Price vs. Value: Is Your Marketing Missing the Point?

   

Everybody loves a great deal. If your product or service is cheaper than those offered by your competitors, then you’d be crazy not to focus on your pricing as your main selling point, right? Well, actually, wrong. You wouldn’t be crazy at all. You see, in a world where audience perception of your product really, really matters, it takes more than just a song and dance about how cheap you are to establish your brand as amazing.

Many companies learn this the hard way. The history books are littered with stories of ambitious brands who have crashed and burned by gunning for the budget market, despite the fact that their value proposition is packed with so much more.

Let’s take a look at one such story and see what we can learn.

“Twice as Much for a Nickel” – The Great Pepsi Blunder of 1936

Think of two cola brands off the top of your head. Now, I might be wrong here, but chances are pretty high that you thought of Pepsi and Coca-Cola, right?

Coca-Cola and Pepsi-Cola both launched their products in the late 19th Century and have been locked in a fierce marketing war ever since. These days, Pepsi and Coca-Cola are considered to be on roughly the same level – it’s all just a matter of which taste you prefer. But it hasn’t always been like this.

Did you know that for nearly thirty years, Pepsi was considered a shameful budget buy that people were embarrassed to be seen with?

marketingPepsi didn’t have much luck with their marketing in the early 1900’s. But in 1936, they developed a winning strategy that would blow their competition out of the water – twice as much for the exact same price. They introduced a brand new bottle size that held 12 full ounces of cola and priced it the same as Coca-Cola’s standard 6.5-ounce bottle. They then sent it to market with its very own radio jingle:

 

Pepsi-Cola hits the spot
12 full ounces? That’s a lot!
Twice as much for a nickel, too.
Pepsi-Cola is the drink for you!

Did it work for them? Heck yeah, it did! Sales went through the roof, and between 1936 and 1938, their profits doubled. But at what long-term cost?

Consequences?

PepsiCo remained a profitable company in the years that followed their 1936 campaign, but their brand image took a total nose dive. Sure, people still bought it, but Pepsi was relegated to the kitchen cupboard, forced to forge its existence as a beverage for people who couldn’t afford Coca-Cola. People were ashamed to consume it in public, and many people would refuse to pour Pepsi in front of guests, opting instead to fill the glasses in the kitchen and then bring them through to the living room, so as to avoid the embarrassment of people seeing that they were buying a low-quality budget drink.

marketingThe public’s perception of Pepsi-Cola plummeted, leaving Coca-Cola to simply step in and scoop up the prize of “best quality cola”.  Pepsi had forced themselves out of the competition with Coca-Cola, not by being too cheap, but by focusing on how cheap they were. And try as they might, they just couldn’t peel off the label.

Subsequent campaigns with slogans like “The Sociables Prefer Pepsi” flopped, and did very little to improve their brand image. It wasn’t until their “Come Alive with the Pepsi Generation” campaign* that they finally cracked the 30-year deadlock, and began to shift public perception of their product.

Three decades to undo the damage of trying to make a few fast sales.

Are You a Table Drink or a Cupboard Drink?

Look, people do care about pricing, and they will try to find a good deal. But what they really want is a product they are happy to be seen with. They want to proudly bring their bottle of Coca-Cola into their living room and pour it for their guests – they don’t want to be sneaking off to the kitchen cupboard every time somebody gets thirsty.

Which of the following thoughts would you prefer your customers to have about your product?

  1. I can afford this. I suppose I’ll buy it.
  2. I love this product. Oh, and I can afford it, too!

Your value proposition needs to be about so much more than just your price. If you attract customers on price alone, they will be fickle, fair-weather customers who are always wishing they had something better. But if you attract customers by appealing to their wants and needs, they will be happy, loyal customers who want to share you with the world.

Let me use one of my clients to show you an example of this in practice:

People® is a Human Resources software company – an industry with a lot of very heavy competition. Now, their HR software is probably one of the lowest-priced solutions on the market. But when we developed their marketing position, did we focus on this fact to stimulate growth? No – we developed a 6-point value proposition, which talks about all the things that make the solution attractive, and then mentions – almost as an afterthought – that their software is also affordable.

