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Category: Brand Value & Pricing

Brand Value & Pricing

The Problem With Brand Value

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Brand Valuation

The problem with Brand Value is really simple: no one agrees on it.

The GE brand, for example, in 2011, was variously estimated to be worth $30.5B, $42.8B, and $50.3B by different brand valuation services. That’s a difference of about $20B between the high and low estimates. It gets worse. One firm estimated that GE’s brand value was rising, while the other two calculated a declining brand value.

These are not small numbers. In fact, they’re large enough to qualify as annual GDP numbers for many small countries — like Uganda. And GE isn’t the only example of the problem with Brand Value.

In a recent article on the issue of Brand Value, The Economist noted: “…arguments rage about how much brands are worth and why. Firms that value them come to starkly different conclusions.”

It’s obvious that brand valuation has a “starkly” real issue. None of the firms estimating brand value agree on the same value for a given brand. And if none of them agree on the value of brands, how can CMO’s and CFO’s begin to understand the brand value they’re creating with their Marketing spending?

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Brand Value & Pricing

Pricing The Brand Ecosystem

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Brand Pricing Strategy

Take a look at the diagram below courtesy of Ryan Jones (thanks for the point Marc Abraham). It shows how Apple spans its offerings over a surprisingly wide range of price points.

Apple Brand Pricing Strategy

By introducing new lines, retaining older lines at degraded prices and through the use of provider subsidies, Apple delivers an impressive range of ‘step-in’ opportunities for customers to join its ecosystem.

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Brand Value & Pricing

Rebranding Your Price

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Rebranding Pricing Strategy

As technology and globalized business models continue to deliver efficiencies and new opportunities, every sector will face disruptive pricing that in effect re-costs what the market would otherwise pay. Many of those movements will naturally be downward; others will lift the entry point. Amazon has effectively reframed the cost of books; Samsung and others are resetting the cost of owning a tablet; Tesla has redefined what an electric car is and also the cost of owning one.

But in response to competitor moves, so many brands make pricing changes without making changes to the brand at the same time. They simply react. As a result, their brand either ‘loses value’ or  ‘becomes more expensive’ for no good reason – or at least none that the consumer can see. By simply shifting what Tim Smith has referred to as the “value exchange” without repositioning the premise by which they compete, these brands have in fact deteriorated both: there is less sense of value; and there is therefore less sense of exchange. Consumers are either getting more or less value than they were getting – for no reason that has been clearly articulated to them.

Rebranding your price is a useful strategy for brands who find themselves needing to adjust their pricing in competitive landscapes and who have the ability to improve, adjust or diversify their offering quickly so that brand, value and pricing align. It works because it effectively links what you’re asking with what you’re offering and what your consumers value.

If you are going to price up, you will of course need to use what you have access to in terms of innovations and value-adds to make the purchase feel more valuable. Or if pricing down, look for ways to actively make your brand more attractive to more people. Because as Seth Godin so rightly points out, “Every great brand (even those with low prices) is known for something other than how cheap they are.” 

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Airline Brand Strategy Brand Value & Pricing

Transaction Mode: Danger For Brands

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Airline Brand Strategy

The response by airlines to customers’ demands for lower and lower fares has been to do exactly that, lower seat costs, but at the same time to strip more and more of what is included in the fare out of the price.

This process – referred to by Time as “the unbundled skies” – points to a business model that I see becoming more prevalent, and not just in the heavens, as price-sensitive brands lower entry points in order to get customers to commit, and then use “upgrades” to restore margin and, according to the article, add another 50% or so to the real price. Pay less, get less. Want more? Pay more. Ryanair have even suggested, somewhat controversially, that “more” could include access to the toilet. In fact, according to one consultant quoted, there are up to 35 add-ons available when you fly, ranging from baggage and food fees to flight-delay insurance and keeping the middle seat empty. You literally get what you pay for.

This seems like an expedient answer to customers’ demands for cheaper goods. Lure them in – then trick them into paying more. It’s not exactly customer-friendly but at least, some would argue, it’s a way to compete.

True, but changing the competitive model this way is not without its consequences. One is that as the product itself becomes less valuable and valued, service now comes not just at, but with, a price. That in turn shifts the emphasis from what customers get to what do they not get, and what shortfalls they are prepared to do without.

For the moment what’s happening in the aviation sector amounts potentially to a complete economic rebalance of the product at that end of the market. As the article points out, “In the unbundled world, airfare is merely the price of admission to get on a jet. If you crave comfort, convenience, less stress, decent food — what was once called good service — expect to pay up.”

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Brand Value & Pricing

Why People Buy Products, Services And Brands

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Purchase Decision Strategy

Why do people purchase the products, services and brands that they do? At a minimum, marketers should think about this periodically. Ideally, marketers should always be thinking about this. So, why do people purchase specific things?

  • They solve problems. They make my life easier or safer or more pleasant.
  • They are whimsical. They make me smile or laugh. They make me feel playful. They entertain me.
  • They are beautiful. They are a source of awe or wonder. They calm me. They make me feel good about my life. I love to be surrounded by beauty.
  • They surprise me. I love their unexpected nature. They fulfill my need for mental stimulation and variety.
  • They make me feel important. They give me status. They feed my ego.
  • They are addictive. They fulfill a deep craving. They are pleasurable. They are satisfying.
  • They provide me with information or knowledge or access.
  • They give me more time. They increase my freedom. They reduce my workload. They release me from mundane tasks.
  • They reduce my anxiety. They increase my peace of mind. They give me one less thing to worry about.
  • They stimulate my senses. They look, smell, taste, sound or feel good.

Think about this. What are some other reasons people buy things? Why do you buy what you buy? What was the most recent product, service or brand that you purchased? Why did you purchase it? Why did you choose it over the competitive alternatives? What was your most memorable purchase? What made it memorable? What product, service or brand do you value the most? Why do you value it?

This sort of thinking should be second nature to marketers. After all, isn’t marketing the art and science of motivating people to buy specific products, services and brands?

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