Price
How much a brand can charge for its product or service is one factor dictating how much revenue it generates.
Price advertising increases price sensitivity, whereas non-price advertising decreases price sensitivity. — How Advertising Works
"Typical drivers of pricing power: Different 49%, Meaningful 45%, Salient 6%"
"Premiumization" = Higher price elasticity
Promoted price vs. non-promoted price affect volume differently.
"Strong advertising can help soften the impact on sales that come from price increases" — The Multiplier Effect
"On average, a 1% increase in uniqueness and meaning drove a 0.57% lift in pricing power", compared to just 0.15% for lifts in personal disposable income, 0.12% for lifts in the S&P 500, and -0.43% for increases in the Consumer Price Index. (The Multiplier Effect)
"Brand advertising substantially reduces the net long-term price sensitivity for the brand, allowing it to raise prices without much demand decrease. The reduced price sensitivity is predominantly observed among consumers who already consider and prefer the brand. Therefore, stimulating existing brand consideration and preference in the market is instrumental in obtaining a large pricing power benefit from advertising." — Raising prices? How advertising strengthens your brand’s pricing power
"Brands with lower-than-average perceived quality obtain 20% higher incremental revenue gains than the average brand, whereas more expensive brands obtain 79% higher gains than less expensive brands... Brands in more complex and frequently purchased product categories enjoy 127% and 51% higher incremental revenue gains than the average, respectively" — Raising prices? How advertising strengthens your brand’s pricing power
"Success is more likely to start with a profit focus, not growth" — Modern Marketing Dilemmas, How should your brand react when prices are going up?
"Even bargain hunters step out of their shopping comfort zone to pay 14% more for brands they single out as meaningfully different." — What should the price of my brand be? Three hacks to get it right
"Brands with emotive clarity are 1.5x more likely to have ‘extra’ Pricing Power, which helps them justify their price." — What should the price of my brand be? Three hacks to get it right
Common pricing strategies (from Gareth O'Connor):
- Cost-plus pricing (adds markup to ensure profit)
- Competitive pricing
- Value-based (based on customer perception)
- Penetration pricing (coming in low to acquire more)
- Price skimming (setting a high price initially then lowering)
- Dynamic pricing
"In rational categories, where brand building is harder, it is more difficult to justify higher prices. In emotional categories, it is easier to build strong brands that can command a price premium" — Effectiveness in Context
"Marketing communications are most effective when the brand’s price is either very low or very high" — Effectiveness in Context
"Supporting higher prices is usually more profitable than just increasing volume. So price sensitivity may be the best loyalty measure of all" — How Not to Plan