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Marketing Canvas - Pricing
Discover how to effectively leverage the PRICING dimension in your Marketing Canvas strategy. This guide simplifies this complex topic, providing examples, tips, and a step-by-step approach to enhance your marketing success.
Last update: 24/11/2024
In a nutshell
The Pricing sub-dimension in the Marketing Canvas examines how your pricing strategy supports your value proposition, aligns with customer expectations, and reflects your brand positioning. Pricing is not merely a financial decision but a strategic tool that communicates value, differentiates your offering, and influences customer behavior toward sustainable choices.
For instance, a brand like Green Clean might emphasize pricing transparency and offer incentives for sustainable behaviors, such as discounts on refillable products, to align with its eco-friendly mission and customer expectations.
Introduction
The Pricing sub-dimension in the Marketing Canvas is critical to ensuring your value proposition is both competitive and aligned with your brand’s goals. A well-designed pricing strategy balances customer Willingness To Pay (WTP), perceived value, and cost structure while promoting sustainability. It ensures your offering creates more value than its cost and encourages customers to engage with your brand’s most impactful and sustainable options.
Pricing also reinforces brand positioning by reflecting the quality, exclusivity, or accessibility of your product or service.
What is pricing?
Pricing is the monetary expression of your value proposition, reflecting the worth of your product or service to customers. A strong pricing strategy:
Communicates Value: Ensures that customers perceive the benefits of your offering as exceeding its cost.
Reflects Willingness To Pay: Aligns with what customers are willing to pay for solving their problems.
Covers Costs: Accounts for the full costs associated with delivering your value proposition.
Supports Positioning: Aligns with your brand’s image and goals in the category.
Promotes Sustainability: Incentivizes customers to choose sustainable options.
For example, Green Clean might set a premium price for its eco-friendly cleaning solutions to reflect their unique value while offering subscription discounts for refills to encourage long-term sustainable behaviors.
Pricing: an in-depth perspective
PRICING is a pivotal element of your marketing strategy that requires meticulous analysis due to its complexity and profound impact on value creation. In the Marketing Canvas Method, PRICING goes beyond simply competing with market rates for similar offerings. Instead, it focuses on leveraging pricing as a strategic tool to create or preserve value, propelling your brand upward on the economic value curve.
Perceived Price and the Value Curve
At the core of effective PRICING is the concept of the Perceived Price—how customers interpret the value of your offering relative to its cost. Understanding the standard pricing unit in your market is critical to analyzing your position.
For instance:
In a supermarket, shampoos or soaps are typically priced per milliliter in Europe, while coffee is sold by weight.
In the service industry, consulting services are often charged per hour or day.
Once the reference pricing unit is established, you can calculate the perceived price of your offering compared to competitors using the formula:
24 / (E - C) * (M7 - C) - 12
Where:
E is the highest unit price in the market,
C is the lowest unit price,
M7 is your unit price.
This calculation helps determine your position on the value curve, indicating whether your PRICING strategy accelerates or impedes your business growth.
Example: Artisanal Coffee
Suppose your artisanal coffee beans are priced at $15 per pound (M7). In your market, the highest-priced coffee is $20 per pound (E) and the lowest is $10 per pound (C). Applying the formula provides insight into where your pricing strategy positions you on the value curve.
A strong position on the curve suggests your pricing reflects perceived value, while a weak position may signal the need for adjustment to better align with market conditions and customer expectations.
PRICING and Perceived Value
PRICING is intrinsically tied to how customers perceive the value of your product or service:
If your offering is seen as a commodity, customers will gravitate toward the lowest price.
Conversely, if your unique value proposition is clear, customers may accept higher prices that reflect this differentiation.
For example:
Starbucks customers willingly pay premium prices because they perceive value beyond the coffee itself—a unique experience.
A luxury fashion brand can command high prices because it offers a transformational experience, making cost secondary for its target audience.
Key Principles of an effective PRICING strategy
An effective PRICING strategy should adhere to the following principles:
Be Value-Based: Align your price with your position on the economic value curve.
