What is a Diaper Worth? An Example of Value and Pricing

When it comes to pricing a product, one principle rises above the rest.  A price is inextricably linked to the value a customer places on that product. If a customer thinks a product is worth the price you’ve set, they will purchase it. And the more they value the product, the higher the price you can set.

A recent article in The Wall Street Journal illustrates this dynamic in crystal clear form. A survey of current trends in the diaper industry show that parents are willing to pay a premium price for diapers when a particular diaper brand helps them care better for their baby.

As the article notes, the demand for diapers has declined in recent years as the U.S. birth rate has declined. This trend creates a challenge and an opportunity for diaper manufacturers such as Kimberly-Clark and Proctor & Gamble Co. It’s significant that both companies have increased their diaper prices successfully without compromising sales of less expensive brands despite this trend. How do they do it? By using innnovation, they provide more value to the parent (customer).

A great example is Kimberly-Clark’s recently released Huggies line, Special Delivery. The diapers are made from plant-based materials and come in sleek black packaging. Some may wonder what parents are willing to pay for a diaper that is gentler to their baby’s skin. The answer: roughly five times the lowest priced diaper on the market!

Additionally, each company continues to roll out various “models” of diapers in both domestic and international markets. This tiered pricing approach not only creates variety for their customers, but it helps the customer see for themselves the value of the product they’re purchasing.

Understanding what a customer values is key to finding the sweet spot when it comes to pricing. Kimberly-Clark and P&G know that parents value the health and comfort of their children, and they’ve capitalized on that knowledge in strategic ways. To read more about this market trend, see the The Wall Street Journal article here.