Pricing and Perception
Pricing affects perception also
Was meeting with a client the other day and we were discussing the building of a brand around a two new products that they wanted to introduce. They are a small company with sales around $2M a year and a product breadth of eight different consumer products.
During the discussion of building the brand, we went down the path of "what price is the consumer willing to spend and will it help or hurt the brand?" I discovered that the products were totally disparate in price - one was under $10 and the other was over $30 (cost). The cheaper item was sold for double the price of the more expensive item (retail).
I told them that the profit margin was great, but, why continue to sell the more expensive product and, more importantly, why try and build a brand around it? The volume of the cheap product made up about 40% of their product line and the more expensive item had yet to be more then 5%.
In our discussions, I discovered that they thought the more expensive item would "allow" them (my client) to be perceived as a more quality conscience company.
Let me help you more understand the dilemma I was in - the products, at Retail were $129 and $99 (with the more expensive retail being the cheaper cost of the two products). Again, if the market will pay, good for them in charging over 100% margin.
But, would it be worth it to build a brand name around the $99 item, when, obviously, it can be easily perceived as a quality product, but, is extremely niche, does not sell well, and could and should remain where it is, a small niche product that has a nice profit - i.e. remain the same.
More importantly to me, should BOTH products be linked? The same brand name.
I can't go further on this right now, but, I think you can understand where I am going. Of course I will advise them on building the brand on both products, but, do they really want to? Where do they see the brands in five years? And, just as important, what do they want that brand to convey?