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Category: Brand Value & Pricing

Brand Value & Pricing

Three Powerful Signals Of Brand Price

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Brands send powerful messages through how they price.

Brands send powerful messages through how they price. Price can be influential in portraying a brand as affordable and ‘on the side of the customer’, or exclusive and just for the few. It can generate responses ranging from the thrill of a bargain to the indignation of a price tag that seems far too steep.

As Martin Bishop explained here, the pricing mechanisms that generate those emotions are increasingly varied, ranging from the ‘lock-them-in’ attraction of unbundled fares for those lured by what it says on the tag to the dynamic pricing of hotels and Uber that re-sets worth based on current demand.

Economists tend to view pricing as an expression of supply and demand, with scarcity increasing price and over-supply pushing prices down. While those dynamics are true for commodities, they don’t always apply to brands. And that’s because brands look beyond market logistics for proof of value. They draw on powerful attributes like perception, aesthetic and story to move the brand’s price beyond what the market would otherwise ask. In fact, through its choice of pricing, a brand sends three important signals to its target markets.

1. Access – price makes a product or service rare or plentiful, regardless of the actual production cost. That, in turn, decides who even looks and who doesn’t.

In keeping with its luxury technology status, Apple prices its products high. In so doing, it not only confines its buyers to those who are passionate about the brand, it also reinforces that Apple products are not for everyone. Walmart does the opposite. By dropping its prices to the point where it now matches online retailers, the brand reinforces the value of buying physically, directly addressing the showrooming issues that plague retailers elsewhere. The clear intention is to lift foot traffic. In this context, price lays out the welcome mat.

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Brand Value & Pricing

How Pricing Impacts Brand Reputation

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How Pricing Impacts Brand Reputation

Most of us are ignorant about prices. Experiments have shown that people will:

  1. Pay more for an item priced at $39 than one priced at $34
  2. Spend more when the dollar sign is removed (1,500 vs. $1,500) and more again if the comma is removed (1500 vs. 1,500)
  3. Think that prices written in a smaller font are less than the same price written in a larger font.
  4. Buy relatively more premium-priced beer than standard-priced beer if a third super-premium beer is added to the choices on offer but buy relatively less premium-priced beer if a cheaper beer is added to the mix
  5. Pay a lot more for any particular brand of beer when it’s being sold in a fancy hotel than if it’s being sold somewhere less fancy like a grocery store

(Good summaries of these and other examples can be found here and here.)

What is a marketer to do when faced with such ignorance? There’s economic reward to be gained by devising pricing and payment strategies that confuse the hapless consumer into handing over more money. But what about the impact on brand reputation?

Unbundling: Unbundling means pricing items or services separately rather than as part of a package. It’s been a lifesaver for the airline industry generating a lot of additional revenue. (Spirit generates almost 40% of its revenue from these non-fare fees.) Consumers hate these fees but pay them anyway because they shop on fares and just grumble about the add-ons. That makes the economics too compelling for airlines to ignore whatever the cost to the brand. Southwest is an exception. With a brand built on being a consumer champion and acting differently from the main carriers, it’s committed itself to a no-added-fee strategy and has made that an important part of its overall marketing message. It’s cost them a bundle but, in this case, adding the fees would have been off-brand and even more damaging to its reputation than it’s been for other carriers.

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Brand Value & Pricing

The Changing Tides Of Brand Economics

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The Changing Tides Of Brand Economics

Consciously or not, many brands are now running a freemium model. They are giving away a lot more than they used to, particularly across social media, just to keep up with the changing competitive landscape. And they are hoping to recoup on that significant content investment when consumers do buy. So has any of this changed the fundamentals of brand economics, or has it merely altered the manner in which brands achieve visibility?

By way of a sanity check, I went back to this paper from some years back to assess what still holds true.

Brands continue to simplify recognition and selection, and to instill trust in a world bulging with options. They continue to offer a simple way for time-poor consumers to filter the choice set. Consumers still buy because they identify with what some brands stand for – although one could argue that the criteria themselves may be shifting, particularly with younger buyers, as ethics becomes an important judging point.

Brands continue to draw on the associations they generate to seek extension and licensing opportunities, and my assessment is that this exploration of brand “green-fields” shows no sign of slowing down as brands look to broaden reach and multiple returns through a single relationship. But we are also seeing major brand portfolio managers like P&G focusing their assets much more specifically within set categories. It will be fascinating to see how these contrasting strategies – intensification and diversification – play out in the years ahead in terms of returns.

