Tag Archives: Brand Equity

3 Golden Rules of Pricing for Value

For any business setting the price of your products is one of the hardest decisions that you have to make (along with picking a brand name, choosing the logo colour, deciding on your range…!) There are a few different approaches that you can take, but the most important thing you need to do is build value. This post will discuss the role of value in pricing and show you the 3 golden rules for building your price on a value proposition.

What is Value?

Value is a perception. It’s the reason why a well cut, good fitting little black dress for $150 can be as savvy a purchase as buying 3 tanks for $20. The price paid is considerably different, but so is the expectation of quality, enjoyment and longevity. Value is the combination of all our feelings towards the item we are purchasing. To set the price, we need to understand the value of our product to our consumer.

Many years ago I was the category manager for a premium cosmetics and perfume company. When it came to setting the price on skin care products that were perceived to rewind the aging process, we set the price by analysing what the consumer would pay, based on what it was worth to them – the value they saw in the product. The product cost was around $10, yet the consumer valued it enough to be willing to pay well over ten times that amount.

In our post “How to Measure Success” we looked at how to analyse your gross profit and your wholesale margin, which are both valid ways to set your retail price. But some products are worth far more than they cost to produce, be it because of desired design, quality workmanship or inherent benefits, and this is where developing your price model around value is most beneficial.

3pricing for value profit margin Golden Rules of Pricing for Value

1.       Understand Value-Based Pricing

When you set price using a value based model your objective is to determine the level of satisfaction a customer derives from your product and what price they are prepared to pay for it. How valuable is the solution your product brings to their life? How long do they perceive it will last? How important are the attributes to them?

Defining value includes analysing tangible and intangible attributes – that is what we can and cannot touch. The price of a Mercedes-Benz is set by what the brand believes the consumer will pay. The value is based on what they can touch – leather seats, alloy wheels, superior styling; but also what they can’t – associations of prestige, confidence and luxury.

There is no formula for value-based pricing, as each product will have its own value. You may find it helpful to do a competitive review to see how others are pricing similar offers and also survey your target market to understand what your offer means to them.

2.       Create a Value Perception

Creating a value perception involves positioning your product or service in the market so that it is desirable. The more consumers want your product the more they will be willing to pay. How to do this depends very much on the type of product or service and who the target customer.

Generally speaking you can create positive value perceptions by paying attention to:

  • The presentation of your brand elements including your logo, brand name and website / store front
  • Building social media networks to have large numbers of engaged and active followers
  • Educating your target on the benefits your product can bring (remembering both the tangible and intangible)
  • Demonstrating brand advocacy through customer reviews and testimonials

 

3.       Maintaining your Value Proposition

When you use value-based pricing, your approach hinges on your target market buying into your offer and seeing the value in it. As it comes time to promote your product, the strategy you choose is critical. Thinking back to Mercedes-Benz, how often do you see an ad for Mercedes-Benz:

“Mercedes Benz A-Class, was $90,000, now $50,000. For three days only!”

A product that is marketed on its value needs to maintain that value and it can easily be tarnished. If you can sell your product for half the price you were charging, your consumer will start to question its true cost, and the value they see in it may decline.

Value adding strategies are the best way to maintain value in your product while creating new reasons to buy. The most well-known value add strategy is the free gift. Offering a free gift with purchase does not devalue the original product in any way, you may be directing some profit into funding the gift instead of using some profit to discount the gift.

Free gifts can also be used to drive multi unit purchases e.g. Spend $52 dollars to get your free gift, setting the spend qualifier above your key products.

With the rise of online stores, another strong value add offer is Free Postage on a required spend. Firstly, we suggest you have a flat postage rate in place e.g $6.95 Flat Fee Postage, that way you have created a value for the postage; then set a minimum spend to receive the postage free e.g. Free Postage on orders over $100. This will encourage multi unit purchases, delivering you more profit per transaction, helping you fund the free postage profitability.

Following the 3 golden rules of pricing for value has the potential to deliver you more profit than pricing to make a margin requirement. What is your product? Can you price for value? As part of our mini marketing plan, we analyse your competitors pricing models and give you recommendations on how you should price within the market. For more information visit our product page.

Until next time, V is for Value and I hope you found it valuable!

Mary-Anne


How to Brand for Success

What is a BrandYou know the importance of brands, you see them in your everyday life however, do you realise how years of exposure and experience have built up your perceptions of those brands and have shaped the interactions you choose to have with them? This post will give you a greater understanding of what a brand is and how you can brand your business for success.

What is a Brand

A brand is the combination of tangible and intangible benefits that work together to create a value. That value is known as brand equity. Your brand encompasses your name, logo, colour and sounds. It distinguishes you from the competition and when successfully executed will foster positive connections to your consumer.

