Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. Youa€™ll be joining the 130,000 Smart Insights members from 80 countries who trust our advice to Plan, Manage and Optimize their marketing. This model relating pricing for a product or service to the quality delivered may not be as familiar as some other marketing models we have covered in our classic marketing model series, although it was created by author Philip Kotler.
You can use the Price - Quality Strategy Model to review competitorsa€™ products and services and review their strategies. This is the High value strategy, where a higher quality product is provided and more expensive components are used.
This is a similar low price strategy involving setting a low initial price to capture market share initially, then when the market grows and costs decrease, costs are reduced further. When they introduce a new product, such as fans and heaters, these follow the same premium pricing strategy.
The objective was for maximum profit, so when Apple iPhones were the first smartphone in the marketplace they could set high prices before other players entered.

The objective was product-quality leadership which was followed by Dyson Vacuum cleaners,A They design and manufacture quality products, based on years of research, testing and significant investment into patents.
Waitrose's objective was more than survival but to recapture customers, or stop them switching. For maximum sales growth, Subway sandwiches offer a lower price lunchtime snack and now have more outlets across the UK than MacDonald.
If youa€™re developing products and changing the quality, perhaps saving money and reducing one element of the process, review the price too, or you could fall into False Economy or Rip-Off strategies. In our free, illustrated guide to 15 classic planning models diagrams we explain what they are and give examples of why and how to apply them in business. Typically, there are few competitors and a strong brand driving demand, so a higher price can be set.
The cost-plus pricing model has long gone as we expect goods and services to be appropriately priced. Their Essential range was launched as the UK hit the recession to re-capture shoppers buying from discount stores, so they reduced the prices of their basic food.

The aim is to help companies position their products or services relative to competitors as perceived by the market, and consider their pricing strategy accordingly.
One marquee hire company I worked with offered high quality service and a very low price which was a superb-value strategy. Every year, we invest half our profits back into harnessing them at our research and development laboratory in Wiltshire. There are 650 engineers and scientists based there.' They share their story and a€?behind the scenesa€™ details, such as the hammer test (below), to justify their premium pricing strategy.
Research showed that potential customers were suspicious and didna€™t place orders with them as they thought the product quality was low because the price was low.

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