Maximize Branding & Price Perception Opportunity
All retailers know that pricing is important, but how consumers perceive that pricing is on the top of the list with it. Don’t believe me? Take a moment to think about Amazon. This retailer has worked long and hard to earn its loss leader status. So much so that now it doesn’t even have to be the lowest price to be perceived as such.
The 2014 holiday shopping season proves this. Amazon consistently had the lowest prices on a number items, but it was beat by Costco’s Black Friday TV deals. Since Amazon built up such a strong image of being a low cost leader, there’s much less pressure to offer super low prices on all items. The magic Amazon is working is called price perception.
These two words can make or break a retailer. How? Well, consider this. Say a consumer is looking for an outfit for a wedding. It’s a black tie affair and they want to dress to impress, but don’t want to break the bank. Which stores will have the styles they’re looking for at prices that they can afford? Perceived price plays a big role in which stores they’ll enter and which sites they’ll click through.
Perceived price can play a larger part in a consumer’s purchase decision than the actual price. If a customer believes your prices are out of their range, they won’t even bother with your store. The opposite is also true. If a retailer promotes itself as a value brand, it might not be top of mind for a shopper looking for evening wear, even if they have products that would work perfectly.
Branding’s Impact on Price Perception
Branding plays a large role in price perception because how a business portrays itself impacts how likely consumers will be to purchase their products. Brand identity must be crafted and constantly curated to put the best foot forward. It’s a back-and-forth between price perception and brand identity because prices must match branding and vice versa.
Why is this so crucial? A strong brand identity that is coupled with matching prices will attract the most appropriate customers. A perfect example of this is Gap Inc. This overarching brand pulls in customers from distinct price points. Shoppers that want to pay less can go to Old Navy, Gap is about in the middle, and shoppers who will pay the most can go to Banana Republic. Having access to such distinct customer segments has made Gap Inc. incredibly successful. The company exemplifies the need to have distinct pricing and target the most fitting audience.
How Competitor Pricing Fits in
We all know that retailers don’t exist in a vacuum, and that means that competitor pricing also has a big role in price perception. I would argue that relative price matters just as much as a retailer’s actual price. For a low cost leader like Amazon, appearing to beat competitors on price is a main aspect of their brand strategy. For that reason, 57% of showrooming shoppers (those that browse in-store, but ultimately buy online) use Amazon as their benchmark of choice and 92% of smartphone shoppers visit Amazon first. A large part of Amazon’s price comparison dominance has to do with the fact that so many believe Amazon will have the lowest prices. That’s price perception at it’s finest for you.
So how does a retailer gain the price perception prowess of Amazon and Gap Inc? It all lies in pricing strategy and brand equity. When pricing always matches up with the brand identity a retailer conveys, then they will be first on a shopper’s mind.
Want to learn more about price perception? Download Wiser’s new online retail pricing eBook for free.