Here’s the secret to how your competitors are getting away with charging so much more than you do
It’s every business owners dream, raising prices without impacting future sales. Why is it that some businesses can charge double or even triple the price of competitors while still managing to maintain market share, and turn a steady profit?
Logically, providing a quality product and solid customer service should be enough to justify charging at, or above market rate. Unfortunately, the world is not a wish-granting factory, so this not the case.
So what’s the reason why some businesses can grow so easily whilst maintaining a profitable, and even enviable pricing structure?
It’s because, like L’Oreal, they’re worth it.
Or at least they’ve made themselves look worth it.
Your Brand Image holds a perceived value
Don’t get me wrong, there are other factors involved in price justification. However, the moment customers first encounter you or your brand is where they will most likely decide whether your business is a budget or premium supplier, and build their expectations of price accordingly.
Let’s have a look at these two logos and look a bit into their branding strategies.
Chances are these are two highly recognisable brands, but just for a moment try to consider them with fresh eyes.
You most likely recognise both these logos and how they position themselves, however for a moment consider them with fresh eyes.
Picture this, you walk into a Dior store, with their elegant, minimalist logo, branding and setup. Each shirt has been perfectly spaced on the racks and is crisp to the touch. You expect to see price in excess of several hundred dollars. Whether or not you’re comfortable paying that, the price feels appropriate and justified due to their branding and store setup.
On the other hand, let’s consider a typical Lowes store, with their bright, playful coloured logo and branding. The shelves are always packed to the brim, generally overflowing, and normally stacked pretty high. When you look at a label, it’s been stuck on to show most things at bargain prices, and the aisles are compact and tight. If you pulled an item off the rack and it was priced like a Dior shirt, there’s no way you’d go for it.
Of course, both of these businesses have tapped into different target markets; Dior focuses on lower volume with a higher margin, while Lowes gears themselves towards higher volume and lower margins.
Here’s the thing though, if your logo and branding look like Lowes’, no one will ever pay you Dior prices.