Price, Brand and Profit
One of the most important things I learned in business school was the importance of price. A 1% improvement in price yields a 7% improvement in profit. Traditional managers are trained to manage costs – modern managers are trained to manage price.
The key to managing price is in brand strategy. Consider the price differentiation between name brand sodas and store brand sodas at your local grocery store. The products are essentially the same – the same ingredients, packaging and delivery. But name brand sodas command 10% – 15% more price than the Safeway brand. Do the name brands compete against Safeway based on price? No! Even though the products sit side-by-side on the supermarket shelf, name brands maintain their price, targeting a different market segment instead.
Does your firm have a brand strategy? How much of your management resources are devoted to managing price?
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