One of the five drivers of customer brand insistence is “value.” While value is comprised of more than just price (benefit bundle, perceived quality, etc.), it’s important to understand pricing to deliver a strong brand value. Following are some concepts that you may find useful as you determine pricing for your brand’s products and services.
Reference Prices
People often compare a product’s price to a “reference price” that they maintain in their minds for the product or product category in question. A “reference price” is the price that people expect or deem to be reasonable for a certain type of product. Several factors affect reference prices:
•Memory of past prices
•Frame of reference (compared to competitive prices, pre-sale prices, manufacturer’s suggested prices, channel-specific prices, marked prices before discounts, substitute product prices, etc.)
o Creating the most advantageous (and believable) competitive frame of reference is essential to achieving a price premium
•Prices of other products on the same shelf, in the same catalog, or in the same product line
o The addition of a more premium priced product typically increases sales of other lower-priced products in the same product line
•The way the price is presented – for instance, absolute number versus per quart, per pound, per hour of use, per application, for the result achieved, etc.; also four simple payments of $69.95 versus $279.80; for automobiles: total purchase price versus monthly loan payment versus monthly lease payment
•The order in which people see a range of prices – like when a realtor uses the trick of showing the poorest value house first.
Price Sensitivity
It is extremely important to be able to estimate the impact of price changes on sales and profits. That is, it is important to know how a price change will impact consumer response, competitive response, and unit volume. Many business people erroneously believe that a price increase is the most cost-effective revenue generating marketing tactic. I have heard generally intelligent business people share their excitement about how a price increase will drop to the “bottom line” dollar-for-dollar. Most of the time, this is simply not true.
Branding Strategy Insider helps marketing oriented leaders and professionals like you build strong brands. To that end we’re happy to answer your marketing questions. Today we hear from Nafisa, a Vice President of Marketing in Khartoum, Sudan who writes…
“I have a brand architecture question about creating the link between a sub brand and the holding company or group. What is the best or proper way to show that link in the logo, for example:
(sub brand) from (parent brand) or (sub brand) part of (parent brand) group
The objective is to clearly establish the relationship between the two brands while highlighting the parent brand as the holding company. Your advice is highly appreciated.”
Thank you for your question Nafisa. There is no one preferred way for a brand to be endorsed by its holding company or group. While many brands use the following phrases, there are notable exceptions: “A division of [parent brand],” “A subsidiary of [parent brand],” or “A [parent brand] company.” For instance Shoebox chose “A tiny little division of Hallmark” to imply a renegade or “skunk works” group loosely affiliated with Hallmark Cards.
They did this because Shoebox’s humor was much more edgy than the humor typically found on Hallmark cards at the time. When Raytheon bought the “Beechcraft” and “Hawker” aircraft brands (it subsequently sold both brands), it endorsed them with “Raytheon Aircraft Company.” I like this approach because it clarifies the exact nature of the relationship between the brands and what type of company the endorsed brands represent.
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People have branded their livestock to indicate ownership since ancient times. Artisans and other merchants put their marks on their wares to indicate source, and with that, a level of quality assurance. After that, Proctor & Gamble (P&G) originated the brand management concept. Other consumer packaged goods companies such as Kraft Foods, Unilever and Nestle developed and refined the brand management discipline and job function. In the 1990s, companies began to grasp the value of brands as assets and started managing corporate brands at senior levels in their organizations. Then the concept of brands and brand management migrated from products and companies to virtually everything – universities, museums, hospitals, musical groups, restaurants, trade associations, governmental agencies, municipalities, geographic regions, countries, religions, individual churches and even individuals.
At first, brands were more aligned with things (products and organizations). Then they were applied to services and experiences. After that, they were more about concepts, ideas and images. Increasingly, they focus on values and access.
Brands have expanded from their focus on products to organizations to virtually everything (as noted above) leading to a completely branded culture. With the increased flux in social institutions from religions and political parties to nation states, it is up to the individual to craft his own identity. He is increasingly using brands to reinforce and signal his social values, lifestyle, culture and identity. So now brands are helping to create communities based on shared values.
