but it is defined only by non-price attributes.
In general price leader and priceless leader are never the same. Either one will do as long as your product is the leader.
- Price leader either has just one segment or treats the whole market as one but the Price-Less leader knows the different segments and what is relevant to them
- Price leader has one lever to control but the Price-Less leader has many levers available at their disposal.
- Price leader has one message to convey but the Price-Less leader gets to have conversations on a variety of topics that are relevant to the customers.
- Price leader innovates on driving out costs and inefficiencies in their products and processes but Price-Less leader does that and innovates on driving out costs and inefficiencies in customer’s systems and processes.
- Price leader worries about ending digits in their price, whether to list the $ sign or not, creative packaging etc. but the Price-Less leader gets to focus on versioning, what is relevant to each segment and how to create unique position in the minds of customers.
- There can be only one Price leader and it is not easy to keep the title. There can be many Price-Less leaders, based on segmentation and the end purpose the customer is hiring the product for.
Strategy is about making choices. Your choice is whether to be the Price leader or the Price-Less leader.
What is it going to be?