Profits, Revenues, Pricing, Branding: The Ripple Effect

This post was updated in June 2022. It was originally written in April 2016.

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:

1. I need to raise the profitability of my business. You can boost profitability in two main ways: reducing expenses or increasing revenues. If you’re already negotiating with vendors and skimping on non-required items, you need to focus on growing revenues. So you realize…
2. I need to raise the revenues for my business. There are also two basic ways to increase revenues: selling more quantity at your existing price point or raising your prices (without losing too many customers). If you can raise your prices and not lose your customer count (or even if it reduces total customers, but each is more profitable), this is a preferable place to be. So you determine…
3. I need to raise my prices. It can be challenging to increase costs with current customers. Depending on the nature of your business, you may have repeat customers all the time, and rising 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…
4. I need to improve my branding. You’re not getting ahead if you’re raising prices to reflect rising costs without changing the value. You need to reposition your product and service, so the perceived value of your product is higher than it was previously.

How much would you pay for a hamburger?

Restaurants are an accessible 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 many casual lunch spots. You can even pay $30 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 would pay that if they continue to be served on Formica tables and plastic booths. The price doesn’t match 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 it’s easy to see how it encompasses so much more when you think about a restaurant.

The brand experience for a restaurant includes:

• their logo and signage,
• the decor and ambiance of the restaurant,
• the uniforms and service you receive from waitstaff,
• what their menu looks like—the physical menu and 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.

Your logo, signage, and packaging design may not be as critical as a restaurant or packaged consumer products. But it’s not irrelevant either.

For most B2B companies, your website is like the sign and storefront. When we walk by a restaurant, we look at the movement, read the menu and peek in the windows to see what we might expect. What are they selling, and what is the atmosphere like? Your B2B website serves this exact purpose. It should be easy to understand what you’re offering and who you can help. Your site also creates a feel for your business, and it’s like working with you. You are likely trying to position your company as a leader, an expert, and highly professional.

Your sales team is like the host or hostess. Are they friendly, helpful, and know the industry? How do they act, and what do they say when networking for your business?

Your team members are like the waitstaff. The customer service you deliver to your customers is vital to their satisfaction with your work. Does every team member treat clients with respect and courtesy?

How you present and describe your products and services is your menu. The top restaurants have small, carefully curated menus. It’s only places like Applebee’s that have multi-page menus. Do you represent one focused niche and do it well, or are you offering too many services, making you poorly qualified to do any of them well?

What you sell is your food. The products and services you offer are the ‘thing’ someone is buying, but we all know that a great meal goes far beyond just calories down the throat. If you want to demand higher prices, your brand image must also fit, or you’ll struggle to close sales.

Good branding allows you to raise prices.

Well-known brands can charge more for similar products or services. Think about Coca-Cola, Apple, or Sony.

An investment in branding will have a financial return as you can show higher value to prospects and raise your prices.

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