If you’re a marketer, commodity status is a bad thing for your brands. It indicates that your product or service is undifferentiated, that it rises and falls with the market and that it carries no inherent value beyond that. That’s fine when things are going well, and supply cannot keep pace with demand – it’s not so good when the dynamics are reversed. I explain how and why perceived brand value degrades to commodity status here.
Brands sent powerful messages through how they price. Price can be influential in portraying a brand as affordable and ‘on the side of the customer’, or exclusive and just for the few. It can generate responses ranging from the thrill of a bargain to the indignation of a price tag that seems far too steep.
Behavioural economists refer to the decision making process brands use to set a price in the minds of consumers, especially when those buyers are dealing with something that is unfamiliar to them, as “anchoring”. Anchoring provides a reference point from which to perceive and negotiate “worth”. Brands looking to set a high value on what they offer anchor highly; brands looking to position themselves as accessible and everyday do the opposite. De Beers anchored the value of their rings around “two months’ salary”. The message to purchasers – in this case, men in a jewellery store (perhaps the ultimate social fish out of water) – was that it will hurt but it’s worth it. At the other end of the value scale, when Coca Cola originally positioned their “delicious, refreshing” drink at 5c a glass, they were sending a clear signal to drinkers that Coke was the affordable beverage everyone could enjoy every day. Both messages were on brand, even though they presented vastly different value propositions. De Beers’ “price” of course takes no reference …
Marianne Bickle takes JC Penney’s to task over their pricing strategy in this pithy and thought-provoking post in Forbes. In it, she argues that the retailing icon misread the market in key ways and compromised its value proposition when it replaced its famous coupon and discounts pricing strategy with a policy that stressed continuity, consistency and predictability. People buy emotionally, argues Bickle, and that emotion extends beyond the shop doors. It reaches all the way to the macro-environment that influences their wallets. It’s critical therefore that brands understand how their consumers feel about the economy. If things feel uncertain – and nearly two-thirds of JC Penney customers were saying they didn’t feel the economy was strong – don’t change what they know. It not only makes a new pricing strategy undesirable, it’s also destabilising. And people are much less prone to buy when things don’t feel as they have. It’s also vital, Bickle points out, that brands understand how people buy, not just what they buy. In the case of JC Penney, over 60% of …
