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.”
If you have many competitors who charge more than you and you either can’t, or don’t want to, change your pricing, what can you do to position your brand as one that democratizes what you offer? Unless you position yourself this way, there’s a very good chance you will simply be seen as the “cheap” option. If you have competitors ranged out at lower price points, what can you add to the sense of who you are as a brand to position yourselves as deservedly premium? And how can you turn price into the validation of the value that your premium brand delivers?
MacDonald’s it seems is facing this very issue at the moment. They continue to offer, and to brand themselves, as a the purveyor of $1 meals, but increasingly their menu reflects higher ticket items. And that’s affecting their bottom line as the gap between what people expect to pay and what they are being asked to pay widens. As John Gordon comments in the article, “If you encourage and kind of seed the notion that you can come in for a couple bucks and get some food – and then you can’t do that anymore – there’s bound to be a reaction.” At some stage, it strikes me, that MacDonald’s will need to make the decision as to whether they are still (and can afford to remain) a frugal diners’ brand.
One of my favorite strategies when a brand is hemmed in price-wise is to reverse the question. Instead of asking “What should the product…cost?”, the question changes to, “What should the cost…product?” In other words, set a desired price point and then literally build your offer (and your repositioned brand) around that. It’s a great question to throw at a development team. “We have competitors at $1.38 – $1.57 and other competitors at $2.10 – 2.30. So what does a $1.72 version of what we offer look like? …
“And what kind of a brand does that make us now?”
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