Price is about perceptions. It is also about reality. Which is to say that price involves both perceptions of value and the reality of affordability. The former is competition, expectations, benchmarks and benefits. The latter is what’s actually in the wallet. Value comes into play only when affordability is no barrier.
In 2013, at the annual Consumer Electronics Show in Las Vegas, T-Mobile CEO John Legere confidently stepped onto the stage, prepared to place a bet. But this was no ordinary Vegas gamble. It was a high-stakes wager on the future of his company—this was a Big Bet.
Consumers face rising prices from many favorite brands. Insurance costs, fast food costs, transportation costs and the cost of stamps have all increased. The pushback from rising prices is now seriously affecting package goods, especially grocery-purchased brands. Package goods volumes are declining. Consumers are finding all sorts of workarounds by which to manage their stressed budgets. Consumers are balking at the cost of goods. Even Target, a brand-business based on affordability is experiencing revenue issues....
Corporate growth often depends on a company building or buying multiple brands. These may exist within one or several product categories. Such a strategy can provide economies of scale. It also reduces risk. If one brand is struggling to grow, profits can be diverted to brands or categories with greater growth potential.
Once upon a time there was a durable goods company with a large staff of engineers. Management felt that the company would benefit from more creativity. Instead of hiring creative minds, the company decided to invest in transforming all of its engineers into creative, creator minds. It was a year of magical thinking.
