Price Surprise

Price is an important ingredient in any brand marketing strategy. It is a lethal weapon in the marketing arsenal and should be used judiciously. The consumer will be put off if he is shocked by the price. However, he will get excited if he gets a price surprise.

Price is a relative concept. Consumers judge price and decide whether it is overpriced or underpriced based on their assessment. Here, the main question is:

What is the reference point vis-à-vis the ‘comparison of prices’?

In my opinion, the reference point of comparing and judging whether the brand is overpriced or underpriced is not competition. It is not even the cost. It is judged on the basis of the perceived value in the eyes of the consumer.

• If the consumer believes that the perceived value of a brand, product, or service is higher than the price, the consumer considers it underpriced. This is a pleasant price surprise.
• On the other hand, if the perceived value of a brand, product, or service is lower than its price, then it is considered overpriced in the eyes of the consumer.

Marketers should strive to keep increasing the perceived value of the brand, product, or service they are marketing. By doing so, they can create a positive price perception and drive consumer satisfaction and loyalty.

In my opinion, value is a balance between quality and price. This is relevant for all commodities and takes into account only tangibles. However, ‘perceived value’ includes a dose of intangibles like image, reputation, and brand equity along with the tangibles of product and service quality.

This ‘perceived value’ is a balanced blend of tangibles and intangibles in the eyes of the consumer. This applies to all brands. Therefore, brand marketers should focus on increasing the ‘perceived value’, because consumers will compare any price against the brand’s ‘perceived value’ and decide whether it is overpriced or underpriced.

• If they feel they have got a ‘price shock’, they will consider the brand to be overpriced and may:
  • Not buy it
  • Buy less of it
  • Buy it occasionally
  • Postpone the purchase
• On the other hand, if they get a pleasant ‘price surprise’, they will find it underpriced versus its ‘perceived value’, and they will:
  • Buy the brand
  • Buy more of the brand
  • Buy the brand regularly
  • Buy the brand immediately rather than postponing the purchase

• If you are giving a ‘price shock’ to the consumer and being seen as overpriced, you are actually, factually, and perceptually cheating the consumer.
• However, if your ‘perceived value’ is good, and the consumer likes, respects, and looks up to the brand, yet you still underprice it, then you are cheating yourself.

A balanced approach, keeping in mind the ‘perceived value’, works in favor of topline and bottom-line growth. The old techniques of having a ‘pricing strategy’, based on cost plus or competitor’s price, in my opinion, are not appropriate. An appropriate ‘pricing strategy’ should be based on ‘perceived value’, seen from the eyes of the consumer.

Many a time, brand marketers misunderstand the concept of ‘affordability’. They think ‘affordability’ has something to do with lower price. In my opinion, this understanding of ‘affordability’ is wrong.

• The brand is affordable to the consumer if the brand’s ‘perceived value’ is higher than its price.
• The brand is not affordable to the consumer if the brand’s ‘perceived value’ is lower than its price.

That is why some consumers say that this brand is worth it, while others say this brand is not worth it.

Based on this concept of ‘affordability’, the consumer comes to a conclusion about whether the brand is giving a ‘price shock’ and is overpriced, or a ‘price surprise’ and is underpriced, when put against its ‘perceived value’.

My strong recommendation is to increase the ‘perceived value’ of your brands and give a ‘price surprise’ to your consumers!