The concept of brand building has become particularly important nowadays, in view of sustainability, growth and the difficult to earn consumer trust. In our previous publication, we explored the benefits of increasing your ad spend particularly in turbulent times. When it comes to the 4Ps of marketing, how do you set the price of your product so that your customers keep choosing your brand, even amidst the recession and rising inflation?
It turns out, long-term brand building provides the answer – and the way to increase profit.
Curious to find out more? We have distilled some valuable expert insights into actionable steps to supercharge your pricing strategy:
- Want to raise your price? Invest in long-term brand building. According to Adam&eveDDB group head of effectiveness Les Binet cited in a recent Marketing Week article, “long-term brand building is the key to firmer pricing”. In his opinion, the process requires creative advertising and changes to budgets. Binet urges marketers to pay more attention to price as a metric, to consistently measure and try to control it, especially in the context of high inflation and investors’ demand for profit. According to Chris Shipferling, Managing Partner of Global Wired Advisors, neglecting to pursue brand building could be detrimental to the health of a business since branding increases familiarity as well as brand equity, driving sales volume while increasing the overall value of a company.
- Brand building generates volume and reduces price elasticity. According to Binet, price elasticity – the extent to which a change in price impacts demand for a product – is widely misunderstood: if a 1% increase in price results in a volume decrease of 1%, then a company has a price elasticity of one; if a 1% price increase results in a volume decrease of 2%, then the company has a price elasticity factor of two, and so on. Hence, companies with a low score for price elasticity are in a good position to raise prices, as this will cause a relatively small drop in volume sales and achieve a profit increase simply by charging more. As Binet says, “the really big increases in profit come from brands that manage to increase both price and volume at the same time”. To learn more about the correct mix of long-term branding and sales activation, check out our previous publication.
- It affects your overall business valuation. According to Chris Shipferling, brand building can have a lasting impact on sales velocity, growth and your overall business valuation. Thus, the benefits are two-fold: First, revenue increases make the company more profitable, and second, you can earn more from a transaction should you decide to exit. “For premium brands, if you are going to pursue a price strategy, you need to spend more. It’s expensive. You also need a different mix of brand and activation,” adds Binet. Rather than the traditional 60:40 mix in favour of long-term brand building, premium brands may need to shift closer to 70:30, he says.
- 3 ways to raise prices successfully. Beyond budget, Binet identifies three ingredients required for companies to succeed in raising prices without losing sales volume:
- Reach. Campaigns that reach wide audiences are more beneficial than tightly targeted messages when tackling this challenge, according to data from more than 2,000 case studies.
- Emotion. According to Binet, it is not possible to convince customers to pay more for a product by rational argument. “The key to pricing power is to get people to feel strongly about your brand, to disengage the rational and make people want the thing at any price,” he says.
- Fame. According to Chris Shipferling, recognizable brands can charge premiums, whereas less-established companies cannot. Moreover, brand equity empowers founders to negotiate for a higher purchase price, which translates to increased value from a merger or acquisition. The easiest way to fame is creativity, according to Binet. “Highly creative advertising is much better at getting an emotional response and is much more likely to generate fame,” says Binet.
- Creative and effective ads generate more than four times as much profit. The latest research from Kantar proves the important role creative quality can play in driving ROMI (return on marketing investment). In collaboration with WARC, Kantar matched data from the WARC ROI database of over 1,100 award entries and winners from around the world and Kantar’s Link ad testing database of over 250,000 global ads across all media channels. The research proves that the most creative and effective ads generate more than four times as much profit and that including some longer-term brand-building features into all advertising is more crucial than may have previously been thought.
- A brand is much more than a business, though, as Chris Shipferling reminds us. It’s an experience and a sensation of belonging that you share with the customer. While it’s hard to quantify (at least at first), focusing on the intangible components of branding can engender loyalty in a way that improves the business in the short- and long-term. Last but not least, there is one particularly important factor to consider: “The stronger the effect on brand metrics like mental availability and positivity towards the brand, the more likely you are to reduce price sensitivity,” according to Les Binet.
Novelty Media, via SmartAdd, has developed a truly innovative framework that helps brands take their message to a whole new level, pairing the power of peak attention with consistent brand building. Our attention-driven media channel endorsed by Mobile Operators helps you cut through the clutter and achieve unparalleled visibility in a particularly human-centric manner. Thus, your brand stands out and makes a lasting impression while connecting with consumers on a deep emotional level. Get in touch to find out how our solution can enhance your brand building strategy and boost profitability.