The first reaction of most people is that the price has to be lowered (in Fig. 4.7b the market position of the bio-product has to shift to the left). Fig.4.7b shows, however, that there is an alternative: increase the perceived quality ratio, either by increasing the quality or by influencing the perception (change the consumer preferences).
We will analyze these options for a market strategy in Step 3.
Step 3. Assessment of the strategic consequences
In the above example, there are three options to bring the product above the fair price line:
1. lower the price by at least 5% by lowering the costs of production and distribution
2. increase the quality of the product
3. change the perception of ‘what is important’.
The first option seems simple, but is often hard to realize in practice. When the sales volume is higher, distribution costs can be lower, but when a lower price doesn’t generate the required extra volume, this option doesn’t work. In general one should take care that savings in production and distribution may not harm the product quality (otherwise one is acting “pound foolish – penny wise”). Savings are only allowed in aspects which are not important to the customers.