At the least effective level, brands claim unique attributes, functions or features. Taking it up a notch, brands claim unique benefits. They may claim functional benefits, or better yet, emotional, experiential or self-expressive benefits. However, more and more, brands are standing for something. They share a set of values with their customers. So today, the most powerful brands create communities with their customers based on shared values, culture and sense of identity.
Sponsored By: The Brand Positioning Workshop
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Featuring John Sculley May 16-17, 2013 in San Diego, California
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Perhaps the most important brand management activity is positioning the brand properly. A well-positioned brand addresses important consumer benefits in unique and compelling ways. It also creates an emotional connection to the consumer. Finally, it provides flexibility for future growth (beyond current product and service categories).
The first step in positioning a brand is in-depth research. The research should provide you with the following:
You should identify functional, emotional, experiential and self-expressive consumer benefits. Of those benefits, you should understand which are “cost of entry benefits” and which are “differentiating benefits.”
In-depth qualitative research, including laddering, projective and ethnographic techniques may be required to achieve the desired insight.
Some would argue that a brand could and should only own one key benefit in the consumer’s mind (Al Reis) while others would claim that creating the right mix of unique brand benefits creates a more powerful marketplace position (Martin Callé’s Brand Dimensioning ®).
Regardless, the ideal benefit to claim has the following three qualities: (1) it is extremely important to the target consumer, (2) your organization is uniquely suited to delivering it and (3) competitors are not adequately addressing it.
We believe there are four key components to brand positioning:
Together, these components define the brand. They are codified in a simple format that provides direction not only for marketing communication and the brand identity standards and systems, but also for all of the organization’s activities.
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One of the reasons I love marketing is because it requires both sides of the brain to be a truly skilled marketer. While some highly intuitive leaders have achieved great success from their intuition alone and while some advertising agency “creatives” have created brilliant campaigns without the benefit of research, most truly gifted marketers know how and when to use each side of their brain.
For instance, it is important to create “out-of-the-box” stimulus to present to customers in research, but it is also important to know which research technique to use and in what order questions should be asked to minimize biasing. It is even more important to know whether the research was constructed in a valid way that can be relied upon. If you are a marketing researcher, CRM expert, direct marketer or product manager, analytical skills and metrics are very important. If you are developing advertising campaigns, you had better have a very active right brain. The same is true if you are developing out-of-the-box publicity approaches.
One must know when to listen to research results and when to ignore them. And one must be able to understand why qualitative research findings might differ from quantitative research findings and what to do about it. Sometimes analytics will indicate a particular market segment, product benefit, pricing strategy or merchandising strategy can take your brand to the next level. But it is equally as important to be able to get deep inside your customer’s head to understand his or her deepest values, attitudes and motivations.
So, what skills are important for a top marketer? A highly skilled marketer should possess each of these skill sets:
This is why I think of marketing as a “gestalt.” It is also why mediocre marketers outnumber marketers who are operating at a high level of functioning by a wide margin. Finally, it is why it is difficult for someone who is not a marketer to gauge the competence of any given marketer. In the end, it is this constant back-and-forth between right-brain and left-brain that makes marketing so fresh and interesting.
Sponsored by: The Brand Positioning Workshop
Join us at The Un-Conference: 360° of Brand Strategy for a Changing World
Featuring John Sculley May 16-17, 2013 in San Diego, California
A unique, competitive-learning workshop limited to 100 participants
As in the marketplace — some will win, some will lose, All will learn
FREE Publications And Resources For Marketers
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Branding Strategy Insider helps marketing oriented leaders and professionals build strong brands. We focus on sharing thought provoking expertise that promotes an elevated conversation on the discipline of branding and fosters community among marketers. BSI is a service of The Blake Project, a leading brand consultancy based in the United States.
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