Profits, Revenues, Pricing, Branding: The Ripple Effect

April 11, 2016 | Branding, Business, Positioning

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Revenues, Profits, Pricing, Branding

If you look at your company’s financials, and the bottom line is not looking as strong as you’d like, you may find yourself walking through this type of scenario in your head:

I need to raise the profitability of my business. You can raise profitability two main ways: by reducing expenses or increasing revenues. If you’re already negotiating with vendors and skimping on non-required items you need to start focusing on increasing revenues. So you realize…

I need to raise the revenues for my business. To increase revenues there are also two basic ways to think about doing this: selling more quantity at your existing price point, or raising your prices without losing too many customers. As a business owner, it may seem much more desirable to be able to raise prices. Face it, if we could all just raise our prices and not lose our customer count (or even if it reduces total customers but each is more profitable), this is clearly an preferable place to be. So you determine…

I need to raise my prices. It is desirable to have the perceived value of your product be higher than your competition. But, it can be challenging to increase prices with current customers. Depending on the nature of your business, you may have repeat customers all the time and increasing prices without some indication of a change in product value may cause them to look elsewhere. So you realize your product or service needs to be perceived as higher quality or in a different niche. So you see that…

I need to improve my branding. If you’re just raising prices as a reflection of rising costs, without actually changing the value you’re not really getting ahead. You need to reposition your product and service.

How much would you pay for a hamburger?

Restaurants are an easy market to understand how brand perception influences pricing.

Think about hamburgers.

You can pay about $1 (yes that doesn’t even seem possible) for an extremely low-quality, fast-food hamburger. You can also pay around $10 for a hamburger at a lot of casual lunch spots. You can even pay closer to $25 dollars for a hamburger at an upscale French bistro-style restaurant.

Now clearly the quality is not the same. But could the fast food restaurant or the casual lunch spot ever get $25 for their hamburger? Even if the casual lunch spot started to use grass-fed, all organic beef, no one is going to pay that if they continue to be served on formica tables and plastic booths. The price just doesn’t match with their brand perception. The restaurant would have to rebrand to be able to make a dramatic price change.

The word branding is often thought to equal a logo, but when you think about a restaurant it’s easy to see how it encompasses so much more.

The brand experience for a restaurant includes:

  • their logo and signage,
  • the decor and ambience of the restaurant,
  • the uniforms and service you receive from waitstaff,
  • what their menu looks like—the physical menu as well as the types of items on it.

Pricing and Branding for B2B organizations

It’s easy to see the connection between pricing and branding with restaurants, but what if you don’t have a consumer product? It’s not as different as you might expect.

Just like a restaurant, you build your brand perception on many levels.

Unlike a consumer business such as retail, restaurant or packaged good, the design of your logo, signage and packaging may not be as critical. But it’s not irrelevant either.

For most B2B companies, their web site is like their store or restaurant. And I’m not talking about e-commerce functionality. I’m talking about creating a feel for your business and what it’s like to work with you. Positioning your company as a leader, as expert and highly professional.

Your host or hostess are the people networking for your business. Are they friendly, helpful and know the industry?

Your waitstaff translates to your customer service. Does every team member treat clients with respect and courtesy?

Your menu is how you present your products and services. Do you represent one focused niche and do it really well, or are you offering too many services, or focused on the only the lower-paying prospects?

And your food is your delivered products and services. Are they high-quality or fast food. Both models can be profitable, but only if your expenses and revenues work out. If you want to demand higher prices, your brand image must also fit, or you’ll struggle to close sales.

What’s the most you’ve ever paid for a hamburger? Was it worth it?

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