There are lots of branding and marketing consultants who might want to change the title of this post from …Branding Strategy to …Marketing Strategy.
I would beg to differ.
You see, most people see pricing as a marketing tool—something that reels people in and helps them to make comparisons among brands.
I believe, instead, that a well-planned pricing structure should work to build your brand.
Allow me to explain…
A Branding Strategy Supported by Price Structure
I've said it before, and I'm going to say it again: A price war is no way to win business.
So, let's get that straight: Slash your prices in order to compete, and you'll be competing for all the wrong people's business. Plus, the effect of that price reduction will only be temporary. Then what are you left with? No profit and nowhere to go.
Now that we've gotten that out of the way, I'd like to talk about price structure, which is totally different than price point.
Pricing structure (or pricing strategy) is a system designed to deliver messages about your brand and its offerings. Different price structures are useful for saying things about your products and services at different stages of launch, as well as in different stages of brand development.
Choosing the right price structure means that you're sending all the right messages, and creating the right feelings, in your ideal customers…moving them toward conversion.
Here are some examples of pricing structures and their common applications in brand strategy:
- Introductory Pricing: This is the type of pricing strategy cell phone companies use to get people to switch to their services. It's lower than what you would typically charge, and will not produce sustainable profit in the long run. If you decide to utilise this pricing structure, be prepared to ensure that the customers you acquire will be around for awhile; you've got to recoup the profit you lost with that great deal. The message this structure sends is that you're so confident in the quality of your service that you're willing to give them something for very little because you're confident they'll want to stick around. Be cautious with this pricing model. Too much at one time can create a huge burden on your bottom line. Do the math, and only proceed if you're able to prove that the cost of acquisition is far outweighed by anticipated profit.
- Bundle Pricing: Bundled pricing is all around us: entrée, side and drink combos; two tickets for the price of one; numerous sessions at a discounted rate; free haircut with the purchase of a colour. This pricing strategy exposes customers to more of your products for a longer period of time, giving you greater opportunity to engage and upsell. As with Introductory Pricing, be careful not to cut too deeply into your profits; the bundle has to be beneficial for everyone involved.
- Premium Pricing: When your prices are significantly higher than your competitors', you're sending a distinct message: My Brand is Better. It's true that consumers do shop around, and that some are concerned with price; however, overwhelmingly, they do believe they get what they pay for and that reviews and referrals from family and friends are far more valuable than any bargain. If you choose to go with this pricing strategy, be prepared to deliver. Your customers have paid more, so they're going to expect more.
- Tiered Pricing: This pricing structure is all about options. What many brand builders don't realise is that when a 3-tier structure is presented, the goal is for the majority of customers to choose the mid-priced option—so this should be your most desirable price point. Three tiers are recommended because when only one option is presented, price objections are common. When there are two, the less expensive option is usually chosen. However, when three are offered, the middle-of-the-road option is the customary choice. This strategy gives your potential customers a sense of control, so they're not boxed in, feeling the compulsion to escape your sales It also sends positive messages about your brand, including that you trust your customers' decision-making power and that you're focussed on creating an experienced catered to their needs.
Pricing structure plays a huge role in the building of your brand strategy, and no matter what kind of brand you're building, it will contribute to perceptions of your brand, customer experience, and trust for your brand.
Not sure what pricing structure will be the most effective in the implementation of your brand strategy? Let's schedule a One-Hour Intensive Brand Audit, where we'll talk about your corporate values, your vision and mission…and what pricing structure will be most impactful.