The strategy of collecting the cream – what is it?

In many companies, there is confusion about who actually has the final say in setting prices and ensuring their profitability. Often the decision-making process blurs when price negotiations with customers become an arena of multiple voices and interests. Such a situation is a recipe for failure for the company. Negotiating prices without a defined product value turns loyal customers into difficult business partners. However, there is a strategy that can reverse this trend – the strategy of collecting the cream. Collecting “the cream” is a strategic business approach that is based on achieving high margins with few sales.

Pricing policy

Implementing a pricing policy based on the true value of the product is a key element of success, however, this is not possible if the customer is not aware of or appreciates the value of the product offered. Many companies make the fundamental mistake of assuming that a customer who encounters a product for the first time will automatically understand its value, even if they are not given adequate information about it. Research confirms that a customer unaware of a product’s value generally assigns it a lower value than it actually has. To effectively communicate the value of a product, one can proceed as follows:

1. Discover Relevant Customer Values: The first step is to identify the key values that are relevant to the customer, and that can be associated with the product offered.
2. Creating Product Bundles: Next, develop product bundles encompassing these values, creating comprehensive customer solutions.
3. Explaining Customer Values: The next step is to clearly explain to the customer the benefits of the product, both tangible and intangible.
4. Convincing the Customer of the Value: It is important to convince the customer that the value offered is worth the price, so present the benefits of the product to the customer in a convincing manner.
5. Providing Value with Fences and Metrics: It is important to make it easy for the customer to understand what the product offers and what benefits they can receive.

Unfortunately, many companies fail to find profitable market segments using the wrong selection criteria. They often focus on the largest or fastest-growing segments instead of concentrating on those where they can gain a real competitive advantage. A key element in the successful selection of market segments is assigning appropriate product prices that take into account the characteristics of the segment.

In the process of proper pricing, specific characteristics are important to keep in mind:

1. Competent Pricing Committee: The deciding vote on pricing should belong to a team of competent professionals who not only understand all the nuances of the market but also have knowledge of effective pricing strategies.
2. Segmentation and Precise Pricing: The first step is to identify the various market segments and then determine the appropriate prices and strategies for each segment. For example, tickets for morning events may have different prices and terms than those for evening performances.
3. Product bundles: For different product groups, the committee should develop different sets of derivative products that differ significantly in economic value to meet customers’ diverse needs.
4. Setting Fixed Prices and Discount Rules: Base prices and discount rules should be clearly defined for each market segment, eliminating the need for vendors to negotiate prices.
5. The Vendor’s Role in Meeting Customer Needs: Vendors should first and foremost be advisors, presenting customers with a wide range of derivative products. The customer has the right to choose based on his needs and expectations, and it is the salesperson’s job to understand and meet them as best as possible.

By maintaining these key elements, a company can effectively manage the pricing process while ensuring customer satisfaction and achieving market success.

Collecting Strategy: A Recipe for Success

In this strategy, product prices, known as “cream” prices, are usually higher than what the average customer is willing to pay for the product. Consequently, this tactic is mainly used in elite market segments where customers are not very price-sensitive.

Collecting “cream” concerns the pricing and promotion of new product launches. It can be used when the company does not have to fear competition and potential customers are not very sensitive to price changes, assuming that the market is limited.

The strategy can be used when the company does not have to fear competition and potential customers are not very sensitive to price changes, assuming that the market is limited.

The essence of this strategy is to set inflated prices in the short term. Products that tend to be novelties or versions that are the most sought-after of the available options are priced this way. These products have a relative competitive advantage because demand for them, at least in the initial stages, is relatively inelastic. However, the short-term assumptions associated with this strategy stem from the fact that in the long run, competitors may launch similar or identical products, which in turn may reduce the advantage gained from higher product prices.

When introducing a new product to the market, price and promotion play an important role. Through promotion, consumers can learn about the product’s benefits and become familiar with it, leading to increased demand. Promotion is aimed at showing customers the existence of a product and convincing them that it was created specifically for them, perfectly meeting their needs. During the product launch phase, the promotion also plays an important role in providing customer feedback, making correcting any product defects possible. Therefore, promotion costs are usually the highest during this phase in the entire product life cycle.

Customers resistant to price

Price-resistant customers, and thus those who can be considered potential beneficiaries of “cream” collection strategies, can often be identified as belonging to one of the following groups, which may overlap in part:

1. Persons who Value Product Uniqueness: These are customers who place great value on a product’s distinguishing features. Examples include buyers of prestige brands, enthusiasts of various fields (e.g., sports), collectors (e.g., works of art), or connoisseurs (e.g., quality spirits). For them, the experience and uniqueness of the product are important, and price is often secondary.
2. People with Company Funds: Employees who take business trips or those who use company funds may be less inclined to control spending strictly. For them, it is more important to provide themselves or their customers with the best possible products without paying too much attention to price.
3. Image-Dependent Persons: Price becomes secondary for those who care about prestige or create a certain impression. Examples include business representatives who lavish luxury dinners on their clients or consultants who must present themselves well in front of wealthy clients. For them, choosing a product can be a way to emphasize their social or financial standing.
4. Gift Buyers: Gift-seeking clients are often not as price-sensitive, especially if they expect tangible benefits such as gratitude or admiration. For them, the symbolic value of a gift is more important than its price.

All of these groups can be attractive targets for a strategy of collecting “cream” because price is not a decisive factor in their purchasing decisions. For such customers, other factors, such as prestige, uniqueness of the product, or the experience associated with it, are more important.

Summary

To successfully execute a strategy of collecting “cream”, a company must undertake careful planning, be flexible in adapting to changing market conditions, and continuously improve its operations in response to customer needs and competitor actions. Regular analysis of market data, customer feedback and competitor actions can help identify areas for improvement and optimize strategy. A strategy of collecting “cream” can bring companies many benefits, but at the same time, it requires careful planning, flexibility and continuous improvement of operations to succeed in the market. Companies that successfully implement this strategy can increase profitability, build brand prestige and effectively use a focused marketing strategy to attract and retain loyal customers.