paul_harrison / PixabayAll too often business owners find themselves trapped into thinking that the price of their product or service is what matters most. But that’s not true.

People often spend money and buy products or services without consideration for price, and it is important for us to understand why. Fundamentally, it is because the product or service they are buying offers something more to the consumer than simply a competitive price. The business has positioned their product or service to live well UP the price ladder, far from the bottom, where price alone matters in making a buying decision.

If you’re not familiar with the Price Ladder, it is an important concept to know and understand. How you position your products and services matter, especially if you do not want to compete on price alone. Allow me to use the purchase of a phone to illustrate how the price ladder works.


The bottom rung of the ladder is Price alone. This is where products and services are sold as a commodity. Nothing differentiates them from their competition. It is price alone that determines whether a customer buys product A or product B. At this point on the ladder, it is essential that your product is very low cost to build because there is little upside on the price you can charge when selling it.

Using our phone as an example, these would be what are known as “burner” or disposable phones. These are pay-as-you-go devices that are very inexpensive and only allow you to make and receive calls. There are no frills, no special features, just a phone connection for a fee.


The next rung up the ladder is a Package. This is where a product is bundled with a service in an attempt to disguise price. This allows for some differentiation in that the packaged product/service can be unique from the competition. Packaging or bundling is a way to get more than just rock bottom price for what you have to offer. While not an ideal place to be, offering a package or bundled product does provide some level of protection and stability for many products and services.

As this applies to our phone, this may be a low feature phone device that comes packaged with a very low monthly connection fee. This phone is likely a flip phone that simply makes and received calls but has the added benefit of a low cost usage plan that allows the buyer to have the convenience of a phone but without paying for all the bells and whistles.


The third rung on the ladder is where there is an Experience. What the customer is buying is something more than just the product or service but the “experience” or “feelings” that are unique to how you deliver your product or service. This requires some thoughtful planning and deliberate customer interactions, but can separate your product or service from the “me to” crowd that is selling only based on price or packaged offerings.

Our phone at this level is probably a “smart” phone meaning it has additional features such as a built in camera, perhaps web access and other features that allow you to fully function and “play” with your device. It comes bundled with a service package but is modestly priced and not fully feature-rich.


Higher yet on the ladder is where there is a Transformation as a result of the purchase. This is where the product or service you are selling actually “changes” something when it gets used. It could be a physical change or a mental change, but something happens as a result of using your product of service. In these situations, a customer who desires that particular change is not focused on price, but on getting the desired transformation.

Our phone at this level is likely the current version of an iPhone, where the device is feature-rich and owning it “makes a statement” that the owner is cool, relevant and trendy. The phone itself is so packed with features that the owner is constantly learning and enjoying new functionality well after the initial purchase.

Guaranteed Transformation or Experience

The top rung on the price ladder is where there is a Guaranteed Transformation or Experience. The furthest point from price is where you can GUARANTEE that the buyer will have an experience or have a transformation as a result of using your particular product or service.

The phone on the top rung of the ladder likely is a part of a virtual reality gaming system where there is an “out-of-this-world” experience associated with owning it. Just the thought of “virtual reality” makes prospective buyers want to buy the device – no matter what the cost. It is something that the buyer wants to show off to others, because it is something that only very few will purchase or experience.

So how about you? Where is your product of service positioned? Are you struggling trying to compete on price alone. Shaving your margins to make ends meet? Why not step up the Price Ladder?

Don’t know how? Don’t think it can be done in your industry? Let me assure you, it CAN be done in any industry. It may require you to re-think your business and re-position your customer service expectations. Give it a try – you’ll enjoy the results!