Tiered Pricing Model: Why Every Company Should Consider It - Essay Sample

Introduction

In his marketing article, why every company should consider a tiered model, Rafi Mohammed provides a pathway for making the G.B.B pricing model beneficial to business organizations. He acknowledges that for decades organizations have considered customers to be price-sensitive and most probably go for the cheaper alternative they find in the market. He thinks that in the last few years, the market situation has changed; there are those customers who value the quality of the product over the price. He, therefore, reasons that there is no need for the business to adding or subtracting the features of a product to create variable price products bundles to customers with distinct economic perspectives. He states that the Good Better Best pricing approach is a dangerous tool for the business and can hurt the profit of the company. However, the model can be the best tool for increasing sales of the organization. Rafi provides a step by step of reshaping the model in a way that increases the profit of the organization and reduces the risk of making a loss. In this paper, we are going to review the steps of reshaping the G.B.B model based on the evidence he provides in the article.

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Capitalizing on G.B.B model

Rafi argues G.B.B can best benefits the business from the dimensions of offensive business plays in creating and growing business revenue, defensive business plays aiming to counter competitors marketing moves, and behavioral games aimed at attracting the attention of the customer.

Offensive plays, Rafi argues that the companies may draw margin lifts aimed at making their customers spend more like creating an ending version that persuades clients to buy multiple products at the same time. He also reasons that the organization may provide a low-priced alternative products/services that will capture the attention of dormant or economic customers.

Playing psychology games should not only mean getting new customers into business but can also mean providing an alternative understanding to current customers and making them choose from what they desire and value (Mohammed, 2018, p.5).

Brainstorming About Tiers and Features

It is essential to consider how many versions of the products to offer when making the G.B.B pricing structure (Mohammed, 2018, p.6). It is apparent that the conventional model is three, but that does not mean companies with a single product cannot use the approach. Here they should design the product in a way it fits the three model by adding features to create best and subtracting them from the good.

Defining and Pricing Bundles

To separate the brands that will separate good and better products, businesses should look for qualities that have high taste and deep appeal, and those are costly to produce, which means most people would want to have them and value them. Here it means that the product is for the better and not good offering. Therefore those customers who are accustomed to better will go for good, and if they chose otherwise, then they will enjoy the discount (Mohammed, 2018, p.8).

Research

Rafi reasons that companies should conduct research to know whether their products are on target of their customers' needs. Here he reasons that companies should rely on research data from expert insights, general market insight (from customers and other independent thinkers), and conjoint analysis that involves providing customers with two distinct products with distinct features and prices (Mohammed, 2018, p.11).

Conclusion

Rafi provides a framework of utilizing the G.B.B pricing approach to make a maximum profit within the organizations. The procedures provided makes the model quite more comfortable to implement. The evidence and examples he provides are concrete that the model can maximize profit if put in action in a more formative way. His procedures are reasonable and easy to follow for any company to realize good profits from using the model.

Reference

Mohammed, R. (2018). The Good Better Best Approach to Pricing. Harvard Business Review, 96(5), 106-115.