You might be asking yourself why is a pricing expert part of a brand consultancy? Today we ask a few questions to pricing expert Janene Liston that will help answer that and other questions around pricing.
Janene is Europe’s most trusted pricing strategist for small businesses. She’s a Certified Pricing Professional, an entrepreneur and a European Public Speaking Champion with 20 years experience in product marketing and pricing. She teaches businesses the strategies and actionable steps to set, get and manage pricing more effectively. Helping them build and implement the best pricing strategies for their business so they can optimize sales and profit.
brandbuch: Hi Janene, how are you today? So, as you know, we are curious to know why are you part of brandbuch? I don’t know any other branding agency talking about price.
Janene: The answer is actually quite simple, pricing is a strategic component of brand equity in ALL industries. Increased price transparency, brought on by e-commerce, puts even more emphasis on pricing as part of your brand. Ignoring pricing will not minimize its effect on brand equity. It will most likely have a significant negative impact on your brand and the bottom line. That is why I am part of brandbuch. To help build pricing strategies that also communicate the brand purpose and values.
brandbuch: You just mentioned that ignoring pricing can have a negative effect on your brand. Could you expand and give us an example?
Janene: Any brand can compete on price but only successful brands are clear about the relationship between pricing and brand. Pricing can make the difference between a brand being successful (or not) and trusted (or not).
For example, let's say your strategy is to provide customers with ‘everyday low prices’. You’ve built your brand and pricing strategy around this concept. But then as the holiday season approaches you decide to reduce prices further. What does that say about your ‘everyday low prices’? It says, they aren’t really low every day. This can cause customers to feel that a business isn’t being transparent or honest; which can damage the value of the brand.
If, instead, your seasonal strategy was to not participate in Black Friday promotions because you already provide ‘everyday low prices’, then your actions around pricing are aligned with your positioning and promise to customers.
Solid pricing strategies can have a positive effect on brand equity while poor (or poorly executed) pricing strategies will hurt customer relationships and sales.
brandbuch: Thank you for this very clear answer. I understand the effect of right or wrong pricing strategies on brands but, when it comes to the immediate effect on sales, a discount on price will always bring more sales, right? And in the end… sales are the priority.
Janene: I am glad you asked that question but let me correct you for a second:
Healthy Profit is the priority, not sales.
By ‘healthy’ I mean profit that will serve your company in the long-term. Sustainable profit is what we want to achieve. When selling at drastically lower prices there’s a high probability that those who bought your product during Black Friday can not afford your products during the rest of the year. These consumers gave a short-term unhealthy boom effect to the company’s sales, not profit. In addition, the company may need to go back to rebuilding trust with their regular high-value customers.
Now, the difference between maximising sales and maximising profit: They key is price elasticity which is the relationship between price and volume. Rarely do companies fully understand how much more they need to sell at a lower price. They overestimate how elastic their prices are. Sales at lower prices can kill your margin and therefore your profit.
A discount on price may bring more sales, but it needs to bring enough sales to earn the same or more profit for it to be a wise pricing strategy.
brandbuch: Can you give us one or two examples of brands that are doing pricing right?
Janene: To define right or wrong with pricing we need to understand a company inside and outside. I can think of REI as an example of a company that has not participated in Black Friday since 2014, instead they incentivize their customers to spend that time outdoors, not at the sales. The campaign #OptOutside attracted 6.7 billion media impressions in the first year. There were 1.2 billion social impressions, and it encouraged over 1.4 million people to spend Black Friday outdoors.
This is a great example of a brand approaching pricing as a key communication element and remaining loyal to their high-value, all year-long customers.
Another example would be brands that offer different prices to different consumers. They have outlets targeting ‘price-hunters’, who are willing to travel to find a bargain. At the same time the same brand will create a different, branded, premium experience for their high-value customers.
brandbuch: Oh I really like the REI example. I love that brand and their loyalty to their purpose. That brings me onto my next question… When creating a new brand what’s more important: design or price?
Janene: That is a challenging question but I am sure that the designers at brandbuch will agree with me: both are important and both need to communicate the positioning and values. Design and price are two strong communication tools to be used in harmony.
Let’s consider luxury brands for a moment. Price is a core element of the brand positioning. For many customers who buy luxury brands, a key value driver is the exclusivity. It’s hard to imagine a new Louis Vuitton line with prices positioned at $20 per item. At that price it would be much less exclusive (i.e. attainable for many more people) and totally inconsistent with their brand & value proposition. The price has a direct link to value perception, ignoring that won’t change it.
It also begs the question, what is the added value of a luxury brand? To determine this, customers will consider both the real and perceived value. Paying thousands of dollars for a handbag will seem outrageous to many. To others it represents the achievements of a challenging and successful career. It makes them feel more empowered, unique and confident... so it’s definitely worth it, right?
The same principles of value communication apply whether it’s a luxury brand or not. When ‘good value for money’ or even ‘low price leader’ brands set prices that are inconsistent with their value proposition and brand values, customers ears perk up like a deer who hears a rustle in the woods. They’re confused by the mismatch, and confused customers don’t stay customers for long.
brandbuch: Thanks for the Louis Vuitton example which I think is a very good representation of the power of pricing for exclusive brands. To wrap things up, what are the 5 tips you would give to brands to make sure they are pricing right?
- First and most importantly: your pricing needs to be intentional (not by accident), supporting long term business objectives, aligned with the brand as well as being appropriate for your high-value customers.
- Second: ask questions. How do customers perceive my prices? How is the brand perceived? How consistent are we with our messaging? How are our pricing tactics (discounts, promotions, etc) perceived by our high-value customers? This means asking customers questions and actively listening to what they say. Pricing is rooted in a deep understanding of the customer. As they change, so must you.
- Implement pricing strategies in a way that helps build further brand equity. The way we communicate pricing is also a strong tool to be used by brands.
- Do not follow the rules. In pricing there are no rules. Pricing needs to serve your customers, maximise profit and your brand. For a lot of time, discounts were a ‘must’ that companies were following without considering the impact on their business. Today, you define the pricing rules that fit your company and brand.
- Last but not least: build trust. Whatever you decide to do around pricing, always maintain and build trust – the most difficult value to regain once lost. Pricing needs to work towards trust and honesty, always.
brandbuch: Thank you Janene for this inspiring interview. I am sure many of us will go back and review our pricing strategies from last year and follow your tips for this new year to come.
Janene: Thank you, and I hope this helps shine a light on why I am part of this next-generation branding agency!