Consider Market Conditions: Analyze competitor pricing and customer price sensitivity to ensure relevance.
Enhance Your Brand’s Purpose and Positioning: Reflect your brand identity. For instance, a disruptive brand might challenge market norms with innovative pricing.
Strengthen Your Value Proposition: Reinforce the unique aspects of your offering to justify the price.
Ignoring these principles can lead to a PRICING strategy that acts as a brake on your progress, rather than an accelerator.
Assessing your pricing strategy
To evaluate your pricing, consider a scoring scale from -12 to +12:
12 represents a low price that may correspond to a low perceived value.
+12 indicates a high price with a high perceived value.
For example:
If your artisanal coffee is priced above average market rates but customers appreciate its unique quality and sourcing, resulting in a high perceived value, your pricing might score a +8 or higher on this scale.
On the other hand, a low-priced coffee with limited differentiation might score closer to -8 or -12, reflecting a misaligned pricing strategy.
Value Map that helps you understand your current pricing situation
Translating pricing into action
A strong pricing strategy should consistently reflect your value proposition and support customer decision-making. Pricing decisions should be based on insights into customer behavior, cost structures, and competitive analysis, while integrating sustainability as a core principle.
Questions to consider:
Does your pricing strategy create more value than the cost for your customers compared to alternatives?
How well does your pricing align with your customers’ Willingness To Pay for solving their problems?
Does your pricing account for all costs associated with delivering your value proposition?
Is your pricing consistent with your brand positioning and category goals?
How does your pricing strategy encourage sustainable choices?
Method for self-assessment
For a comprehensive evaluation of your understanding and application of the Pricing concept, rate your agreement with the following statements on a scale from -3 (completely disagree) to +3 (completely agree):
Your value proposition is creating more value than the cost of the next best alternative for your customers.
Your pricing strategy is based on customer Willingness To Pay (WTP) for solving their problem.
Your pricing strategy takes into account all costs associated with your value proposition.
Your pricing strategy is aligned with your brand positioning and your goals for the category.
Your pricing strategy encourages customers towards the most sustainable option available.
Interpretation of the scores
Negative scores (-1 to -3): Negative scores suggest that your pricing strategy is misaligned with customer expectations, cost structures, or brand positioning. This can result in undervaluing your product, losing competitive advantage, or failing to support sustainability goals. Immediate action is required to reassess your pricing approach.
A score of zero (0): A neutral score reflects uncertainty or incomplete alignment in your pricing strategy. While some elements may be in place, such as cost coverage or WTP analysis, they lack cohesion or fail to drive sustainable behaviors effectively. Further refinement is needed to strengthen your strategy.
Positive scores (+1 to +3): Positive scores indicate that your pricing strategy effectively communicates value, aligns with customer WTP, covers costs, and supports brand positioning. Additionally, your pricing encourages sustainable choices, reinforcing your commitment to long-term impact and differentiation.
Case study: Green clean’s pricing
Misaligned understanding (-3, -2, -1): Green Clean’s pricing fails to reflect the value of its eco-friendly products, either undervaluing them compared to competitors or setting prices that exceed customer WTP. The lack of cost alignment and sustainability incentives weakens the brand’s positioning and reduces customer appeal.
Surface understanding (0): Green Clean’s pricing covers basic costs and aligns with industry averages but lacks differentiation or focus on sustainability. Customers may perceive value but are not incentivized to choose more sustainable options, limiting the brand’s impact and competitive edge.
Deep understanding (+1, +2, +3): Green Clean’s pricing highlights the value of its unique features, such as non-toxic ingredients and zero-waste packaging, while aligning with customer WTP. By offering subscription discounts and promoting refillable packaging, the brand encourages sustainable behavior. This strategy reinforces its eco-friendly positioning, builds customer loyalty, and ensures profitability.
