There are a number of factors that impact the way your customers see your brand, and the price you charge for goods or services is chief among these. The amount shoppers have to spend to become customers matters, and can play a leading role in whether your company is considered a premium brand or a discount retailer.
For these reasons, it's imperative to put considerable thought into your organization's pricing practices and how these policies align with your overall brand.
Established pricing strategies
There are a few pricing strategies that have been used by retailers in a range of industries for years now. In the minds of customers, the price of goods and services always connects back to the company providing them. According to QuickBooks contributor April Maguire, some of the most popular pricing strategies include:
- Premium pricing: This approach is seen when brands charge a higher price for merchandise than their immediate competitors. Typically taken by luxury companies, this strategy requires a brand to create a value perception that makes inventory worth the higher price.
- Market penetration pricing: Newer organizations usually adopt this strategy to get a foot in the door among competitors in the marketplace. Lower prices help to attract customers to a name they may have never heard of before.
- Economy pricing: This approach has become increasingly popular, helping brands speak to spending-conscious buyers. This no-frills strategy functions thanks to companies reducing production and marketing expenses to lower the price of products.
- Psychological pricing: This style seeks to encourage an emotional customer response to a price as opposed to a logical one. The most popular example here includes using prices ending in 9 as opposed to rounding up – like charging $29.99 for a T-shirt instead of $30. Retailers hope – and research shows – that many shoppers put more of an emphasis on the first number in the price, creating a higher perceived value for the buyer.
Using a pricing strategy like this can help define the brand, particularly in the eyes of consumers. Some organizations will utilize multiple pricing practices throughout their lifecycle – adopting market penetration pricing in the beginning, and then moving on to premium pricing once the brand has an established following, for example. No matter which a brand uses, these approaches show just how much the tag attached to an item can impact the company, its seller network and the ways in which customers connect and interact with the business.
Maintaining consistent pricing
Once your organization has decided on a pricing strategy, it's imperative to communicate this approach with your seller network and explain the importance of keeping prices the same across the board.
Overall, prices being charged within your seller network must be maintained at the same level in order to keep the brand image intact. This is important for merchants at both ends of the spectrum – discount and premium.
"[E]ffective brand marketing can give consumers compelling reasons to pay a premium," American Marketing Association contributor Gordon Wyner wrote. "The reasons can relate to product quality, special ingredients, processes and craftsmanship. Many brands are activated through convincing messages of a storied heritage and legacy."
Once a company has put the work into crafting this type of image, charging different prices for the same goods within the seller network can undo all of this effort. Similarly, charging a higher-than-usual price for economy goods can also have a negative effect.
"Once a company has put the work in to crafting its image, charging different prices for the same goods within the seller network can undo all of this effort."
In order to combat this and ensure consistency, brands should have a way to monitor their pricing policies, especially within the seller network. PriceSpider's MAP Guard takes the manual, heavy lifting out of maintaining a minimum advertised price, as well as spotting those that don't adhere to your company's MAP. This service enables brands to reduce time and effort needed for manual monitoring, while supporting companies' ability to enforce any MAP violations with a template and screenshot.
Price alignment in the real world
Premium shoe retailer Spring Footwear uses PriceSpider's MAP Guard service to protect the brand's integrity and ensure that sellers within the network don't charge less than the company's established MAP.
Because pricing disparities can be as much as 60 percent less than what a brand charges, businesses have their work cut out for them when it comes to MAP monitoring. Now, Spring Footwear enjoys simplified MAP management, thanks to MAP Guard, which automatically monitors prices and identifies any sellers that violate the company's policy.
"You want to make sure that prices are upheld in the marketplace so people see you as a premium brand and not a promotional brand," noted Steven Greenstein, Spring Footwear Vice President of Sales. "We needed a single, accessible portal so we could stay on top of price violations and let people know that we're serious about maintaining our integrity online. Before using PriceSpider's solution we had over 900 violations, now we're under 100."
To find out more, check out the case study today.