Wednesday, March 17, 2010

The relationship between Price & Value

Excellent Insight from:

The Naive Marketer and Consumer

Does price really affect brand image?

Most of us have been led to believe that high pricing enhances brand image and conversely low pricing affects brand image. This is the reason why marketers fear to be the lowest priced brand in a category or do frequent price-led communication. Is this fear well founded?

What a brand sells isn’t price; but value. Consumers evaluate a brand by the value it offers and not by the price at which it sells. The purpose of any brand, therefore, is to create unique value that consumers would be willing to pay for. A brand that can offer this value at the least possible price would be the most preferred brand.

Consumers expect more value from a high priced brand and less from a low priced brand. This is how price and value are co-related. A brand that helps consumers rationalize, articulate and experience this value would be a “value for money” brand. Price by itself is not the value. A brand that does not offer any value would be perceived to be expensive, even if it isn’t. Sales of such brands would not increase even when there is a price drop.

The role of marketing communication is to make consumers want and prefer the value offered by a brand. Since price is relative to value, it is important to promote price along with value. Brand image would suffer only when a brand fails to communicate the value it offers for its price.

Brand image should have the least consideration in pricing decisions. Price should be a function of a brand’s target audience, context (business objective, brand life stage, product life stage, consumer life stage, and competitive environment), and cost and desired margin.

The notion that high priced, expensive brands have a better brand image is incorrect. Brands like Pepsi, Coca Cola, McDonalds and many others aren’t expensive; yet they have a good image. Apple iPhone’s image hasn’t suffered despite the many price reductions it has announced. Wal-Mart has built its business and brand image on the brand promise of “always low prices”.

My earlier post “What is value for money?” might also be of interest to you.

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