Low introductory pricing endangers clear product and brand outlines.

In the past, P&G has set standards, for instance in the areas of innovation and quality. These standards were so high that the company was also very successful in the single national markets in Europe.

A change in corporate management, a loss in revenue, an environment which has gotten more difficult due to the increasing power of retail, and immediately the new front man believe to be able to achieve growth through cheaper introductory prices. Maybe even displace private labels of the retailers or at least slow down their development. If P&G were not P&G we would not need to be worried about the catastrophe of Cincinnati. P&G is the largest consumer goods manufacturer in the world. The whole world looks upon this company. P&G has been for decades, benchmark for whole generations of marketing specialists and rightfully so. P&G has lead by example and it is most likely going to find many quick imitators anywhere around the globe. All the more it is important not just to impersonate but to make sure with the utmost diligence to realize the possible downfalls. A lower price and the inevitably following reduction in product quality facilitate figures which seem to be very successful. But in the end the consumer receives a lot less performance for his or her money. Those responsible for finances at P&G and those companies who experience such a development, will only feel joy for a relatively short period of time, that they were able to show market strategists just how they influenced market development with their figures.

From our point of view, introductory prices are no promoters of business in difficult times. Because, if that was the case, the question would automatically come to mind, if prices are raised in good times, if they aren’t actually inflated? We are convinced that in the future it is no longer going to be possible to simply ‘make’ prices. The times of highly valued price finding theories and their successful implementation are over.

More than ever it is about avowing oneself to a comprehensible price-/performance principle and to sustain it as basis of the pricing policy. Products do not need to be cheaper, they need to be worth the money.

Introductory prices used to be standard practice in the automotive industry. Today we are experiencing the exact opposite. The “all inclusive price” is the preferred customer choice.

We have to practice a fair give and take. It is justifiable, yes even necessary that in ‘taking’ the costs are contained, which are incurred when new products are created. Who should pay it, if not the consumer? Consumers understand and accept this.

We experience this in all markets, where money for innovation is lacking the descent of a company is programmed. And the old rule where the bulk always brings a profit, is no longer applicable for quite some time now. And this is one other thing we can put in writing, the cheap price does not necessarily entice to additional consumption.

Low introductory prices endanger the product and brand profile. Consumers act from a merely inconceivable pool of knowledge. What the ‚mass of people‘ does and thinks is becoming less and less important for the single person. The consumer is looking for individuality. And he or she expects a clear-cut product and brand profile.

We take the liberty of pointing out here, that P&G is going to change its adopted course quickly or they will experience a crisis. A crisis where not only the turnover but also the earnings drop critically. Our recommendation is not to follow P&G and to treat the topic introductory prices with reserve.

In closing I would like to point out that it is very unusual for us in the presentation of our thoughts to name company names. But P&G is not only a company. P&G has written market history in the past and it has set the standards for a long time. It is not possible to write this story without naming names. If ‘just anybody’ tried to find a new business source through low introductory prices, the results would remain the business of this one company. If P&G changes course, this affects the whole world of consumer goods marketing.

The year 2010 is seen by many as a difficult year. National debt has consequences the citizens, meaning the consumers, have to bear. The magical cure ‘growth’ is not going to be able to change this much. Best case is that the mass of people is not going to experience existential hardship. Overall we are optimistic and yet we say, that he, who wants to be successful in the future has to offer the better product. The price itself only plays a conditional role. What matters is to meet the expectations of the consumer. And this is something new in our times. Customers today and even more so in the future know what they expect from a product, because this is an evolutionary process.