Why Customers Happily Pay More for Brands They Trust
You will never see someone bargaining for a pair of jeans at a Levi's store. You will never encounter anyone negotiating a deal for Boat speakers. You will never come across an individual who convinces a salesperson to give them an iPhone for a thousand less than the original price. But on the other hand, once they pay the premium pricing, they tend to flaunt it and tell everyone they know, sometimes even people they don’t know, about how much they paid for it and how expensive their bags, clothes, bike, or appliance is.
The irony is that you will observe these same people fighting for pennies at a local grocery store or bargaining hard with a fruit seller.
Why is that? Any guesses?
Come on, the answer is simple.
They value the brand they pay more for, and most importantly, they trust it. Remember this: price is rarely just about cost; the real effect comes from the brand perception. The example I just mentioned is merely a reflection of how people react, but if you want to dig deep, you can visit any electronics store in the local market, and you will see that certain products, let’s say Apple products, are priced significantly higher than competitors with similar specs. Yet they register more sales, catch more eyes, people ask about them, are ready to go over budget, and most importantly, they just have this urge to buy it. If we talk particularly about Apple, decades have gone by, new companies came and collapsed, and the other market competitors tried to copy and offer better features and deals, but still Apple prevails in the market. Why do you think that is?
Because Apple has strategically and smartly worked on brand positioning, which elevates its brand perception to such an extent that people do not even want to think logically about buying it, and they just want to have it because they feel that having an iPhone connects them to a particular level and segments them to a certain status quo in society.
Of course there are other examples of strong brand perception and premium pricing, but if you ask me, Apple is the classic example of premium pricing attained through the power of brand perception. They worked out a strategy and it's their brand strategy ROI to realize. Come to think of it, what is brand premium pricing? Nothing but the ability to charge more simply because of who you are, not just what you sell. In this blog, we are going to explore the importance, application, and process of building premium pricing. Let’s do this.
Why Strong Brands Escape Price Wars
A good and successful brand is often considered strong when it comes to determining their brand recognition, goodwill, and reputation in the market. A brand that enjoys this easily escapes out from the price wars, leaving it for the other competitors to fight over. As a founder or a new entrepreneur, you can also understand this as a return on investment that you invest in effective branding operations, strategy, and efficient brand identity.
Strong brands do not indulge in price wars because they pursue and, over time, attain brand perception. There are many prominent brands known to attend brand strategy workshops for it. They build perception. They build trust. They build identity. And in doing so, they earn the right to charge more without losing customers. Branding transforms your offer from a “product” to a preference.
Brand Power and Price Elasticity
Let’s talk economics. This is important to fathom the further context. In economics, there is a famous term called the price elasticity of demand. In simple terms, it refers to the measure of how sensitive consumers are to changes in price. The more “elastic” your product is, the quicker people will switch to a cheaper alternative. As someone who is planning to brand their business and become successful, know in your heart that when you become a strong brand, the demand will become inelastic.
Premium pricing is a part of personal brand building to unlock real visibility as well. With premium pricing comes the perception of high value. There is a primitive notion in the market that still exists that if the product is of premium pricing, it ought to be good, and so it gives the underlying customers status, identity, or a sense of belonging. With this, the brands are no longer just selling a laptop or a coffee; they are selling a story, a belief, a lifestyle.
Real-World Examples of Brand Premium Pricing
The world is filled with such examples. I’ll not be joking if I say that the whole fashion and clothing industry is based on premium pricing. There are branded watches, bags, and apparel that are priced significantly higher by global brands simply because they have been able to craft a prominent perception of their brands in the eyes of the people. We have already discussed the example of Apple products.
Then there is the classic example of Starbucks, people spending 3x for the regular cup of coffee as it offers them a badge of urban lifestyle. Customers perceive more value, not necessarily more caffeine.
There are other brands like Maggi that have increased their prices more than twice in the last decade, but still people are not switching to any other noodle brand. This also is a reflection of brand perception if not premium pricing.
How to Build a Brand That Justifies Premium Pricing
Here is a quick list of pointers to keep in mind when you are pursuing the idea of building a brand with the justification of premium pricing.
- Make sure your brand stands and represents something. People must see clearly that you are reflecting on an idea or a purpose.
- The whole part of design, from packaging, content, website, messaging, voice, tone, and imagery, must influence the customers in a consistent manner.
- Seek effective brand positioning. Remember, logic drives decisions, but emotion drives value. If customers feel something about your brand, they’ll justify the price themselves.
- Practice patience and be consistent with your efforts. It will not happen in one day. On the other hand, inconsistency erodes trust, and trust is the currency of premium brands.
Bottom Line
Premium pricing has always evolved from a strong brand perception. When you invest in branding, it becomes your escape hatch from the commodity trap. The effects of strong branding reflect on creating a heavy brand perception. Now, this brand perception is how you stop justifying every rupee and start commanding it. Because when customers believe in your brand, they will stop comparing and start committing to it. Make sure you remember all of this that we discussed and implement it strategically for the success of your brand. Brand Professor blesses you with the power of brand perception.
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