Welcome to the segment price marketing. In this segment, we will learn about what a price is at a very fundamental level. We'll learn about cross country price issues, cross industry price issues, and lastly how pricing can help other mix elements. So, let's get started. Okay, so what is a price? I think the common word that we associate with price is pay. But the thing to keep in mind is that it's not just about out-of-pocket pay, out-of-pocket expenses. Because a lot of what is paid is not monetary. It can be in the form of inconvenience. It can be in the form of uncertainty, fear. When you buy something for something that is lower than you normally expect. And, so price reflects the Noon Nopi, the perception of value, which will vary by consumer. So what is value? We can think of value as being an equation, a ratio. Benefits over costs. So as we can see in this formula, there is a topside which has a positive relationship with price. Normally when we think about price, we think only about the negativity, but here the keyword is positive. So, the higher the price the better. Especially in terms of benefits perceived at the Noon Nopi level by a consumer. But, of course, there is also a bottom-side. So that is the normal economic interpretation of price. The lower the price, the greater the value for consumers. But again, I remind you that there is a topside and a bottom-side. So in that sense, there's much more wiggle room that we have to play with as marketers with price. So in that sense, as we can see here in this formula, which is much more complex, there are many components of the topside benefits. And many components of the bottom-side costs. So we have to think in terms of total benefits, which is the combination of all the benefits. But also total cost as well. And we have to think of them in a relative way. Meaning, it's not just our benefits and our costs, but that relative to the competition. So the POP here refers to point of parity. Things that are equal between us and the competition. Not only in terms of benefits but also costs. But also the point of difference, which is what we can be better at, which I hear coined superior, or which we can be inferior at. So if we're inferior at something, like let's say brand image, well then our pricing has to reflect that. There has to be a discount in terms of the lower brand equity that we have. Say, as a newcomer, compared to a more established brand. And the same would be true for costs. So if we are superior in terms of saving people money. Well, then we can charge something higher. Such as having, let's say a car, that needs no repair. But, if the competition offers greater discounts and we don't, well then again, our prices, in terms of the perceived Noon Nopi value of the consumer, will be much lower. So the key message here is that we have to look into the details of the various components of both benefits and cost. Okay, so what does this all mean in terms of cross country? Well, the keyword was value, so if we're going abroad we have to ask ourselves, does our product, Product A, have the same Noon Nopi value perceived at home as well as abroad? The answer may be yes but the answer may be no, depending on the various components of both benefits and costs. So travelers often are surprised when they come to Asia, to find that branded coffee is much more expensive because maybe Asians play a higher premium on the brand equity of a coffee. But when they go to, let's say Europe there, because they are so many coffees, good coffees that one can drink, maybe the perceived Noon Nopi is not as high. So that same brand of coffee isn't able to charge as much there as in other places. And we also have to think about again the different cost components. So if your competition offers greater discounts locally, well then that's something that has to be accounted for in your competition with those rivals there. Okay, so what about Cross Industry? So this is where I think we can benchmark other industries in terms of how they convey the top side benefits better. Or how they lower costs to consumers, and thereby increase value. So some examples here might be offering newer kinds of services. So here in Asia, many hospitals offer valet parking. And these are premium hospitals, so this could be something that non-hospitals can refer to, in terms of how to convey better benefits. So valet parking is something that can be easily copied. So your service, your product. If you haven't offered valet before, again, to increase the transaction of your consumer, that's something that you can offer. Also in terms of saving costs, a good example might be sushi conveyor belts. So this originated from this very resourceful Japanese sushi operator in Japan. Who got that idea from a factory, a beer factory to be exact. So he noticed how fast beer was moving and so he used that same conveyor system, and adopted it into his restaurant. And provided, in essence, a new service where people can actually self-choose what sushi they could have. But more importantly, save money in terms of lower personnel need. Okay, so how can price help other marketing mix elements. Well, price can convey quality, especially in the absence of information about quality. So for some consumers their inference, their Noon Nopi perception, of a product may be based on a higher price. So that is the top side of the value equation. Of course, a lot of people are more interested in lower price and that in effect can become your point of difference. Also, people vary in terms of their reservation prices, which enable you to have segmented Noon Nopi for your market. And thereby have a greater product line. What about price and place? Well, we have to offer incentives to the channel for stocking our product. So that's what pricing does, in terms of giving more margins to stores that place their product in better shelves. That can be especially true for new brands that have to overcome resistance by channels. And finally, price incentives within the store can be a point of difference for brands. What about price helping promotion? Price is often said to be the lazy marketer's advertising. And it's because you can always advertise, oh, we have the lowest prices. So if you're lacking POD, well, then pricing can be bad in terms of advertising. Pricing a high price, in fact the highest price, can be a good position if, and this is a big if, you can back it up by having the best product. And price cuts, in effect, can become a very effective promotion which leads to very fast and higher sales. So what are the takeaways for the segment? Well, we learned that price is not just about you calculating costs. That there is a topside component that consists of perceived benefits, as well as a bottom side. So it's, I think, a balance that you should always need in terms of how to set prices. In terms of cross country, we learned that we have to test whether the Noon Nopi, a value, is equal across countries. And if not, then the Noon Nopi has to be either lowered or raised to match the per country Noon Nopi. And we also learned that from a cross industry innovation standpoint that we can outsource ideas, in terms of how to alter the benefits and costs configuration.
