The Brand Effect

Description

The perceived value and consequently the price people will be prepared to pay for a product or service is closely related to their perceptions of the brand.

If a customer sees the brand as signifying quality or exclusiveness, then they will expect to pay more than the market average. If they recognize the brand but have no strong view of it, they will expect to pay around market average. If they do not know the brand at all, they will expect to pay below market average. If they perceive the brand as signifying poor quality or expect others to look down on them for buying the brand, they may not buy at all.

When you set prices for a particular market, take account of the brand perceptions within that market.

Example

A fashion clothing manufacturer sets prices very high.

A new entrant to a market works hard to get positive reviews of their product. They set the price a little below market average and then sell the product as 'high quality, moderate cost'.

An importer of low quality goods prices them at one tenth of the market average. They sell a lot, even as they gain a reputation of poor quality. For the next set of imports they change the brand label.

Discussion

A brand is a effectively a 'trust envelope' within which products and services are expected to have a particular value, including quality and style. Beyond buying something that works as expected, people look to several other qualities to determine expected price, including general aesthetics and the social status that the item will confer on them. Brand can also include a wide range of factors such as ease of maintenance, service time and 'green credentials'.

Brands work hard to become desirable, as the factors above. They also need to manage their price profile, especially as people often use price as a heuristic for quality.

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The Brand Effect

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