Price is the communication of the value of your brand

The truth about brands book reviewYour brand possesses an assortment of attributes and meanings. Your brand connects with your consumers in both rational and emotional ways. Your brand also provides financial value for the company. Your brand is the source of your company’s profits. Your brand’s attributes, meanings and rational and emotional connections are sold, via the marketplace, to your customer.

When a family goes to Disney World, they are buying the park, the exhibits, the rides, the food and the employees who ensure everything is running smoothly. They are buying entertainment. They are buying memories. They are buying an icon of childhood. They are buying being a good parent. All of this represents value to the customer – value worth paying for. Disney creates this total experience in part because it reflects who it is as a business, and in part because this experience is desired by a segment of the market. Disney is investing in a brand experience that people find desirable. The price of Disney adventure should be commensurate with the value it has created.

Price is the cost of the bundle of attributes and meanings called “your brand”. The price you charge reflects the value of your brand – whether you intend it to. The greater the perceived value, the greater the price your brand commands.
The more you have distinguished yourself from competitors, the less vulnerable your brand is to their pricing strategies.

When you price low to gain market share, you say to potential customers, “My brand is not worth much.”
When you discount your service to meet short-term sales goals, you declare, “My brand is usually priced too high.”

When you regularly offer coupons on your product to attract price-sensitive consumers, you fail to appreciate the value the brand represents for loyal customer base.

Price represents more than just money from a sale. Price is more than just cost plus 25% markup. Price represents the value of your brand’s attributes, associations and meaning.

Often, companies feel competitive pressure to reduce the price of their brand (either directly by lowering selling price or indirectly by raising discounts). A mistaken emphasis on market share sales volume (rather than profits) drives this pressure. A desire to expand the appeal of the brand also leads management to reduce the price of the brand. But these actions communicate directly the value of the brand –  and will have long-term consequences.

Izod Lacoste drove itself to the brink of extinction through price reductions. Created as moderately upmarket brand of clothing, General Mills bought the brand in the ’80s. Intent on capitalising on the positive image of the brand and maximizing sales, General Mills lowered the quality of the clothes, expanded distribution and reduced price.
In short run, this worked as the brand became more accessible to a larger market and sales increased.

However, this move planted the seed of the brand’s demise. Izod’s reduced exclusivity and lower quality made the brand less appealing to its traditional constituency. And, as the brand held less value to its more affluent market, it because less appealing to the masses – whose original attraction to the brand was a status symbol. The lower the price, the less valuable the brand.

Reducing the price of your brand seems appealing in the short run – having potential for increased sales, and being more appealing to a larger market. But caution is in order. In the long run, as your price erodes, your brands erodes.

What is your brand known for? What key associations, emotional or rational, have you developed around your brand? Developing satisfying answers to those two questions is the essence of strong brand management. In developing your brand meaning and attributes, focus on those things that your target consumers values so much that they are willing to pay for them.

Starbucks has created a brand experience in the US that commands four dollars for a cup of speciality mocha.
One goal of marketing is to give consumers a reason (or reasons) other than price to choose your brand.

Your brand’s meaning is one of these reasons. Callaway‘s innovative over-sized drivers give some golfers a reason to prefer its brand (and pay a significant price premium).

Pricing decisions are not simple. There are a number of factors to be considered. Are your competitors moving up or down with prices? What is projected for your labour and material costs? Do you have a sense of price elasticity? (are consumers relatively sensitive or insensitive to price?) for your brand? Are there industry watchdogs influencing price? Are achieving your profit objective?
One important factor is the signal your price communicates regarding the value your brand provides.

The better your brand connects with your customers, the more indispensable your brand becomes as part of their life. The more emotionally connected your customers become to your brand the better your brand meets the needs your customers have, the more pricing flexibly you will have.

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This chapter is part of Truth about brands review thus copyrighted to its authors.