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Branding by price

While many think that price is the antithesis of branding, it is actually a powerful positioning tool.

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Price Tag

We don’t always think about pricing as a branding decision, but for some customers price sets an expectation about your brand’s quality. A new study finds that branding by price may reinforce an important belief held inside the mind of the person making the purchase.

For example, when buying a bottle of wine, many consumers assume that the higher priced wines taste better than lower priced wines. Or, they assume the higher priced wine is less of a risk than the lower priced wine. This effect is amplified in direction proportion to the consumer’s knowledge of the brands she is evaluating. But it can also be driven by an internal belief about one’s passion for and/or sophistication about wine. There are some consumers who won’t buy lower priced wines that may, in fact, be quite good.

The relationship between price, perceptions of quality and internal beliefs can have a profound effect. For example, a number of years ago Dell ran a famous advertising campaign featuring a college-age student who proclaimed his enthusiasm about being able to afford a computer by uttering, “Dude, I got a Dell!” The campaign became a catch phrase that made an indelible link between Dell and affordable value. Unfortunately, it also had the unintended consequence of scaring some IT professionals away from Dell as an enterprise server solution. These customers perceived Dell’s low price positioning as an indicator that its hardware was not high equality enough to power their company’s network infrastructure. With their professional reputation on the line, the link between price and quality often impeded a rational analysis of functional value.

A recent study published in the March issue of the Journal of Consumer Research took a closer look at how price functions as an indicator of quality. Specifically, it examined the types of customers who are most likely to use price as an indication of quality. It validated previous studies that found that customers who view brands holistically (they look at the big picture) are more likely to connect price with quality. These holistic thinkers are most prevalent in eastern cultures. However, this new study found that price becomes an important link to quality across nearly all segments when the product was positioned as being symbolically important to the consumer’s life. In other words, when the product or brand was positioned to relate to consumer’s core identity, price became a far more reliable predictor of perceived value, and a strong moderator of purchase behavior.

For brand marketers, there are several implications to this study. First, if you have a premium-priced product, you may be able to gain share and grow sales by targeting interdependent cultures that are apt to think holistically and equate a high price with high quality. It is no coincidence that Asia and middle eastern markets are consistently the top buyers of luxury goods.

However, this study should also encourage marketers to spend more time considering how price can play an important role in your overall brand strategy. Though it may frighten product managers and financial analysts to price higher than competitors, many brands have an opportunity to charge more for their product or service and increase the attachment  consumers will have to that product or service. Like so much in branding, this potential depends on how well the brand is aligned with a consumer segment’s values and beliefs. The more the brand is symbolic of their self-concept, the more willing a consumer will be to pay a premium price—a price that connotes quality and validates belief.


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