Pricing is a marketing issue, especially as cost of living crisis mounts.
“We should not talk down the power of advertising in the wider marketing mix. When a brand buys advertising, it sends a message: that it wants to be noticed and win approval, that it wants to generate desire and drive behaviour.” Gideon Spanier, Campaign editor in chief.
Of course, one other thing that advertising does is drive a price differential versus other, less desirable, brands. And in the cost of living crisis, it is crucial that marketing has influence, a significant one, on pricing.
The great Jeremy Bullmore once cautioned the audience of marketers at a MediaCom conference against focussing too tightly on the core target market for any brand. In the face of a step change in the availability of data to calculate pinpoint precision of targeting ads at those, and only at those, in the market to buy a brand (in this case a luxury car) in the next 3 months he said: “If brand x only ever targeted people in the market to buy the car in the next quarter, there would soon be far fewer of them. Because one of the reasons that you pay the premium to buy that luxury car is to be the envy of all of those who cannot afford to do so.”
Luxury cars has been an outlier category, in as much as the performance of most modern cars is satisfactory. The electric car marketplace is shaking up this norm but in the past the premium lay largely in the prestige of the brand, of the marque and this was highly influenced by great advertising and of course entertainment in general (Bond and Aston Martin for example). To use the category recently cited by Tom Darlington, there is less brand premiumisation for instance for a toilet cleaning product, but still advertising drives brand recognition and memory structures and therefore should allow a premium in terms of pricing.
As the guru of effectiveness, Jane Christian, managing partner at MediaCom, puts it: “we see strong brands benefit from inelastic pricing”. In other words when prices go up by 1% you might expect to see sales drop by a proportionate amount. She goes on to say: “if the brand is strong enough, then there may be only a minimal or even zero drop in sales.”
Here then is one effect of growing demand in the right way and driving value for the business. McKinsey estimate that raising prices by 1% without losing sales can, on average, boost operating profits by over 8%.
Pricing systems are therefore crucial, and Artificial Intelligence advances are stepchanging their effectiveness. The Economist reported recently that the latest AI charged models “can spot patterns and relationships between multiple items.” The models scrape social media sentiment and product reviews.
We can look forward to a marketplace for many products where pricing is more volatile than we have experienced in the past. Some consumer segments may find this challenging – those who hunt for a bargain will have to put more homework in; those who just don’t like to be ripped off may have to do the same. And this in itself may affect brand perception. If you have a reputation as a brand that is good value for money, your pricing choices may need some marketing input on top of the AI.
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on Monday, September 26th, 2022 at 2:24 pm and is filed under MediaComment.
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Ensuring that the price is right
Pricing is a marketing issue, especially as cost of living crisis mounts.
“We should not talk down the power of advertising in the wider marketing mix. When a brand buys advertising, it sends a message: that it wants to be noticed and win approval, that it wants to generate desire and drive behaviour.” Gideon Spanier, Campaign editor in chief.
Of course, one other thing that advertising does is drive a price differential versus other, less desirable, brands. And in the cost of living crisis, it is crucial that marketing has influence, a significant one, on pricing.
The great Jeremy Bullmore once cautioned the audience of marketers at a MediaCom conference against focussing too tightly on the core target market for any brand. In the face of a step change in the availability of data to calculate pinpoint precision of targeting ads at those, and only at those, in the market to buy a brand (in this case a luxury car) in the next 3 months he said: “If brand x only ever targeted people in the market to buy the car in the next quarter, there would soon be far fewer of them. Because one of the reasons that you pay the premium to buy that luxury car is to be the envy of all of those who cannot afford to do so.”
Luxury cars has been an outlier category, in as much as the performance of most modern cars is satisfactory. The electric car marketplace is shaking up this norm but in the past the premium lay largely in the prestige of the brand, of the marque and this was highly influenced by great advertising and of course entertainment in general (Bond and Aston Martin for example). To use the category recently cited by Tom Darlington, there is less brand premiumisation for instance for a toilet cleaning product, but still advertising drives brand recognition and memory structures and therefore should allow a premium in terms of pricing.
As the guru of effectiveness, Jane Christian, managing partner at MediaCom, puts it: “we see strong brands benefit from inelastic pricing”. In other words when prices go up by 1% you might expect to see sales drop by a proportionate amount. She goes on to say: “if the brand is strong enough, then there may be only a minimal or even zero drop in sales.”
Here then is one effect of growing demand in the right way and driving value for the business. McKinsey estimate that raising prices by 1% without losing sales can, on average, boost operating profits by over 8%.
Pricing systems are therefore crucial, and Artificial Intelligence advances are stepchanging their effectiveness. The Economist reported recently that the latest AI charged models “can spot patterns and relationships between multiple items.” The models scrape social media sentiment and product reviews.
We can look forward to a marketplace for many products where pricing is more volatile than we have experienced in the past. Some consumer segments may find this challenging – those who hunt for a bargain will have to put more homework in; those who just don’t like to be ripped off may have to do the same. And this in itself may affect brand perception. If you have a reputation as a brand that is good value for money, your pricing choices may need some marketing input on top of the AI.
This entry was posted on Monday, September 26th, 2022 at 2:24 pm and is filed under MediaComment. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.