Brand Perception

Every time you see, hear, touch, smell or taste a brand, you are forming opinions and as those opinions are processed, you develop brand perceptions. Put simply, brand perception is how favourable or unfavourable a consumer feels about a brand at any point in time. Brand perceptions are constantly shifting; think of your experiences from being a child to now, how has your brand perception of McDonalds changed? As a child you probably felt it was the best place to go for lunch, as you got older you started to feel differently. You formed different opinions about the McDonalds brand and your perceptions evolved meaning you might not connect with the brand like you once did.

Building a Brand

Building a brand is not a short term strategy. To be successful, brands need a balance between time and investment to grow; limited time and high investment is one strategy but for most of us starting out we build our brand with limited investment and so we need to appreciate that it will take time.

With limited investment word of mouth becomes the most cost effective way of building a brand. The more people are talking about you positively, the more desirable your brand will become. Social Media has increased the simplicity of maximising word of mouth promotion, but don’t get caught up in the numbers game. Having 3,000 “likers” on Facebook means little unless they liked you to connect with your brand, not just to win a prize or to get a like back on their own page.

Just as people invest in property to build equity from its increase in value, we aim to build equity in our brand to increase its value to our consumers.  The equity comes from perceptions of trust, quality, reliability and value for money. As these
perceptions grow in our brands favour, so too does the value of our brand. The more valuable your brand is perceived as being, the more desirable it is to your consumers as your brand equity increases so too will demand.

How to Brand

5 Brand Strategy Truths

1. Stand For Something

What to name a new business seems to be one of the most widely debated topics during the start up phase, with everyone having an opinion and the business owner struggling to make what seems like the most critical decision. My advice is to take a breath and relax. Your brand name doesn’t need to be too clever, cute or catchy. Think about the brands you come in to contact with. The most traditional come from family names – Arnotts, Kelloggs, Myer while the modern seem to make no sense at first but over time they became familiar – Ikea, Apple, Nespresso. The most important factor for a brand is ensuring it stands for something, something you can explain and something that will make a connection to your customer, adding value.

2. Get To The Essence Of It

Brand Essence is a single statement that defines what your brand stands for. The Brand Essence will guide everything you do, from what you sell, to how you promote, to the tone of every message you send out. The Brand Essence will become the reason why consumers choose you instead of the competition. Crafting a unique, inspiring and motivating Brand Essence will engage your consumers and create loyalists. Your brand essence, if succinct, can become your tagline complementing your brand name and logo.

3.       Repeat Yourself, Repeat Yourself, Repeat Yourself

We all know that the more times our brand is seen the greater recall it will have. After all repetition goes a long way to developing memory (remember learning your times tables – we recited the same lines over and over again until we could sing automatically “3 times 5 is 15, 4 x 5 is 20”, along with some mumbling here and there). Brand everything you can. Anything that leaves your desk should leave with a brand on it, as every product is a mini advertisement for your business. If you make a product, ensure you attach a label with your brand on it (and your website if it will fit). If you import a product put a label on it “distributed by” with your brand. Develop a digital signature so every email goes out with your brand name and how to find you. Repeat it enough times and it will start to be remembered.

4.       Consistency Is Critical

Brand is King. All Hail the King. We must worship our brand identity and pay our respect to our brand with consistency. This means your logo should present the same across your business cards, website, flyers and beyond. Further than that, if you use a tagline then you need to consider when you will use it. It may not be practical to always use it, but as long as you keep it consistent e.g. always on printed materials, but not on your product you will still be maintaining consistency.  Develop a short brand identity guide and send it with your logo if someone else has requested to use it. Have your designer give you a version of your logo on a black background and one on a white background. Stipulate in your brand identity guide when to use each so external parties know what to do if your logo won’t work on their very dark website

5.       Brands can Evolve

In most big organisations, every 12 – 18 months they research the market and get a read on how their consumers feel about their brand. They compare this to the previous year and to the competition and create strategies to exploit their strengths and defend any weaknesses. This can mean a tweak to the logo to appear more modern, a change to the tagline to reflect a new brand essence or an update to the product mix to be more competitive, and so thereby evolving the
brand. Many small businesses worry about making changes to their brand, but it is important to remember that brand evolution is natural and is a sign you are shifting to remain competitive. Generally I would say any small change is
survivable. You can change an element of your business name but not all. Aim to think big at the beginning – will Julia’s Gifts for Girls service your business long term? Or are you better starting as Julia’s Precious Presents with a tagline “Girly gifts to treasure” that could evolve to “gorgeous gifts to treasure” if you decided to add toys for boys.

How to brand your business will depend of course on the unique factors such as your target market, your competitive environment and your offering. Get in touch today and tell us about your business and we can work with you on strategies to increase your brand equity or have a look at our current packages.

Until next week, B is for Brand and also for vanity.

Mary-Anne

Wise Up Marketing Solutions


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