In case you missed it, last October I published a blog post about value-based pricing, a strategy of setting prices based on a consumer's perceived value of a brand's product or service. This involves anchoring how much value you add to their lives, then putting a price tag on how much buyers believe this added value is worth.
If you haven’t had a chance to read that previous post, let me explain again what are the benefits of value-based pricing.
- You attract the right kinds of buyers.
We want to attract our ideal buyers who are aligned to our brand values because they will be the ones who will become your advocates who will spread your brand message to their own networks.
For example, Tesla wants their consumers to be aligned with the company’s sustainability mission. These will be the people who want to stand for something important and do their part to reduce their impact on the climate change (compelling benefit) and want a piece of Tesla’s pioneering technology to help them do that seamlessly (superior product). This pricing model will in turn help you filter out those who are not truly your brand advocates.
(Source: carbuyer.co.uk)
Why does this really matter? Shouldn’t the fact that they buy your product in the first place be enough? In light of a growing demand for electric vehicles, what will happen when a comparable (and perhaps cheaper) alternative enters the market either from an existing car brand or from a completely new one? Only the true Tesla advocates will invest again in the brand as they are clear on how the brand adds value to their life and is aligned with their values.
- It helps you to distinguish yourself from the competition
In a saturated category, leveraging a value-based pricing strategy could help you defining factor to make your brand stand out against the competition as you are forced to communicate your brand values and benefits to your consumer as a way of justifying the price.
Here is a quick example. In the UK, if someone is suffering from sensitive teeth they would be really choosing between two brands: Sensodyne and Colgate. The Colgate Sensitive range currently sells around £2.50[1] whereas Sensodyne’s products are priced between £3.50 - £5[2] depending on the particular SKU. So, with Colgate’s desensitising toothpastes retailed at a lower price point, how does Sensodyne justify the premium price to shoppers?
It is at this point one would really need to dig in to present their distinctive point of view to act as the differentiator. Unlike Colgate, Sensodyne was created as a desensitising toothpaste so the brand has the provenance (also known as root strengths) and the years of research to craft an ownable expertise positioning.
Through their marketing communications, Sensodyne tells a distinctive story that delivers a compelling benefit to reinforce the superiority of the product: it is the number 1 dentist’s recommended toothpaste for tooth sensitivity[3]. Telling the brand story via the dentist is Sensodyne’s positioning “trump card”; its distinctive, ownable and recognisable to the brand. Sensodyne has used this narrative formula consistently over the years to continuously communicate product efficacy in order to build trust with its audience so it is unsurprising that Sensodyne has built strong memory structures and automatic associations with tooth sensitivity in the eyes of the consumer. The expert voice reflects the expertise of the product itself, which would be helpful in justifying the premium price.
(source: quora)
In comparison to Colgate’s expertise which is broader and more general, and it simply doesn’t have the scientific credentials that can match Sensodyne’s.
(source: houseofmouth.com.au)
So you can see here that we have actually touched upon a couple of principles that I have already talked about in previous posts as they are beneficial in communicating value:
- The brand offers a superior product and compelling benefit: what solution are we offering that people want or need? How is it going to be beneficial to their lives?
- The brand has a distinctive positioning that guides the team as a North Star: what is the distinctive nugget that helps you stand out from the crowd time and time again?
Once you have clarity on these details, you will then be able to create a great “argument” to tell returning consumers or potential new consumers why your product will be worth buying; what is the value you will give to them that nobody else can, and therefore how you can make their lives better, healthier, more sustainable, more efficient etc. With this tight and distinctive narrative, it will be easier for a consumer to comprehend “if I pay X, I will get Y.”
Now it goes without saying that the vital part is that you must consistently and authentically deliver on this distinctive value to keep your current consumers. Brands need to truly “walk the talk” of their brand positioning – what they want to stand for in the consumer’s eyes. But brands also need to stay relevant and adapt to the changing times, without losing sight of what the brand stands for at its core. That consistency builds mental availability, it builds affinity and appeal, it is what creates value for which people are willing to pay a premium.
As it is now July, we are official out of Pride month. Many brands use Pride as a marketing opportunity, looking to present themselves as allies of the community and supporters of gender equality. Although this nature of communication is often outside the brand’s positioning, businesses find themselves in a position to announce their support to avoid being critiqued for not saying anything.
As each year passes more and more brands and business are looking to get a piece of the Pride pie. Yet I find it surprising that these brands feel they can tick this box purely by integrating their logo with the Pride rainbow, or by creating a limited-edition product with a questionable policy on how much it will donate to LGBTQ+ charities. However, some brands do get it right when you see they are genuinely acting on what they believe in, and this action and dedication can also help justify a price-tag.
MAC Cosmetics has been a longstanding supporter of the LGBTQ+ community with a clear mission to “enable limitless self-expression by turning makeup into art for ALL”[4]. In 1994 the Viva Glam campaign was launched to raise money for and awareness of the HIV/AID pandemic. Today MAC uses this platform to support LGBTQ+ charities, claiming that the full retail price of every Viva Glam lipstick sold is donated. The brand voice is authentic. The brand’s action is consistent. These add up to presenting a clear value that the consumer pays for.
To conclude, there are a couple of things any marketer or brand to do to set your brand up to be valuable to the consumer. This helps justify the price of your products. However, remember to stay authentic and consistent to your brand positioning. Any inconsistent or inauthentic action (or even lack of action) can make consumers question the integrity of your brand; a very quick way to depreciate your brand.