Many brands struggle with finding the right price point for their products in regular economic times.
Add a recession into the mix, and getting it right becomes even more complicated.
How do you charge what you want without scaring customers away? In this article, we're teaching you how to maximize your brand's value, even in a recession. Because in reality, what really matters isn’t so much the price but the way your brand is perceived.
Why Branding Determines the Price You Can Charge
In a recession, customers are going to be more discerning over their budgets and where their money is spent. Rather than simply slashing spending all across the board, consumer behavior shows us that this tends to be more of a reprioritization of spending toward the items that bring the most perceived value. When you actually look at consumer behavior, however, you see that people are willing to pay more for items they regard as high value. Consider brands such as Mercedes, Apple, or Tiffany. True, some customers of these brands are affluent enough to easily afford the hefty price tags attached to such products. Many others, however, are willing to pay extra to own something made by a brand they admire.
A MacBook costs approximately twice as much as a comparable Windows computer. We could write a hundred pages comparing the merits of Macs vs. PC. The point, however, is that Apple has lots of fervently loyal customers who will shell out the additional cash for iPhones, MacBooks, iPads, and other Apple products, specs aside. It’s the same with countless other luxury brands such as Jaguar, Gucci, Burberry, and many others. What you’re probably wondering is how do you position yourself at the upper end of the market so people are happy to pay a little more?
Branding Is About More Than Money
You can’t turn yourself into a luxury brand simply by raising your prices. There is a certain perception that something that costs more is probably better. However, many other factors also come into play. If your brand isn’t differentiated from the competition in any meaningful way and you simply raise the price, people will just complain that you’re charging too much. You have to look and feel the part of a high-value brand. You also have to effectively communicate your brand’s meaning to your customers.
If you want customers to pay a little (or a lot) more for your products, you have to establish your value. Naturally, you need a quality product or service if you want to position yourself as a premium brand. That’s just the beginning, though. The name of your company and products, the design of your logo, your website, signage, marketing materials, and everything else that represents your brand must stand out in a way that screams “quality” and “value.” If you’re searching for a brand identity or you want to rebrand yourself, study how established luxury brands present themselves.
Often, what separates luxury brands from their more ordinary competitors are the finishing touches and details. A luxury car such as a Porsche, Maserati, or BMW doesn’t only have a great engine. It also comes with distinctive curves, comfortable leather seats, a high-end audio system, impressively designed headlights, and dozens of other small but aesthetically-pleasing design details. If you’re selling services rather than physical products, you still have to keep this philosophy in mind when designing your website and other digital properties.
How Do You Make Your Customers Feel?
People consider so much more than practical matters before they buy something. If that wasn’t so, there’d be no 5-star hotels or restaurants. After all, you can get filled up just as efficiently by fast food as by cuisine prepared by a Michelin-rated chef. But the top-tier places don’t just serve great food, they provide an experience of comfort, luxury, and quality. The psychologist Maslow came up with a very useful model of human motivation, known as the hierarchy of needs. Maslow believed that our needs exist in an order of importance. We first need our physical needs met and to feel safe. Then we want to belong, After that, we start looking to higher-level needs such as esteem and self-actualization.
Maslow’s hierarchy of needs ties in with branding and value. How does your brand make your customers feel? Products that only fulfill basic needs can’t command as high a price as those that make people feel esteemed and actualized. For example, a basic car serves the need for transportation. A luxury model, however, can elevate your status. Nike isn’t just selling athletic wear. Everything about the brand is carefully constructed to make you feel like you can be a champion. That’s why I’ll pay four times more for a Nike t-shirt — it makes me feel like I can jump higher and run faster! On the other hand, I won’t pay more than $10 for a basic t-shirt even though it’s made from the exact same materials as one made by Nike. The same principle is true for food, clothing, jewelry, travel experiences, and everything else.
Raise Your Value, Then Your Prices
An ordinary brand has to study the market and charge what’s deemed a fair price. Luxury brands, on the other hand, have no such constraints. When you create a high-value brand, you have a lot more freedom to set the prices you choose. This approach can help you thrive under all types of economic conditions, including recessions. Very often, businesses at the top and bottom of the market do best in challenging times while those in the middle experience the greatest challenges. If you want to reach the elite status of a premium brand, you have to look the part. You also have to make your customers feel special when they use your products or services.