Brand pricing is a challenge
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| Mercedes Benz Vs Lexus |
When Lexus started to make inroads against Mercedes in the United States, Mercedes wasn’t going to lower its price to match Lexus’ lower price. No, some Mercedes managers even proposed raising Mercedes’ price to establish that Mercedes is selling prestige that the buyer can’t get from a Lexus. But brand price premiums today are shrinking. A leading brand in the past could safely charge 15 to 40 percent more than the average brand; today it would be lucky to get 5 to 15 percent more. When product quality was uneven, we would pay more for the better brand. Now all brands are pretty good. Even the store’s brand is good. In fact, it probably is made by the national brand to the same standards. So why pay more (except for show-off brands like Mercedes) to impress others? In recessionary times, price loyalty is greater than brand loyalty. Customer loyalty may reflect nothing more than inertia or the absence of something better. As someone observed, “There is nothing that a 20 percent discount won’t cure.”
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