Conclusion
The Pricing sub-dimension is a strategic tool for aligning your value proposition with customer expectations, brand positioning, and sustainability goals. By creating value beyond cost, basing pricing on WTP, and incentivizing sustainable choices, businesses can enhance their competitive edge, foster customer loyalty, and achieve long-term success.
Sources
Market and Economic Value, Laurent Bouty, https://laurentbouty.com/blog/2019/marketing-canvas-market-and-economic-value
Neil Patel - 5 Psychological Studies on Pricing That You Absolutely MUST Read, https://neilpatel.com/blog/5-psychological-studies/
The Ultimate Guide to Pricing Strategies, https://blog.hubspot.com/sales/pricing-strategy
Replyco, 23 Pricing Strategies Any eCommerce Seller Can Use to Increase Sales, https://replyco.com/brainery/23-pricing-strategies-for-ecommerce-sellers/
More on the Marketing Canvas
Marketing Canvas by Laurent Bouty
Marketing Canvas - Features
Unlock the full potential of your product or service with compelling features. This comprehensive guide explores the importance of features in your value proposition, how they can make you stand out, and effective tools to enhance them. Create a unique selling proposition that resonates with customers.
Last update: 26/11/2024
In a nutshell
The Features sub-dimension in the Marketing Canvas examines the functional benefits that define your value proposition. These features are the tangible and measurable aspects of your offering that meet customer needs and differentiate you from competitors. A strong set of functional benefits ensures alignment with your brand purpose, positioning, and sustainability goals, making your value proposition more compelling and relevant.
For instance, a company like Green Clean might emphasize features such as “non-toxic cleaning agents” and “zero-waste packaging” as core elements of its value proposition. These features align with customer expectations for safety and sustainability while differentiating the brand from conventional cleaning products.
Introduction
The Features sub-dimension is a critical component of the Value Proposition category in the Marketing Canvas. It focuses on identifying the functional attributes that make your product or service valuable to customers. These features must not only meet category expectations but also include distinctive elements that set your offering apart and align with your brand purpose and sustainability goals.
By ensuring that your features are both relevant and unique, you enhance your value proposition and increase customer satisfaction and loyalty.
What are features?
Features represent the functional benefits of your product or service—the tangible elements that solve customer problems or meet their needs. These benefits range from basic requirements to unique attributes that provide differentiation in a competitive landscape.
For example:
Core Functional Benefits: The essential features expected by customers within a category (e.g., cleaning efficacy in a cleaning product).
Differentiating Functional Benefits: Features that provide added value and set your offering apart from competitors (e.g., hypoallergenic formulas or plant-based ingredients).
Unique Functional Benefit: A standout feature that makes your offering the preferred choice (e.g., 100% biodegradable packaging).
Green Clean’s value proposition might include:
Core Benefits: Effective cleaning performance.
Differentiating Benefits: Safe for children and pets.
Unique Benefit: Zero-waste packaging that appeals to eco-conscious consumers.
Features: an in-depth perspective
To create a compelling value proposition, the functional benefits of your product or service must:
Meet Basic Expectations: Deliver on the fundamental features required by the category.
Differentiate Your Offering: Include features that set you apart from competitors.
Provide a Unique Selling Point: Offer a feature that becomes the primary reason customers choose your product.
Align with Purpose and Positioning: Reflect your brand’s mission and values.
Integrate Sustainability: Address modern customer demands for environmentally responsible solutions.
For example:
Alignment: Green Clean’s focus on non-toxic and eco-friendly ingredients aligns with its brand purpose of promoting health and sustainability.
Differentiation: By offering a subscription model for refillable cleaning products, Green Clean stands out in a crowded market.
Sustainability: Features such as zero-waste packaging reinforce the brand’s commitment to sustainability.
Translating features into action
To successfully translate features into action, a customer-centric approach is essential. Features must not only meet customer expectations but also provide a seamless, intuitive, and meaningful experience. Achieving this involves several key steps:
Make Features accessible and understandable
Customers should easily grasp the value and functionality of the features your product or service offers. This can be achieved through:
Clear communication: Ensure features are well-highlighted in product descriptions, advertising, or sales materials.
