Three Powerful Signals Of Brand Price

Mark Di SommaAugust 3, 20154 min

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.

2. Confidence – a brand shows its hand through its price. If it prices high, it tells the market that it backs itself to deliver greater perceived value and that it intends to depend on that superiority to achieve a sustainable premium. Premium priced brands believe in the quality and rarity of what they do, validating their pricing through perceptions of exclusivity and strong storylines built around history, craft and luxury.

If a brand prices low, it telegraphs a belief that it can depend on volume to offset smaller margins and maybe that it will squeeze its supply chain for every ounce of efficiency it can find. Low priced brands believe in their ability to generate mass interest.

If it prices dynamically, then a brand is indicating that it will price where it has to in order to achieve its targets. That requires high confidence in the ability of the business to read the market and respond with unwavering accuracy. And if it prices in an unbundled way, then the brand does not see the core service as its core source of margin and will aggressively up- and cross-sell to recoup what it has ‘given away’ with its asking price. Such a brand believes that its add-ons are either necessary and/or attractive enough to deliver targeted profits.

3. Wortha brand talks powerfully to the image and priorities of consumers through its pricing. Those schemas help a buyer decide whether a given item on a given day in a given situation is worth it. For some that will be about what they can save; for others what they can get; for still others, what they will feel and remember.

As I pointed out here on Branding Strategy Insider, “No-one will do this uniformly…Depending on what’s important to us, we’ll shift between budget, standard and luxury in most of our purchases. That makes understanding what we are getting for our money even more important. The key point for brands is that they need to make it very clear to their customers what the trade-offs are. Most don’t. They don’t carry storylines that explain why consumers are paying what they’re paying and why they’re getting what they pay for.”

When you frame pricing through the lens of the three signals, it shifts the function of pricing considerably. Price becomes a symbol for who you want to include, what you back yourselves to deliver and what you want buyers to feel. Pricing in other words is reflective of the wider business strategy, not just the financials. It expresses where you want to be in a market and therefore who you intend to compete against and on what basis. It puts a value on what you sell for the whole world to see. To me, it is the very point of branding.

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