It was the Italian painter and engineer, Leonardo da Vinci, who once said that, “All our knowledge is the offspring of our perceptions.” I totally agree with that statement. That's because—overwhelmingly, it is our perception of reality that has more bearing on the decisions we make—than actual reality does.
For example, think about that one person you know—whether it was a classmate, co-worker, or maybe even a neighbor—that you probably perceived to be a certain way and may have viewed them negatively prior to actually getting to know them. But after being around them more and more—you realized you were wrong about them—in reality, you found out that you both had a lot in common and ended up becoming friends with them.
However, when it comes to customers—in many cases, your brand won’t get the chance to make a second or third impression on them. And the stories that your brand’s prices initially tell customers—whether true or not—is often all the knowledge they’ll need in order to come to a conclusion about just how valuable your products or services are to them. Which could have a big impact on your sales.
How pricing creates perception
In 2017 alone, luxury clothing manufacturer Burberry burned $37.8 million of unwanted products. Not just Burberry, but the reason why many other high-end labels like Cartier, Louis Vuitton, and just about any other luxury brand you could think of—also destroy hundreds of millions of dollars worth of unsold merchandise is simple—it beats the alternative. Which is discounting the price of their products.
By destroying their unsold merchandise rather than lowering prices to sell them—luxury brands protect the perception of their brand—which to consumers, is one of prestige.
Luxury brands understand that price points tell a story that creates a perception in the minds of their target customer. The more that their products costs—the more exclusive those products become. And the way that the human mind works—high-value is a direct correlation between exclusivity and a higher price point.
Make no mistake, valuable brands that are known for being inexpensive also understand the narrative that their price points convey to customers as well. Which is why in their advertising—brands with low priced products or services often put an emphasis on their quality—due to the fact that consumers often affix lower prices to poorer quality.
Selecting the proper price point to tell the right story to customers
If you’ve ever taken an economics course, odds are—one of the first lessons you learned was the theory of price. The theory of price states that the price point for a specific good or service should be determined by its relationship between supply and demand at any given time.
In other words, the demand or lack thereof for your products or services is the key determinant in whether you should raise or lower their prices.
The theory of price is a great way to decide the price for your products or services if your only aim is to generate revenue. But what we’re talking about here—is how to create a proper narrative through pricing, so that your target customers will view your brand through the lens of your choice.
The way to begin that process is by answering the following questions about your target customers:
Who are they?
Why would they want to buy your brand's product or service?
What could they afford to pay for it?
How do they want to feel after experiencing it?
On a scale of 1-10, how much do they care about what others would think of this purchase?
Then, ask yourself:
Do you want your brand to be perceived by your target customers as high-end, moderate, or low-end?
Where do you want your brand to be positioned in its respective industry?
By answering those seven simple questions—you’ll have a clearer understanding of your target customer and how to set a price point for your offerings that would help cultivate a perception of your brand that is congruent with how you’d want it to be perceived by those target customers.
Examples of great brands that intentionally tell stories through pricing
In her book, What Great Brands Do, author Denise Lee Yohn, writes, “For great brands, the customer is not always right—only the right customers are always right.” When it comes to the perception of your brand—whether they are accurate or not—your target customers are always right.
Great brands are aware of the fact that whatever perception their target audience has of their brand is true…to them. Which is really all that matters in the long-run. This is why great brands do their very best to influence the perceptions of those they seek to serve. And pricing plays a huge role in achieving that objective.
These are a few great brands that have done an amazing job at telling their story through pricing:
Hermès: World-renowned for being the oldest luxury brand still in business today, Hermès is a brand that exudes luxury. Their products tell a story to consumers that Hermès is a brand that is only for the opulent—which is a lifestyle most people aspire to live.
Walmart: Walmart’s current slogan is “Save money. Live better.” Not only is that a great slogan—it’s also reflective of their low prices. Walmart's prices tell a story to consumers that Walmart will help them save a lot of money if they purchase products at their stores—which is appealing to the majority of consumers.
Nike: It’s hard to keep Nike off of any list of brands that do a great job at storytelling. Nike has found that perfect balance between luxury and affordable pricing. Nike’s prices tell a story that Nike products aren't priced so high that you couldn’t afford them. But they're also not priced so low where you would question the brand's prestige.
Conclusion
When you really think about it, the art of branding is simply the process of telling a continuous story in order to shape or reshape the way an audience interprets something.
By being cognizant of the fact that your pricing tells a story to customers—intentionally, you now can tell a story to your target audience that is congruent with the way you’d like them to perceive your brand.