What brand advantages are needed to use low-price strategies for marketing?

Many people believe that if the product has the same quality and the price is lower, it will be easier to win in the market.

In fact, it is not like that.

I remember seeing a paragraph before:

• When listing at a high price, it is difficult at first but becomes easy later; when listing at a low price, it is easy at first but becomes difficult later.

• High prices beating low prices is the norm in the market, while low prices beating high prices is an exception.

This happens because:

1) Consumers have two concepts of "price recognition" of products: one is the price itself, that is, the high or low price. This recognition does not lead to purchasing behavior; the other is the relationship between price and value, that is, whether the product is worth the price, which is the difference between price and value.
Low prices themselves only produce the first type of recognition, not the second; the second type of recognition is generated after "consumer experience" and " marketing promotion " .

In order to create a consumer experience, there must first be a prerequisite, that is, someone has to buy it first.

But if it is not an innovative product at the Tesla level, you must actively do marketing if you want people to buy it, otherwise it will be drowned out by other homogeneous products.

And marketing requires money.

Where does the money come from?

Just make an advance payment from the product’s “profit margin”.

Take Yunnan Baiyao toothpaste as an example: if it was not priced at an astonishing 20 yuan, how could it survive in the meat-grinder-like hypermarkets like Carrefour and Walmart while paying the advertising vampires of CCTV?

2) Of course, this also includes what is said in "Marketing Wars" - high prices often bring a certain "sense of mystery" , and consumers will wonder "Why is it so expensive?"

Now is the time to introduce your new product to people…

3) Many people think that consumers like cheap prices - they think "for the same quality, lower prices will make products more popular."

Actually, that’s not the case.

Consumers don’t like bargains, they like to “get a bargain”.

Setting a higher price is also to allow room for "opening high and ending low" in the future, so that consumers can enjoy more "discounts". If you start with a low price, it will be hard to turn around...

4) If a consumer buys your product because of the “low price”, it means that he is not your “loyal customer”. If other brands offer lower prices, users can be easily snatched away.

In order to win back these “bad customers”, you need to engage in a price war with your competitors, which further reduces your profit margins. This is obviously not cost-effective…

Ye Guofu (founder of MINISO) once said:

But what he said does make sense.

As mentioned above: high-priced products are more likely to win, this is a universal law of marketing.

Although we can indeed see many brands that win by low prices, the low-price strategy is actually not something that most start-up brands are capable of doing, and it is quite difficult. (We won’t discuss inferior products)

In this article, we will take a closer look at those brands that have successfully adopted a low-price strategy (such as Xiaomi, MINISO, Wahaha, Uniqlo , Southwest Airlines, Costco, PX Supermarket, and Walmart). Why are they successful?

Then you can simply judge whether you can afford to go the low-price route.

The reason is simple: because its channel resources in China at that time were unmatched by any other brand (including Coca-Cola ).

Therefore, the strategy adopted by Wahaha is: once it is discovered that a certain product in the high-end market performs well, it will immediately imitate it, and then quickly distribute it in the low-end market to seize the minds of consumers.

Other manufacturers, due to considerations for dealers' interests, were unable to follow up quickly, allowing Xiaomi to reap a large number of users. (No. 1 in national sales in 2015)

Of course, the success of the low-price strategy based on channel advantages is generally temporary . When other relatively high-end (or focused) beverage brands achieve channel penetration, Wahaha’s good days of making money by imitating others are basically over. When other brands of mobile phones open up online channels, Xiaomi has to take the initiative to advertise, open offline stores, and move into high-end phones.

What does “large trading volume” mean?

To sum up, there are probably two points:

1) A wide range of product categories : Xiaomi, Miniso, Walmart, Costco, Uniqlo, and Wahaha all have very rich product lines (or areas of coverage). Among them, Costco (a chain of warehouse hypermarkets) has even taken over the gas station business...

2) There are many high-frequency consumer goods : There is nothing much to say about this. Many of the products sold by brands such as Miniso, Walmart, Costco, and Wahaha are high-frequency consumer goods - consumers will buy them frequently.

The above two points basically guarantee a sufficiently large trading volume.

As for why we should pursue high trading volume? This is very simple - if the profit is low, you should sell more.

1) Xiaomi: Many people believe that Xiaomi does not make money from mobile phones alone, but from other products in the "ecosystem", such as Xiaomi TV , Xiaomi Box, Xiaomi Travel Case, Xiaomi Purifier, etc.

In fact, these are not Xiaomi’s real core business…

Don't believe it? Let's take a look at its business layout:

Next come technology (cloud computing, big data , etc.), services (Xiaomi Interactive Entertainment, Xiaomi Finance, etc.), products (mobile phones, ecological chain) and channels ( Xiaomi Home , Youpin, etc.).

Of course, the reason why Xiaomi can operate in this way has a lot to do with the CEO’s resources - Lei Jun used to be an angel investor .

2) Costco: As a warehouse hypermarket, although Costco has a large number of SKUs, it does not make a profit by the price difference of these products.

In this case, after deducting various costs, there is no profit.

Therefore, it needs to find a new profit point - charging "membership fees". (In 2014, Costco's net profit was 2 billion, merchandise profit was 1 billion, and membership fees were 2.4 billion - after deducting various costs, its net profit was basically the same as membership fees)

Here is a brief introduction to its membership system:

3) MINISO: According to Ye Guofu himself, MINISO relies on “winning by quantity” – low gross margin and high sales volume.

In fact, it is not that simple...

