How Businesses Convince You To Pay More

Ever wondered how businesses extract money from you or to put in a better words how businesses convinces you to pay more?

Let me start by asking you a simple question. Among the soaps mentioned, which one would you pay a premium: Lifebuoy, Liril, Dettol or Dove?

I believe any sensible person would answer it as Dove. Before proceeding further think for a moment. Why am I paying a premium for Dove while other soaps too clean our body and keeps us fresh.While the answer to it is a combination of chosen target segment, branding, advertising and marketing. I will explain you about its target segment and its business model.

Target segment is a marketing strategy which involves dividing a broad target market into subsets of customers, business or countries who have or perceived to have, common needs, interests and priorities, and then designing and implementing strategies to target them.

Initially target segment of Dove was cheerful, successful, independent and expressive women but over the years it has evolved which I will explain in short while.So how do you charge a premium or differentiate your product from others? I will explain this using a 3-Step or WOW business model.

Hygiene factor: These are the bare minimum factors which is expected to have in a product. Without these factors product can’t exist. For example: Soap is expected to clean ones body and keep you fresh or a deodorant is expected to smell good. If a product fails to deliver these basic requirements it will soon disappear from the market.

Measurable factors: One shouldn’t position a product on a measurable factor. Say, bikes position themselves as mileage bikes. One should avoid this because advancement in technology or better R&D will result an improvised version.

For example: Few years ago Kawasaki launched a bike which said 91kmpl. Kawasaki positioned it as best in category but failed to grab enough market share as other bikes soon came up with more fuel efficient bikes. Hero Honda passion was one among them which grabbed majority of market share.

WOW factor: A product that positions based on WOW factor has an ability to charge a premium and grab market share (sweet spot for a companyJ). Basically a WOW factor is one which competitors don’t provide, customers need it and you are providing it. Let us see how Dove has done positioned itself using a 3-step model.

ü  Hygiene factor for Dove: Smells good, cleans your body.

ü  WOW factor for Dove: It’s not just a soap, it’s a mild moisturizing bar that is one-fourth moisturizer and is also called a beauty bar.

But as we see what started as a WOW factor for Dove can soon turn to a measurable factor by some other company.

Dove soap according changed its positioning gradually with time and let us see how Dove is positioned today and how it appeals to a wider target segment.

ü  Hygiene factor for Dove: Smells good, cleans your body

ü  Measurable factor for Dove: It’s not just a soap, it’s a mild moisturizing bar that is one-       fourth moisturizer and is also called a beauty bar.

ü  WOW factor for Dove: The brand that celebrates “Real Women” and  Beauty is not an elitist it’s about every women. It’s about removing inhibitions from women and making them more confident. It challenges stereotypes.

So how a company positions itself based on the above factors?

Simple the way it advertises, the way it leverages a brand and the way it reaches out to its customers. Check out Dove advertisements, you will find that advertisements don’t involve any film stars or models, it’s very realistic and has all kinds of women irrespective of colour, weight, age or any factor on which a person discriminates a women.

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