User-friendly tools: Use explainer videos, user guides, or tutorials to simplify the adoption process.
Intuitive design: Incorporate thoughtful design to ensure ease of use, reducing any learning curve.
Integrate Features into the customer Journey
Embedding features into every touchpoint of the customer journey ensures that they are consistently experienced and appreciated. This includes:
Highlighting features during onboarding processes.
Showcasing their value in promotional materials or during customer interactions.
Demonstrating them in action through trial versions or interactive showcases.
Communicate Features effectively
Features must be prominently featured in marketing efforts to help customers understand their benefits. Consider:
Advertising: Highlight features in ads to attract attention and drive interest.
Product descriptions: Clearly articulate how features solve customer problems or enhance their experience.
Sales presentations: Use demonstrations or testimonials to showcase features in action.
Leverage customer feedback
Feedback is invaluable in refining features to better align with customer needs. Continuous engagement helps ensure that your features remain relevant, effective, and appreciated. Techniques include:
Surveys and polls: Gather structured feedback on specific features.
User tests: Observe how customers interact with features to identify pain points.
Social media interactions: Monitor conversations to uncover unfiltered opinions and suggestions.
Statements for self-assessment
For a comprehensive evaluation of your understanding and application of the Features concept, rate your agreement with the following statements on a scale from -3 (completely disagree) to +3 (completely agree):
Your value proposition has all the core functional benefits required by the category.
Your value proposition has a few functional benefits that set you apart from the competition.
Your value proposition has a unique functional benefit that is the primary reason for customers choosing you.
Your value proposition functional benefits align consistently with your brand purpose and positioning.
Your value proposition has integrated sustainability in its functional benefits.
Interpretation of the scores
Negative scores (-1 to -3): Negative scores indicate that your value proposition lacks clarity or fails to deliver the functional benefits required to meet customer expectations. This could result in weak differentiation, poor alignment with your brand purpose, or missed opportunities to address sustainability.
A score of zero (0): A neutral score reflects uncertainty or gaps in your understanding or delivery of functional benefits. While your value proposition may meet some basic expectations, it lacks distinctive or unique elements that make it compelling to customers. Further refinement and alignment with brand goals are needed.
Positive scores (+1 to +3): Positive scores suggest that your value proposition effectively delivers all the required functional benefits, includes distinctive and unique features, and aligns with your brand purpose and sustainability goals. This ensures strong differentiation, customer satisfaction, and alignment with modern market demands.
Case study: Green Clean’s features
Misaligned understanding (-3, -2, -1): Green Clean focuses only on basic cleaning performance, failing to address customer expectations for safety or sustainability. This limited scope leads to weak differentiation and a lack of alignment with the brand’s eco-friendly mission.
Surface understanding (0): Green Clean meets basic category expectations but lacks distinctive or unique features. While it recognizes the importance of eco-friendly products, its functional benefits are not fully articulated or aligned with customer priorities, limiting its value proposition.
Deep understanding (+1, +2, +3): Green Clean offers a well-rounded value proposition with core benefits (effective cleaning), differentiating benefits (non-toxic and safe for children), and a unique feature (refillable, zero-waste packaging). These functional benefits are consistently aligned with the brand’s purpose of promoting health and sustainability, setting Green Clean apart from competitors.
Conclusion
The Features sub-dimension is essential for defining the functional benefits that form the foundation of a compelling value proposition. By meeting core expectations, differentiating your offering, and providing unique benefits aligned with your brand purpose and sustainability goals, you can create a value proposition that resonates with customers, fosters loyalty, and stands out in a competitive market.
Sources
Strategyzer, Value Proposition, https://www.strategyzer.com/canvas/value-proposition-canvas
Bill Autlet, Disciplined Entrepreneurship
Wikipedia, USP, https://en.m.wikipedia.org/wiki/Unique_selling_proposition
More on the Marketing Canvas
Marketing Canvas by Laurent Bouty