Brand Management (MKT624) VU
Lesson 37
PRICING
Introduction
We move on to the next learning block of pricing. The lecture discusses the concept for
developing premium pricing for your brand. The considerations that lay the ground for
developing such a model are a part of the lecture.
Pricing
Once you have determined the positioning of your brand, developed brand architecture, and
have plans in place to leverage it through the right channels and communication, the next most
important task is the determination of pricing. Pricing has to be done keeping in mind that your
brand is an asset that is going to provide you with the right contribution to enable you achieve
all your financial goals.
Raising or lowering the price point makes the difference between high or low contribution
margins. Pricing, in other words, determines the level of value that it adds to the company.
The ideal situation is that we try to command a premium price in relation to competition, but
idealistic set of circumstances is not what always prevails in the market. We, therefore, have to
take a realistic look at all the determinants of our brand architecture strategy in the light of
forces that define the market.
Strong umbrella lets you charge premium
If you are stretching a strong, powerful brand or following umbrella strategy to gain the
benefits of a strong brand, then you should be all set to go for a premium price.
Source/endorsing brand strategy also helps premium
Similarly, if you are introducing a new brand under the source brand or endorsing brand
strategy to gain the benefits of brand power, you again are in a position to charge a premium
price.
The question is what if you are a new company offering a new brand? It may be difficult to go
for a premium pricing. However, it is not impossible. You may co-brand and go for a decent
price point, if not premium.
There are so many different pricing models, but let’s concentrate on the premium price model
and see under what conditions it works best? Some of the following conditions offer a good
ground for brands to stand on and enjoy the benefits of premium pricing1:
•The stronger the brand, the greater the potential to charge a premium price. Customers
are always willing to spend more on a brand that is well established and commands
power.
•A strong extension (line or brand) sets the stage for a launch that is less expensive and,
hence, offers you a platform from where you can extract better margins. This is a case
of lower costs!
•By the same token, you can recover development and launch costs sooner if your
introduction is endorsed by a strong brand. Customers are willing to try a new product
under a familiar brand name than a new one. This also entails lower costs!
•The larger the base of loyal customers, the greater the chances that those customers will
pay a premium price. That is why managers work so hard to retain their customers over
time. The longer customers stick to one brand, the more they are willing to pay, thus
enhancing value of the brand.
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