Brands continue to build value through emotion – but there are two changes in dynamics here that I think are worth noting. Firstly, the nature of the emotion generated. In a less connected world, brands sought to build emotional connection on a more one-to-one level through reassurances around quality and features. In theory, buyers saw an ad, were convinced and acted. Today, as quality becomes more consistent or at the very least more tiered and defined, brands must look to generate likeability at a highly collective social level as well, and the timeframes within which passions, good or bad, can grow has condensed enormously. These macro-attitudes can significantly affect the trending power of a brand – making it hot or not.

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Brand Value & Pricing

8 Ways To Build A More Valuable Brand

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Valuable Brands

We talk a lot about the pressures on brands to perform and about the difficulties of staying competitive in huge and rapidly changing markets. Nevertheless, global brands experienced a 12 percent increase in value in 2014 – and there are powerful lessons for all those responsible for brands in how they did that. If demand generation is part of your role, here are eight things that you can be doing to retain reputation, stem decline and make the most of upswings in economies and consumer preferences.

1. Be part of a rising category – According to Millward Brown, the top 10 apparel brands, for example, grew by 29% last year. If you have brands in this or another of the rapidly growing sectors, that’s a clear prompt to be investing to meet what is clearly increasing interest. If you don’t yet have brands in one of the rising categories, are there ways that you can naturally (and quickly) extend your brand into these burgeoning categories through acquisition, partnership, licensing and/or co-branding?

2. Be part of a resurgent economy – If your brand is spread across diverse regions, it makes sense to focus on those areas of the world where there is inherent economic growth driven by rising consumer confidence. To ride the wave, look for ways to get a foothold through an agency arrangement or work with an established player to increase their stock range. Also introduce premium lines to take advance of rising aspirations.

3. Tackle social issues – A number of sectors are fighting reputational issues at the moment. Brands in areas like fast food and soft drinks need to directly address their social impacts or risk being disrupted by healthy challengers. Equally brands with potential ethical issues – environmental, social, health-related, behaviour based or that involve processes that people feel strongly about such as animal cruelty – are going to need to show that they are actively minimising the downsides of what they do. Addressing reputational issues won’t necessarily mean growth, but it will help arrest declining sales.

4. Increase “share of life” (Millward Brown’s phrase) not just share of market by integrating and extending ecosystems. Apple are the masters of this approach, closing loops between product and content in order to retain control and to encourage consumers to stay and shop within their universe. By diversifying into new areas of interest and maximizing brand equity as they do so, brands can look for smart ways to be more involved in every person’s every day. As Nigel Hollis observes, “. Apple spans our needs for entertainment, music and productivity. Amazon fulfills our need for convenience with effortless one-click shopping and relevant purchase recommendations for stuff we never knew we wanted. Nike, with its Nike+ Fuelband, has transformed itself from a mere apparel brand to a companion and coach for runners.” They do this through that they offer and what they socialize.

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Brand Value & Pricing

Brands And Discounts: A Dangerous Liaison

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Brand Pricing and Discounts

Failing retail brands often have a second theme that unites them: discounting.

While the popular press might trumpet sales promotions as being good for the consumer, it’s also worth remembering that price discounting is very bad for brands that over-use it.

Let’s start with the most obvious drawback: it’s literally money off the bottom line. Too many marketers focus on traffic and revenues at the expense of margin. And that could be a crucial error when there is a vital trade-off between attracting more consumers into the store with discounts versus cutting deep into gross margin with 30% or 50% off list prices.

The second downside of discounting is commodification. The reason consumers are hopefully prepared to pay more for your brand is because it represents more to them than the alternatives. The brand associations add value to the offer and that lowers price sensitivity, increases demand and further enforces brand loyalty and repeat purchase – the classic outputs of brand equity.

But just as you build brands by focusing on their associations, you break them when you reinforce the commodity at the expense of those associations. And that’s what discounting does. It draws attention to the price and the product and says to the consumer ‘forget about what we stand for, buy us because we are cheap. Buy us because we are a commodity’.

When I see brands on sale for less than the recommended retail price it makes me question the brand. Suddenly it is not expertly made, high-quality fare – it is just cheap at a bargain price. Once the spell of the brand is broken, very few branded manufacturers can support their high cost operating model in the cut-throat environment of commodity competition.

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