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Common Brand Problems

Overcoming Common Brand Problems – 2

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Overcoming Common Brand Problems

We are analyzing The 40 Most Common Brand Problems and how to overcome them.

Common Brand Problem Number 2: Increased product or service prices inviting low-end market segments and competitors, the cumulative result of gradually raising prices at a rate greater than inflation.

Analysis: This is the other side of a brand’s value equation: price. Consider what has happened in several industries in which companies have raised prices faster than inflation over time. Remember Marlboro’s Black Friday? Would Malt-o-Meal exist if cereal companies had not raised their prices as much as they had? And would discount card stores like Factory Card Outlet have grown from zero share of the greeting card market to over 20% within a few years if greeting card companies hadn’t raised card prices to well over two or three dollars in the same time period?

Key Point: Make sure your brand delivers a good value to the consumer. Even if price sensitivity studies show you can raise prices more, consider the long-term consequences. If you “push the envelope” on price, you will invite two outcomes: (1) consumers leaving your category and (2) new competition.

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Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Licensing and Brand Education

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1 Comment

olivier blanchard on October 11th, 2006 said

I worked for a company that fell into this trap HARD, and will be paying for it for a very long time.

Step 1. The assumption: We have the best product. People will pay more for it because it is a better, more durable product.

Step 2. The validation: Our main competitor just had a 6% price increase six months ago, and their sales haven’t been affected. Ergo: Let’s raise our prices 7%. We’ll be okay.

Step 3. The mistake: Forget to build value in the minds of the customers. Assume that they already know that we have the best product… ir that they care.

Step 4. The writing on the wall: A year later, low-pricepoint competitors (imports) that we thought were a completely different market have seen their sales double. Moreover, they are now eating into our market share.

Step 5. Do nothing about it.

Step 6. Three years later: Don’t make any changes to the marketing (hey, it’s been fine for fifty years, right?) but attempt instead to fight a price war we can’t win by cutting corners in production and quality (thereby destroying the value proposition of the brand instead of taking advantage of it).

It was painful to watch.

Great post.

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