The result? Well, by using value-based marketing instead of focusing on price, People® went from being an unknown start-up, to becoming one of the fastest-growing HR software suppliers in Europe. And they’re definitely not attracting the budget clients, either – one of their 3,000 customers is Victoria Beckham; another is the Ministry Of Sound.

Here’s the bottom line: you need to be a table drink, not a cupboard drink. You should strive to be the bottle of Coca-Cola proudly sitting in front of guests, not the shameful bottle of budget cola hiding in the kitchen. You should focus on what makes your product awesome, instead of trying to win your clients based on price alone.

So, are you a table drink or a cupboard drink?

*Despite succeeding in reshaping their brand image, Pepsi’s “Come Alive with the Pepsi Generation” campaign brought with it a new set of problems – when it was translated into Chinese, the slogan was interpreted as “Pepsi brings your ancestors back from the dead”. But that’s a lesson for another day!

About the Author:

john crowleyJohn Crowley is a professional copywriter and content marketer. Over the last five years, he has helped hundreds of growing organisations to articulate the true value of their business, in a way that their target market understands and trusts. John has also helped ambitious companies to develop and execute a working content marketing strategy. If you need to make your complex business message more concise and more appealing, or if you need help with your sales and marketing copy, then John is your guy. You can hire John on PeoplePerHour here.

Want to contribute to PeoplePerHour blog? Get in touch via juste@peopleperhour.com!

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15 Comments

  • Sandrine

    Thanks John, I really learned a lot!

  • jane tareen

    Great article!

  • Joe

    This is one of the best Articles I read on PPH, I really learnt from it!

  • Osu

    Good article, but you might want to add an ‘E’ to your graphic: “Is your markting missing a point?” as it’s missing a point 🙂

  • Juste Semetaite

    Thanks, Osu! Good catch 🙂

  • Paul A

    It was a nice touch leaving out the ‘e’ in ‘Marketing’ in the email mailshot.. ..nice to see that you’ve fixed it here.

    That’s the problem when you drink ‘cupboard’ drinks while ‘markting’ .. 😉

    I liked the phrase “Let me use one of my clients” for your example company. It’s a pity you didn’t go the whole hog and explain that you are listed on their website under ‘Who we are’ – so a bit more than a client, perhaps?

    So, I learned something about Pepsi, and also the art of promoting your own organisation without saying so.

  • Ray Gillespie

    While I found this to be a very interesting article, I don’t actually agree with your summary: “you need to be a table drink, not a cupboard drink”.

    I’m sure there are plenty of ‘cupboard drink’ manufacturers who are successful and make a lot of money in a market that they are proud to be a part of. In fact, if everyone tries to be a table drink it will make even more opportunities in the cupboard drink market.

    I think the real lesson is that you need to decide what kind of drink you want to be, and then put all your effort into getting there – don’t get sidetracked and potentially veer off-course.

  • John Crowley

    Paul, I’m glad you learned something, but you’re not quite right about my relationship with PeopleHR.com

    It is true that they are my client. The fact that they value my services enough to include me on their website is a huge compliment, but the fact remains that I am simply a self employed contractor.

    My specialist skillset means that many companies pay for my services as a semi permanent part of their team. For example I am also listed on the following website: http://translateyourbusiness.co.uk/blog/team/john-crowley/ – again, this company is a client of mine. I remain self employed. 🙂

  • John Crowley

    Ray you make excellent points. I think Pepsi’s mistake was targeting the market they wanted to be a part of with the wrong message.

  • Sandeep Jethwa

    nice post.

  • Deepak Rajput

    nice post!

  • Marc Sobbohi

    Definitely a good article. Informative and well written to convey an interesting point.

  • Janey Hollo

    I love the fact that all it takes is a basic Google search to find information like this that will assistance me become familiar with digital marketing in general. I’m curious, how long have you been working in this industry?

  • John Crowley

    Hi Janey

    I’ve been writing copy and consulting on content marketing for around 5 years

  • Cyrstal Sterlace

    After checking out the content on this page, I cannot wonder however help exactly what other marketing topics I still have to find out about. Do you have any tips or resources that I should check out that will help me get more comfortable with this industry?

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