Kristine
The so-called Four Ps (Product, Place, Price, and Promotion) are often touted as the main factors in creating a successful marketing campaign. Knowing which product to promote, where to advertise, and how to market it requires businesses to thoroughly analyze consumer behaviors, determine who is most likely to buy the product, and promote it where the greatest number of people will see the item. However, even the best product on the market with the most carefully-planned campaign can flop if the price isn’t right.
If you feel like your sales could be affected by a competitor’s lower prices and you’re worried about losing business, don’t be so quick to drop your prices. Instead, try the strategy known as “sandwich marketing.”
How It Works
Sandwich marketing is a fairly recent concept, but it has already been proven to be successful by companies in a wide range of industries. The basic process of sandwich marketing involves:
- Considering consumers outside of your current target market who could benefit from your product.
- Redefining and resegmenting your target market base.
- “Sandwiching” your competitor’s price between two of your own products: one that’s less expensive and one that’s more expensive and offers more features. This can also be used with three of your own products in an effort to drive more customers to purchase the mid-priced item.
This may sound complicated, but a case study on FedEx’s sandwich pricing model shows just how simple it was for the business to employ and how consumers positively reacted to the new changes.
Sandwich Marketing Example: FedEx
Several years ago, the United States Postal Service (USPS) and Federal Express (FedEx) were both trying to create the most appealing “express” or “overnight” delivery options for their customers. When FedEx first introduced its overnight delivery service, which was priced at $12, the USPS responded by releasing Express Mail, which cost $8.95.
Instead of immediately dropping their prices to compete directly with USPS, FedEx implemented the sandwich marketing strategy to appeal to a wider market. They made their Overnight Delivery option much more accurate to inform customers of the date and time their package would arrive. They called this service “Priority” shipping and actually increased their price to $13. Then, FedEx updated their “Standard” option by adding morning and afternoon deliveries, but they still kept the cost down at $9 — virtually identical to the USPS price.
FedEx customers knew that ordering from FedEx would come with additional benefits for them if they chose the more expensive option, and they knew that FedEx had more accurate delivery alerts than USPS, no matter whether they chose Standard or Express shipping. This strategy left the USPS sandwiched in the middle, leaving little room for it to compete.
Tips for Implementing a Successful Sandwich Strategy
If you’re thinking of switching up your current pricing model, carefully consider these three key factors required for a successful campaign:
- A sufficient budget. FedEx was confident that it could keep up with accruing expenses while the company worked on its sandwich marketing process. Cost leadership is an essential component of any major price restructuring process.
- Ability to expand. A company must be able to innovate and deliver exceptional products that will make customers want to purchase their products over a competitor’s items. Having a variety of choices is incredibly valuable for consumers, but only if each product is high-quality.
- Speed to market. Businesses don’t necessarily have to react immediately to a competitor’s low-priced options, but it’s important for them to monitor consumer behaviors and determine how they can transform an idea into a superior product to compete with other retailers.
