The temptation is to see story as a luxury item: something that brands implement to lift their margin. There’s nothing wrong with that of course – it’s powerful and it works. But we don’t think that story is just a top-end nice-to-have. Our view is that most brands, no matter where they are positioned in the marketplace, need a storyline that enables and empowers their pricing strategy.
In this post:
A product and a price are not enough
Story provides a context for a pricing strategy
Applying stories to every pricing strategy
Stories introduce humanity
The new default experience
Story helps growth
Stories and price need to be directly aligned
Matching your pricing strategy and your story
A product and a price are not enough
To understand why a pricing strategy needs a story, first let’s think about the alternative. Without a storyline, a product is just that. It has everything it needs (hopefully) to do what it’s being bought for, but that also means it’s just another detergent, car oil, computer, whatever …That makes it highly vulnerable to house brands and to cheaper versions of what amounts to ‘the same thing’. It also means markets get packed very quickly with variants of the same idea that rapidly diminish the value equation.
This problem of course only becomes more acute as you move down the value chain – meaning that at the very points in the market that are most crowded and where competition is highest, the chances of finding differentiation are diminished, and much of the marketing amounts to little more than a rowdy discounting squabble based on ‘unbeatable pricing’. In point of fact, of course, those positioned in middle and lower markets should be upping their back story to compensate for this lack of differentiation.
Story provides a context for a pricing strategy
The real power of story is that it provides context, in two senses. First of all, it helps consumers differentiate an offering by attaching more than just functionality to a product. It can also help them understand why a product is priced the way it is – up or down. Ryanair are masters of this. Their price is a clear call to the market – don’t expect much, because you’re not paying much. And everything they do revolves on that premise. They do have a storyline, albeit an unusual one, based it seems on minimalism.
Secondly, and perhaps just as importantly, a storyline gives the brand owner a consistent and differentiated narrative upon which to base and evolve brand marketing. Again, Ryanair play on this with their discussions of stand-up passengers and paying for toilets. Their whole approach to their business and their marketing revolves around ‘how much less can we do?’
Provocative it may be, but it’s also consistent, distinctive and, in a highly effective way, it proves their price point. Even their at-times resentful customer service has that air of the cranky scrooge who insists on you meeting their demands on every aspect of your flight in order to qualify for their unreasonably low price.
Is it really that much cheaper to fly Ryanair than anyone else? Does it really matter? The airline brings that story to everything it does and talks about. For some people, they are utterly irresistible.
Applying stories to every pricing strategy
We sourced this post from Zapier on 15 different pricing strategies. We’ve aligned a story to each to show how each pricing strategy needs a particular type of story for it to work to its potential
Value-based pricing
This pricing method focuses on finding a price that the customer is willing to pay. On that basis, tell a story of why a product/service feels worth what you are asking. It could be a quality story, a production story, an origin or founder story.
Cost-plus pricing
If the basis of value-based pricing is your customer’s spend tolerance, cost-plus pricing is about the margin you expect to make on everything you sell. It could be a story about how you select what you sell, your specialist knowledge or what you have access to (that others don’t) and how you acquired that.
Competitive pricing
This pricing model takes its cue from the asking price of others. It’s particularly applicable to those selling a product or service that looks or feels the same to consumers as what they can get elsewhere. In such a situation, the story varies depending on whether you are pricing above or below others. If you are charging more for the same service, emphasise your ‘hidden’ benefits, such as experiences or quality. If you are pricing below others, tell a story of why and how you can afford to price below others while still maintaining quality. That could be a business model story for example.
Economy pricing
Here, one price is everything. The lowest option. And the target market is bargain hunters. There are a number of stories that make sense in these circumstances: how smart customers are; the “outrage” of what others are charging; or the joy for customers of having access to something they feel they can afford.
Penetration pricing
Penetration pricing is about establishing the right to be able to charge more. Low initial prices give way to more normalised pricing once trust and loyalty has been earned. Sincerity is a powerful storyline in these circumstances: a brand committed to winning you over. Your story should be charming, simple and generous.
Dynamic pricing
This pricing strategy is often used by airlines, hotels and rideshares. It’s tailor-made for businesses where demand fluctuates dramatically. If customers order at a time when demand is high, they’ll find themselves paying more – sometimes a lot more. Storylines for this kind of pricing often revolve around responsiveness and availability, with “the market” cast as both the villain and the hero. The benefit for customers is “there’s more likely to be a place available for you, even at our busiest times [if you’re prepared to pay for it]”. Conversely, storylines also emphasise the advantages of planning well ahead or sacrificing convenience in order to make savings.
Price skimming
With this strategy, customers pay more for new and then less over time as the novelty wears off (and others catch up). As Zapier point out, this strategy works best with products that have major releases, like laptops or cars. “One of the most well-known price skimmers is Apple, which has made its product launches into full events with tickets and fans to build as much hype as humanly possible. Mega-fans buy the newly unveiled products the moment they’re available … As each new product is released, the older models get shunted down the pricing ladder to capture buyers with lower WTP points.” The storyline here must also evolve to keep pace with the strategy from an origin story based on innovation and excitement to an availability story based on quality and patience.
