Sunday, April 18, 2010

Impact Of Price On Brand Image


Market behaves with respect to the consumers’ knowledge and sensibility. But still most of us have been led to believe that high pricing enhances brand image and conversely low pricing affects brand image. This is the reason why marketers fear to be the lowest priced brand in a category or do frequent revisions of price, in their efforts to increase brand image. Does the fear of the marketers have any strong analytical reason behind it or it’s just an intuition? 

To get a clear picture on the said fear about brand[1], brand image and pricing implications, I googled about the exact business definition of ‘brand image’ which implies ‘brand image’ as an impression in the consumers' mind of a brand’s total personality (real and imaginary qualities and shortcomings). Brand image is developed over time through advertising campaigns with a consistent theme, and is authenticated through the consumers' direct experience. After searching for almost an hour I was in more confused state than before. Some studies say that pricing strategy has an adverse affect on well established brand image while some other studies point the opposite theory. 
Let’s analyze the fact in general perspective. In my point of view when a customer intentionally purchases a product of a certain brand, he \ she actually purchases a two things, a generic product and an imaginary benefit( you cab say add-on) made by conscious and continuous marketing effort. In customers’ point of view, the image of the brand is not the price at which it sells rather it’s the value which it pretends to be or the value the product would offer. 

Hence Brand Image = Generic Product + Value by Marketing effort

Taking the customers’ choice as base, we can say, any brand building attempt should aim at creating a value around the product for which the customer will be attracted. The more successful the company is in creating value around the product in customers’ mind, the more price the product can fetch. This implies price as a function of value creation around the product by marketing activities. 

       Hence Brand Price = Generic Price + Value Perceived\Created

If we perceive the above statement as true, then the typical brand promotion doesn’t directly promote the price, rather it communicates the value the product would offer at the said price. If the customer finds the price of the brand matching the perceived value, then he \ she would buy the product at the said price and the brand image is created as targeted or remain intact. And in most of the cases pricing is done looking at the cost and margin, market competition and target customer segment along with products brand image. The perception of high priced brands have a better brand image is not always true as inexpensive brands like coke, pepsi and Wallmart (Selling products at low price) are having a very high brand value. 

But still the question remains the same for a marketer of an already established brand while dealing with price off. It’s for sure that the easy thing for a marketer to sell is a brand than a product because for a brand, the image is already created and the customers have perceived a value of the brand for the price. At this time, the marketers don’t want to take risk in terms of price, as if anything goes wrong in communicating the perceived value through marketing communication, then the established brand image will be the one to suffer and it will take long time to recover the image.  

In my view for an established brand to go for a price off strategy, three major factors like (i) product category, (ii) price segment and (iii) brand status have to be analyzed with respect to the current market situation.

i.        Product Category: First, the marketer has to determine its product category before taking any risk in terms of price.

o    E.g. In my view if the brand is in consumer durable, then there’s not much risk of its brand image for a price drop or a sales promotion.

ii.      Price Segment: Next, the marketer has to consider the price segment the product is in. If it’s in a premium segment and not targeted for mass then a price drop towards economy class may evoke questions in existing customers and there will be a loyalty shift and brand image will hamper.

o    Special Case: But if the product is in high end technology category, then the price drop can be justified with advancement of technology (e.g. price drop of iPhone from US$500 to US$99 in a year).

iii.    Current Brand Status:  The marketer has to consider the current competitive brand status and the brand equity it has in the market. If the brand is a strong market leader with high brand equity then a price off will not hamper the brand image in a great way. 

From the above discussion, one thing may be concluded that pricing may not have direct implication on brand image but for a brand to go for a price change, several market factors have to be analyzed carefully 



[1] Brand: A distinctive symbol or name or both intended to identify the goods and services of one seller or group of sellers and to differentiate them form those of others”. To be simple the term ‘brand’ is nothing but a seller's /maker’s promise to deliver a specific set of values (features, benefits and services) consistent to the buyers

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