In my article Enjoy the movie, but don’t take away the wrong lesson, I argued Christopher Robin’s proposal to increase sales by cutting prices across the board was a dangerous move.
If I was one of the directors of Winslow Luggage, this is how I would respond to Christopher Robin’s proposal.
“We make and sell luxury luggage aimed at upper-class buyers who care about the quality and reputation of what they purchase. However, sales to this market segment aren’t enough to sustain our company.
One way to increase our sales and profits is to sell luggage to buyers who are more price sensitive. However, we don’t want to cannibalize sales to our upper-class customers or ruin the luxury image of our product.
The question then becomes: how can we sell more luggage to price-sensitive buyers without hurting sales to our quality-sensitive customers?
The answer is to create and sell a more economical version of our luxury product line.
In doing so, we should:
[1.] Use lower quality materials.
[2.] Use a different brand name for this new line.
[3.] Sell it through different distribution channels.
These actions will protect the cachet of our premium brand. And that will discourage our high-end customers from trading down to our economy brand. As a result, we can increase sales to price-sensitive buyers without hurting sales to our quality-sensitive customers.”
How can you apply this story to your own business? Don’t assume you have to cut price for all buyers in order to sell more of your product or service. Look for ways to cut price for just some buyers — those not willing to pay more. Offering a lower-priced, lower-quality version of your product is one way to do this.