Positioning through pricing

Pricing plays an important role in branding. The luxury brands have been the first to "discover" such an interplay, wholesalers cannot be too far behind either.

Consumer markets in developed economies have been facing steady dollar inflation and rise in commodity prices.

From a branding/positioning perspective, the status qvo for companies selling into the US market is being challenged.

US imports come from the following areas:
  • China for trinkets--whose currency is pegged to the dollar;
  • Europe for upscale products--since the "discovery" of (affluent)consumers in emerging markets they are no longer that dependent on the US consumer;
  • Japan for automobiles and electronics--pegged currency;
  • Latin America for agricultural products--prices have come up since such products are imported mostly by US brands.
Exporters into the US have several options:

As examples for gimmicks, consider the socks at Wal-Mart that are shorter and sell at the same price. Trash bags at Costco, sold under Kirkland Signature brand, are weaker. Import cars, due to the annual cycle of "innovation" and reduced Detroit competition have been able to play the "segmentation" game to their advantage and passed along cost increases. Moreover, sensing the market share opportunity play, automotive luxury brands are coming in with cars at lower prices.

For a conversation about this, check out the Q&A section at LinkedIn.

1 comment:

Anonymous said...

Raising Prices Enhances Sales

Published: January 14, 2008

WASHINGTON (AP) -- Want people to like your product more? Raise the price.

That seems to be the lesson from a new study in which people were asked to taste wines marked with different prices.

Researchers scanned the brains of the testers and found that the part of the brain that records pleasure lit up more for the more pricey vintages.

And that was true even when -- unknown to the testers -- they were sipping a wine that they had liked less when it had a lower price tag.

Antonio Rangel and colleagues at California Institute of Technology thought perceptions of higher price meaning higher quality could influence people, so they decided to test the idea.

They asked 20 people to sample wine while undergoing functional MRI's of their brain activity. The subjects were told they were tasting five different Cabernet Sauvignons sold at different prices.

However, there were actually only three wines sampled, two being offered twice, marked with different prices.

A $90 wine was provided marked with its real price and again marked $10, while another was presented at its real price of $5 and also marked $45.

The testers' brains showed more pleasure at the higher price than the lower one, even for the same wine, Rangel reports in this week's online edition of Proceedings of the National Academy of Sciences.

In other words, changes in the price of the wine changed the actual pleasure experienced by the drinkers, the researchers reported.

''Our results suggest that the brain might compute experienced pleasantness in a much more sophisticated manner that involves integrating the actual sensory properties of the substance being consumed with the expectations about how good it should be,'' they reported.


On the Net:

PNAS: http://www.pnas.org