Trade on price at your peril

Peter Walshe and Lynne Deason

Brand owners need to build equity to get the best return

Price led brands are less They offer something to a consumer

attractive, command less loyalty and that makes them worth paying more
are less likely to grow. The price for over and above other the other
positioning of your brand speaks brands available. There is however a
volumes. At the extremes: ‘I’m really ceiling beyond which the additional
expensive and certainly not just for cost can’t be justified, reducing
anyone’ or ‘I’m pretty cheap (and volume sales. Brands that are too
nasty)’. expensive can lose their relevance to
consumers.
Because consumers have relationships
with brands, what you say to them Offering a better or more acceptable
influences whether they continue to price than others can itself be
buy you or not. If you speak to them advantageous and be the basis of a
in ‘price’, they will judge you strong relationship with consumers.
accordingly. And a relationship These brands have to maintain their
focussed on price alone tends to be a price advantage and often this is the
shallow one. only reason for buying them. Brands
that compete in price sensitive sectors
Analysis from the huge BrandZ often need to find a way to
database (the premiere global differentiate themselves from others.
branding study from WPP, that covers
more than 25,000 brands across the If all of the brands available are at a
world and which has been running reasonable price, how is the consumer
since 1998 with interviews amongst to choose between them? Airlines are
1,000,000+ consumers) shows that a good example of this. When EasyJet
the stronger your brand equity the launched, it was principally positioned
more you can charge for your product: as being the cheap alternative. Many
other airlines have since entered the
1.50 market meaning that whilst price is
still a key factor other elements such
Brands that have high equity can charge higher prices - but not any price

1.40
as location of the airport, the
1.30
experience of dealing with the airline
etc have an influence on the choices
made by consumers.
Price Index

1.20

Equity Gap
1.10 -Brand is worth
paying more for
Brands with high equity are more able
to justify their price premium, in fact,
1.00

0.90 the price premium might be part of

the reasoning for buying the brand.
Low Equity Brands that have low equity, but
0.80 High Equity

increasingly demand a premium are

3

11
13
15
17
19
21
23
25
27
29
1

9
7

% Volume Share
likely to see volumes declining.
[i\401001\40100102\pres\Marketing matters.ppt1 ]
 Low High
Bonding Bonding
Ideal place for a Maintain high price.
Bottom 5th 4th 3rd 2nd Top 5th
High brand with a value Price drop/promotions
Equity positioning. Other likely to yield good Bonding driven by:
brands may have an volumes but prolonged Affinity/Leadership/
34% 44% 72% 85% 98%
opportunity to raise drop could erode Fame/Difference
price a little equity

Raising price
In order to (slowly)
Low Equity likely to result in
increase price, need
big volume loss.
to build brand equity
Need to boost Price 66%
at the same time.
equity. 56%

28%
Low Relative price High Relative Price 15%
2%
[i\401001\40100102\pres\Marketing matters.ppt4 ] [i\401001\40100102\pres\Marketing matters.ppt2 ]

The choice is clear: Let price dictate The lesson is to avoid the vicious circle
and ignore brand equity at your peril. of selling on price, which in turn
reduces the equity of the brand, which
The BrandZ Study indicates that brands means you need to charge even less…
with perceived leadership (innovation),
with a great experience and with clarity The effects of relying on price to the
(being known for what they stand and exclusion of more motivating aspects
being uniquely associated with that) are reveal them selves when we split our
the winners. They achieve the highest brands in to strong/weak equity and
‘Bonding’ levels with consumers. well known/lesser known on the
BrandZ Map. The stronger brands do
But the quality and basis of that not trade on price alone:
‘Bonding’ is a vital component.
Bonding – Price proportion

What is striking is that brands that rely

on price rather than the other factors
Voltage™ (brand strength)

Olympic
are much less likely to ‘Bond’ with 5%

consumers:
Specialist Classic
Little Tiger 2% 2%

There are five aspects on which 12%

Defender
brands can drive ‘Bonding’: 54%
Weak
Clean Slate 58% Fading Star
Affinity (both rational and emotional) 15% 79%

Fame
Leadership (or Challenge) Presence
Difference [i\401001\40100102\pres\Marketing matters.ppt3 ]

Price
Create the virtuous circle – look after
your brand and see your margins
improve.
Peter Walshe is a Global Account BrandZ is the WPP funded global brand
Director of Millward Brown, the leading equity study available to clients and potential
international brand and communications clients via WPP owned companies. It is
research consultancy and Lynne Deason validated against sales and quantifies and
is an Account Director. diagnoses the strengths and weaknesses of
brands.