today we hear from simon, a startup ceo in london, england who has this question about pricing strategies. “we are exploring pricing strategies for our new line of consumer products. price can be influential in portraying a brand as affordable and ‘on the side of the customer’, or exclusive and just for the few. people often compare a product’s price to a “reference price” that they maintain in their minds for the product or product category in question. a “reference price” is the price that people expect or deem to be reasonable for a certain type of product. creating the most advantageous (and believable) competitive frame of reference is essential to achieving a price premium.
5. the order in which people see a range of prices. “rule of 100.” percentage discounts seem larger if the total amount is less than $100. it is extremely important to be able to estimate the impact of price changes on sales and profits. many business people believe that a price increase is the most cost-effective revenue-generating marketing tactic. people display different price sensitivities to different products in different situations. whatever pricing strategy your choose simon, do everything in your power to maintain the integrity of your price. bsi is a service of the blake project, a leading brand consultancy based in the united states, serving marketers around the world.
one of the quickest, easiest, and most popular ways for brands to compete is price. there are many reasons for this phenomenon, and that’s the topic of part 1 of my new series, pricing strategies and brand value fundamentals. the fundamental rule of pricing tells us that the price charged for a product must match the value consumers perceive that they get when they purchase that product. in other words, if all brands were new and they all launched new products on the same day, all of those products would have the same value perception in consumers’ minds. of course, each brand has its own unique tangible differentiators, but the intangible differentiators that lead consumers to become emotionally connected to brands take time to communicate and demonstrate consistently and persistently. with that said, it’s easy for brands to price products according to tangible differentiators. these types of tangible differentiators can cause price differences across different brands in the same category as well as across different products under the same brand umbrella if that brand has launched extensions within the same category.
those other brands and products create a frame of reference for the consumer, and the consumer tries to fit each brand into a comfortable position in his mind based on that frame of reference. brands and products with pricing that doesn’t fit well into that frame of reference are typically not even considered when it comes time for the consumer to make a purchase because they don’t make sense. it’s the perceptions part of reference prices that gives brands the opportunities to set prices based on intangible differentiators. if price were the only factor that mattered in consumer purchase decisions, everything we buy would be a lot cheaper and everyone would buy the same brands and products. price is just one part of brand value and purchase decisions. successful brands don’t rely on pricing alone, but that doesn’t mean pricing strategy isn’t important. stay tuned for upcoming parts of the pricing strategies and brand value fundamentals series where you’ll learn more about developing a pricing strategy, understanding the pitfalls of pricing, and using research to strike that price vs. brand value balance introduced above.
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