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Brand Value & Pricing

A Brand That Discounts Or A Discount Brand?

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This article in Time on how to get the most out of Apple is a reminder that there is a noticeable difference psychologically between a brand that discounts (even if it’s only occasionally) and a discount brand. Apple does discount – but for selected parts of its range or for specific reasons: change-over on a model, for example. The most important thing is that they don’t give that impression.

Apple’s approach is to treat price as a reliable indicator of value. By not overtly or uniformly discounting, they maintain the value of the brand by making products that excite customers and they continue to charge for them at that level of value until there is a good reason not to do so. In other words, Apple’s ethos is never discount an Apple product while people are most excited about it – no matter whether that is days or years after it was first released.

But while Apple have worked hard to position themselves as a full-price, full value brand, that’s not always the case. As the article points out, “With the exception of the iPhone and the iPad, Apple products are typically discounted within eight days of first hitting the market …” Surprised? I was. But “As for the most in-demand Apple products—iPad and iPhone—there doesn’t seem to be much financial incentive to delay your gratification. The price for either is unlikely to change by waiting a few days, or even a few months … discounts have basically been non-existent until it’s time for Apple to introduce the latest new-new model.”

Even when Apple discounts, the wider motivation seems to be to give customers entry points to the Apple universe. By lowering the price of a laptop, they invite customers into their world, knowing that they will then be pre-disposed to go Apple all the way. At least that’s my theory, and it’s one I think extends to the pricing of their new operating system. Lower the barriers to entry to get people involved, but retain the pricing and the aspiration on the iconic products that people continue to be excited by and around which the world of Apple pivots.

Such an approach seems worlds away from the volume-driven approach taken by discount brands that advertise serial sales to drive up their top line. But as I’ve said many times before, there’s nothing wrong with that model if you’ve built your business and your brand around it. Smart discount brands rely on a very different perception of price though than a brand like Apple. Whereas Apple sees price as proof of value, astute discount brands treat price as a pain point. And they rely on easing perceived pain in order to generate interest. They rely on you paying less in one area but more in others to help balance the load. Just like with Apple, it’s a feel-good balancing act. The difference is that one brand makes itself known for discounting and the other doesn’t.

One truth straddles both approaches. No matter how you choose to use discounting, to use it effectively you need to hard-wire it into your ethos not just your pricing. You need to be very clear too about how it works to protect your margins store-wide.

You might like to ponder that the next time you see a sign advertising “30% off selected lines”. Which lines have been selected…and more importantly, why?

Contributed to Branding Strategy Insider by: Mark Di Somma, Brand Consultant

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2 Comments

Mash Bonigala
Twitter:
on May 21st, 2013 said

Nice article Mark. I am not really surprised with the discount tactics of Apple. Even major luxury brands such as Louis Vuitton or Prada – which have a NO DISCOUNT policy (yes, they do shout about it) use discounting methods in overseas markets such as China and other BRIC countries.

In my opinion, a brand should stick to its policies, no matter where.

markdisomma
Twitter:
on May 21st, 2013 said

Thanks Mash – the key I think we agree is to have a policy and not just a reaction strategy that is pulled out when things get desperate. Having said that, of course, JC Penney also shows that when you change your policy, customers can easily and quickly become confused.

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