MINISO adopts the "direct sales + franchise" model - it has both direct sales stores for "advertising" and franchise stores that are truly used for profit.

According to the official website of MINISO: Investors who join MINISO need to pay a brand usage fee of 150,000 yuan, a product deposit of 750,000 yuan, and a decoration advance payment for each store, and they also have to find the store themselves.

But no matter what, this is its unique model, unlike MUJI , which can only operate directly and make profits solely by selling products.

At that time, mainstream large supermarkets all adopted a "decentralized operation" strategy - each store had the right to operate independently and could choose different suppliers and logistics systems according to local needs.

Walmart adopts the "overall management" strategy - through unified coordination, it not only enhances the overall logistics efficiency, but also enhances the bargaining power with upstream manufacturers, thereby significantly reducing costs. (PS, this is very similar to MINISO)

Of course, Xiaomi and Southwest Airlines are also typical "cost control experts".

Xiaomi naturally didn't say anything more.

The case of Southwest Airlines has been mentioned before - it only uses a single aircraft model, only operates short-haul routes, does not provide redundant services, and even uses the cheapest, most reusable materials to make its materials, etc...

As the saying goes, “You get what you pay for.”

And then there is: "If things are not valuable, why are people valuable?"

In fact, this reflects people’s psychological dependence on high prices - they don’t want to buy cheap things, so as not to be cheated by inferior products; they don’t want to buy cheap things, so as not to be despised.

This is the consumption concept of most people towards most products.

If low-priced products want to be successful, they must find ways to circumvent/overcome these concepts.

Generally speaking, there are two types of methods:

1) Tell others “Why my product is so cheap” : For example, Xiaomi said at the time that it saved a lot of money because it had no offline stores, no dealers, and no advertising - thus making more people believe that although its price is low, its quality is still good.

2) Advocate new consumption concepts : For example, Taiwan’s PX Mart, in order to encourage more people to buy cheap goods, launched slogans such as “The money saved from PX Mart can help you do other more meaningful things.”

(PS, a study on consumption upgrades in the United States found that in the process of consumption upgrades among the American middle class, there is a phenomenon of "consumption downgrade" in other categories - some very cheap brands are more popular.)

Yes, the essence of consumption upgrading is the upgrading of consumption "concepts", not just selling products at a higher price...

The so-called "concept upgrade" means that consumers are more "clear" than before about where they should spend more and where they should spend less.

So at that time, PX Mart, which was a seriously outdated brand, suddenly became popular.

However, this approach of “advocating new ideas” is generally more suitable for categories that are already well known to the public (such as food and department stores), and is less suitable for relatively new categories and markets.

For example, Meizu tried to persuade people not to spend money on mobile phones, but to do other more "meaningful" things (such as traveling and buying gaming equipment).

One of the reasons is that most young people still cannot give up their obsession with "good mobile phones" - they haven't had enough fun with them yet...

• Channel advantage - having channel resources that competitors can hardly reach;
• Large transaction volume - more categories than competitors, small profits but quick turnover;
• Profit model - not only relying on the price difference of selling goods to make profits;
• Cost advantage - the overall cost should be significantly lower than that of competing products;
• Consumption concept - overcoming/avoiding people’s psychological dependence on high prices.

We have said before: "The low-price strategy is not something that most startup brands are capable of doing, and it is quite difficult."

The so-called difficulty is mainly reflected in the first four aspects.

As a start-up brand (especially a startup project), you often don’t even know how deep the industry is; you haven’t even succeeded in making a single product of the same type; and you can only count the number of suppliers you’ve dealt with on your fingers…

Who has channel resources that competitors cannot reach? Who dares to offer more SKUs than their competitors right from the start? Who can come up with a brand new profit model right from the start? Who else can guarantee super low costs?

There are indeed such people, but they are a minority after all. (If you are, congratulations)

For most start-up brands, the high-price strategy is relatively easy to succeed, especially in today's world where resources flow very quickly. Although it will be limited by scale (small) at the beginning, as long as the first wave finds that it can make money, it will soon be possible to do the second and third waves...

If you find that you cannot make money, immediately change your approach - fight if you can win, run if you can't. This is the "guerrilla warfare" that most companies should adopt.

Instead of spending money to grab market share, and then dragging users of low quality to think about "how to make profits", and finally trying to hold on to such a large piece of market...

But in my opinion, the simpler, the more reliable. Once there are too many variable factors, an uncontrollable situation will inevitably arise. If we have to use a fashionable word to express it, it would be "entropy."

Innovation in business models is certainly valuable. However, it is precisely because it is difficult that it is valuable - it is not the first choice for most companies. (The business model of Huadianshi is great, but other flower shops don’t have the resources to follow suit.)

Most companies are only familiar with their own products, so they just need to focus on value exchange of the products themselves. (Of course, if you suddenly have a good idea or opportunity, it’s worth a try)

Everyone loves to listen to and tell legendary business stories, but the reason why legends are legendary is because they have a low probability of happening - when something that should not have succeeded is successfully done, it becomes a legend. (For example, Xiaomi’s success story is not universally relevant. Its products are not used primarily for profit, but for layout and valuation, which is beyond the reach of most people.)

Speaking of this, I suddenly remembered an article I read a few years ago, which said that a hot pot restaurant owner claimed that eating hot pot in his restaurant would be free in the future - he did not make money by selling hot pot, but by "community" or "fans" or something like that...

I don’t know if Haidilao panicked after seeing the news, and I don’t know how the hotpot restaurant is doing now…