Hourly pricing
Hourly pricing focuses on what can happen in a defined period of time – be it an hour or day. A strong storyline here is one based on what customers are getting access to. It’s a story of resources, pooled experience, skill and productivity. Because time is front-of-mind in these circumstances, delivery is the big driver.
Project-based (also commissions) pricing
Here the emphasis is on the value of the overall project, and fair recompense for the scope, complexity and resources required. The storyline here is based on what the end customer stands to gain, financially, physically and emotionally when the project is delivered successfully. In all cases, the point of the story is to explain why this arrangement is a small and reasonable price to pay for what customers are getting. Credentials and track record are powerful narratives in these situations.
High-low pricing
A little bit like dynamic pricing, there are two storylines here. One focuses on motivated customers paying more and getting sooner while the other is for price-sensitive buyers and is all about waiting in order to save. Because there are two stories in play, there are also two sentiments at play: one focused on access and availability; and the other concentrating on short-term opportunism. In both cases, the attraction revolves around the prestige of the brand itself. The make-or-break for this pricing strategy is robust anchor pricing, accompanied by a story that ‘explains’ why the product/service is priced the way it is at the high end.
Bundle pricing
While the focus for bundle pricing is on combined benefit – how much you save when you bundle related products/services – the storyline is often one built around relationship. It’s a story built on recognition and trust rewarded. The other storyline for bundling is one of collective benefit. For example, if we go back to Apple for a moment, the brand works hard to encourage you to stay within their ecosystem. The payoff is a combination of products/services that works better than it would if you combined unrelated products. Customers don’t necessarily get a discount in such circumstances, but the story is still one of greater benefit than ‘going it alone’.
Geographic pricing
This form of pricing involves setting prices based on specific markets and factors in things like surrounding pricing, levels of competition, availability and access. You may be able to draw on a place of origin story here – one that focuses on the specialness of the area and/or the association of your brand with a particular locale.
Psychological pricing
Psychological or charm pricing is all about encouraging customers to think they’re getting a better deal than they actually are. The story is often one of ‘give and take’ – customers give more than what they would normally pay, but take home a quantity that feels like they did well out of the deal. Some retailers build a storyline around a “club” to add a sense of belonging and special access to this pricing arrangement.
Freemium pricing
Freemium is a ‘try before you buy’ story that looks to short your curiosity in favour of the rewards that come with the paid version. The story is one of glimpses. See what this product can do. Get a sense of what is possible. And then it’s a story of commitment – of one awaits the customer on the other side of the paywall or subscription. The key tensions in this storyline are: will the paid version be worth it; and, once the customer is paying, will they continue to feel like they are continuing to get value?
Premium/luxury pricing
Story is critical at this end of the market. Premium and luxury brands should always be looking to sell their customers the ‘dream’ of what their product or service stands for. Storylines here can involve pedigree, heritage, status, exclusiveness, craft, technology and more. This strategy is all about hierarchy and superiority, and the story is a key validation for the “irrational” pricing (nothing to do with what things actually cost) that such brands command.
So, what conclusions can we draw from these examples?
Stories introduce humanity
They make customers think through and act upon a narrative that is fundamentally rooted in human truths. Stories generate empathy. As buyers, we see ourselves in the tale. Or we see a side of ourselves. Perhaps, we see the ‘me’ that we would like to be. Without that narrative, what are brands going to talk about and how are you going to focus your behaviours? Exactly. Everything is going to be dominated by features and discounts basically. These are much more restricted lines of engagement. And without a storyline hook to hang them on, they’re boring: witness the beauty pageant of bargains on any rush-hour TV ad break for evidence.
The new default experience
Everything in marketing goes through phases. For some time, brands couldn’t move without running into experience advocates. Experience is still important, but as that too commoditises, we’re now seeing experiences that are informed by stories. This is no surprise really. As marketing has become more socially aware, brands have needed to become even better and more sophisticated story-tellers. It’s a pre-requisite for getting people to talk about you and think about you in positive ways.
Story helps growth
As companies move into new sectors and industries converge via technology, brands will need to spread their story consistently across diversified product lines in order to keep growing. The story will act in some ways as the constant point of connection for products that potentially range hugely in pricing and distribution.
Price and story need to feel right together
Storylines, as we’ve seen, are many and varied. Some emphasise history and luxury. Others tie a product to a place or a hero, an idea, a challenge or an outrage. The key to success is to adjust the story you tell to the price you charge and vice versa. No point in telling a luxury story and charging a low end price. The whole thing will just look and feel out of whack. Beer brands have this down to an art. Just look at the way lower priced drinks often come with grittier and more parochial stories.
Matching your pricing strategy and your story
One of the hallmarks of an Articulate Company is the ability to wrap what you sell and the price you sell it for in the right story. By aligning your storytelling with your pricing strategy, and indeed your wider business strategy, you move your brand forward in ways that affirm direction, engage customers and ultimately reward investors. If this is something you need to get right, a strategic session is a rapid way to talk through the opportunities.
Photo by Angèle Kamp on Unsplash