The price of your merchandise has a big impact beyond just your brand's sales and profits. Higher prices, for example, can help mitigate high material costs while establishing a premium brand image. On the other end of the spectrum, lower prices can serve to undercut the competition and provide customers with the best bang for their buck.PrimePay pointed out that companies make a range of important considerations when they establish their pricing strategy, including:
Because so much work goes into the pricing scale, it's important that you're able to defend your inventory cost, and understand how it impacts the image of your brand.
One of the most important considerations to make here involves the equity of your brand. Your company's equity refers to the commercial value that your brand holds, as well as its overall perception in the marketplace, with customers and among competitors.
"The effect of a discount or competition pricing strategy can create an image of second-rate products, which could have a negative effect on the brand's equity," Sandilands wrote. "With niche brands, such as Chanel, Mercedes Benz or Rolex, the price is an aspect that the customers of the brand enjoy. It adds meaning and value to their purchase and sets the product apart from its competition. This makes the pricing strategy an important and integral aspect of the product's brand equity."Luxury or high-end merchants, on the other hand, may be doing more harm than good when they put a discount strategy in place. Because these types of retailers create a brand image of quality, sophistication and exclusivity, offering discounted inventory may be tarnishing this view with customers.Small Business contributor Tracey Sandilands noted that pricing can have a significant impact on brand equity, including from perspectives like discounted and everyday low pricing. For instance, brands seeking to compete with other discount retailers will offer the lowest prices possible. And because their brands are built upon a commitment to low-cost inventory, this will only benefit these companies' equity.
While it can be tempting to adjust a brand's price to increase its competition in the marketplace, this is not always a winning strategy and it can have a larger-than-expected impact on brand image. This especially true with a company's customer audience – as Killian Branding noted, although customers may not have a brand's pricing scale memorized, chances are good that they are able to gauge merchandise prices in comparison with other, similar products.
"Quality and price do not exist as isolated concepts in consumers' minds. They are interrelated," Killian Branding pointed out. "Research has shown that deep discounts do cause the consumer to believe that something is wrong. Frequent discounting serves to lower the value of the brand because of an almost subconscious reaction by the consumer who believes that quality also has been lowered."
"It's crucial that retailers have a minimum advertised price."
For this reason, it's crucial that retailers – particularly those that work with multiple sellers – have a minimum advertised price, and put in the effort necessary to ensure that there are no violations of this agreed-upon price point. Because, as we've seen, any dips in price can seriously impact the way your customers view your brand, its equity and the quality of your offerings.
"The most powerful value contribution of a strong brand is the ability to demand and defend higher prices than competitors," Killian Branding noted.
However, once your organization has established a MAP policy for its products, what are the next steps?
While many brands look to maintain their MAP and enforce any seller violations manually, this can quickly become a very tasking job. It can be helpful to seek out a service that can gather the important MAP-related details you need in a single place, and eliminate the need to check prices by hand with each of your sellers.
Your brand should look for a solution that enables you to:
A service of this kind can help you maintain your brand's equity, its high-quality, premium image with customers and its ability to compete in the marketplace. Don't let your sellers undercut your brand image. To find out more about the best ways to guard your brand's MAP policy and its relationships with seller partners, contact PriceSpider today.