Inflation: Does your brand equity justify your price point?
By Zion Rufus
–Brand managers must understand that the justification of a price point is not merely a numerical exercise but an intricate connection between consumer perception and the brand’s ability to deliver on promises. Only brands with strong equity can weather the storm of economic uncertainty by upholding the trust they’ve meticulously built.
Now, more than ever, as we navigate the intricate terrain of an economic crisis coupled with inflationary pressures, the need for brands to judiciously justify their price points is a critical aspect that can make or break their resilience in the market.
Once-affordable commodities are slipping out of reach, leading some businesses to exit the country, and others are forced to shut down certain product categories.
During inflationary periods such as this, consumers are also forced to make tough choices about where to allocate their limited resources. As a result, a brand’s ability to maintain price appropriateness becomes a critical factor in retaining customer loyalty; brand managers must also now tread with caution.
“Price is vital,” said Akin Afere, Associate Director, for Nigeria at Kantar, as he shed light on the importance of understanding the intricacies of consumer behavior during economic challenges.
“During times like this, you need to understand the pricing power of your brand and be meaningfully different. What do your customers value most about your brand? You need to understand who your buyers are. You cannot exist, and your product cannot exist without its buyers. So, how predisposed are those buyers to your brand versus other brands in that category? Secondly, you need to understand price sensitivity. We’ve talked about inflation, and we’ll allude to it a lot more as it affects people differently, affecting the way that they make their plans and decisions,” Afere explained, adding that this is where the perceived value, backed by strong brand equity, becomes the compass guiding consumers through the maze of rising prices.
During economic upheaval, consumers scrutinize their spending with a discerning eye, making decisions based on perceived value and brand trust. This is where brand equity comes into play – the intangible yet immensely valuable asset that encapsulates the trust, loyalty, and perceived value consumers attach to a brand.
According to Afere, the key lies in ensuring that price adjustments align with the intrinsic value consumers associate with the brand. It’s not just about passing on increased costs; it’s about preserving the delicate balance between price and value.
“Does your brand’s equity justify the price point? Those are questions we need to ask ourselves. Especially in an environment like this. What you shouldn’t do is say, ‘How do I just get volume and increase my capacity to reach the audience in any way necessary? Or pushing for promotions; you know, it seems like a low-hanging fruit in inflationary times. But we can tell you from studies and research that those short-term gains will not stand the test of time. There are better ways,” Afere continued,
As we find ourselves in an economic crisis, marked by low purchasing power and a surge in discretionary spending due to inflation, consumers are reevaluating their priorities. The very essence of brand equity lies in the emotional connection a brand has fostered with its consumers. It is this emotional tie that influences the perceived value of a brand and, consequently, justifies its price point.
A robust brand equity acts as a shield during an economic crisis, allowing a brand to command a price that aligns with its perceived value. Consumers, even in the face of financial constraints, are more likely to stretch their budgets for a brand they trust and value. This trust is earned through consistent quality, reliability, and a commitment to meeting or exceeding customer expectations.
In essence, the relationship between brand equity and price appropriateness is a symbiotic one. As brand equity builds and strengthens, it provides the latitude for a brand to navigate through economic crises with the flexibility to adjust price points judiciously. Conversely, maintaining price appropriateness during inflationary periods safeguards the hard-earned equity by ensuring consumers continue to see value in their purchases.
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