Monday, March 23, 2009

Are Pricing-Strategies Here To Stay?

BusinessWeek has an interesting article addressing what many brands must be worrying about over the past few months - whether the recent panicked pricing strategy would eventually mean that low prices are here to stay. A shift in attitudes about consumption and frugality for many consumers - if sustained - could mean brands' loss of pricing power endures long after the recession ends.

There are some faint glimmers of hope at the end of the tunnel, it would seem. Brands can eventually expect the same level of pricing power as experienced previously, but need to do far more work to keep brands more relevant than before. With margins cut thin by increased competition - both on the Internet and globally - retailers should expect to woo customers through service and time savings. Even when the economy rebounds, services will almost certainly become increasingly important in a range of industries as big-ticket goods - that once offered healthy margins - become commoditised.

Brand differentiation and profit margins will revolve more tightly around intangibles, not just the physical product.'s recent strong financial performance stems from bargain prices and their innovative customer reviews - both helping to unlock better margins for the online retailer.

Perhaps the recession has just served a timely reminder to us on some of the fundamentals of brand building and brand management. It has always been and always will be about how our brand makes the consumer feel. Pricing strategies are mainly a lazy and short-sighted view on meeting sales targets and will never be sustainable.

Via: BusinessWeek