The price quality approach of positioning uses the relation between price and quality such that it optimally prices a product according to the quality of the product to keep the product higher in the customers mind. Pricing does not need to be high for higher positioning. For example – Walmart has positioned itself in the minds of its customer using low pricing rather than high pricing.
Lets review the basics. What is positioning? We know that positioning is related to what perception a customer forms in his mind for your product. Both pricing and quality play a crucial role in forming the right perception in the minds of customers – internal as well as external.
Lets take an example. You are offered an option to buy clothes. You might buy a jeans worth 1500 rs or you may buy 3 jeans worth the same amount of money. Immediately what comes in your mind is that the 3 jeans will be of lesser quality and therefore you might not get value for money. That’s the price quality approach of positioning for you.
Several Brands and products use the price quality approach. They will keep the pricing higher to attract only the cream customers and keep themselves exclusive. This high pricing also ensures that the product is placed as a quality product in customers mind. However, price quality approach can be a double edged sword. Every sector has lower priced product and thus entry in the sector with penetration pricing becomes easier.
The best example of price – quality approach is premium automobile brands like BMW and Mercedes. They maintain their quality such that their customers are ready to give the highest pricing for the cars. Thus the quality and the pricing positions the car to the topmost segment. Retail chains like walmart and others position themselves mainly through pricing. Whereas consumer durables mainly position themselves through a combination of pricing and quality.
Summary – The price quality approach is an excellent positioning tool. However it needs to be used with care as changes in the market can affect the pricing strategy and thereby the margins of a company.