chapter 5

chapter 5 · a concept of the future 147result for many companies in an impressive profit improvement. Alternatively,further price erosion may result in higher turnover and attract more customers,but is very likely to reduce the already slim profits even more. Upon closer inspection,marketers are often amazed to see little or no correlation in a two-dimensionalscatter diagram that plots account size versus realised price levels. 81Remember our basic premise: the objective of marketing is not only to createvalue for the customer, but also value for the company:Rivalry is especially destructive to profitability if it gravitates solely to price, because price competitiontransfers profits directly from an industry to its customers. 82There are viable alternatives to a free fall in price. Marketers and sales people mustlearn to sell value, not price. They must become true value merchants. 83 ‘Qualityis remembered, long after the price is forgotten’, is the Gucci family slogan. Oneinternational industrial distributor decided to track prices more strictly, whilstat the same time training their sales people to adopt a value merchant approach.The marketing director acknowledged that asking the sales people to workon tight margins without educating them and giving them the necessary toolswould only increase frustration. ‘We have many good people,’ he said, ‘many ofthem with twenty years of experience. One year of experience, twenty times over.’The training fostered dramatic improvements. In the new situation, 56% of unitsales were realised within the targeted price bandwidth (up from 26%); only 27%were below the target price (down from 46%) and 17% were above the target prices(down from 28%). Interestingly, while loss-making price-setting occurred lessoften, the frequency of compensating ‘rip-off’ prices decreased as well.A company can also bundle products and services, in order to limit a customer’sunderstanding of the matter. 84 Manufacturers of luxury cars such asMercedes, bmw or Audi present a model with standard equipment, which theythen fill with attractive and expensive options. There is also latent bundling.Companies minimise acquisition costs, but charge heavily for the cost-to-use(e.g., inkjet printers and cartridges). Bundling sounds easy but requires an indepthintegration of the supply chain. In addition, competitors and legislativepowers are continuously on the look-out for initiatives that disturb competition.The European Court required Microsoft to ‘unbundle’ its media player fromthe Windows operating system. Where large companies bundle their products,other players apparently bundle legal forces.© rudy moenaert, henry robben, peter gouw, lannoocampus • marketing strategy & organization