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Pricing Strategies from the multinationals that can be used in your business and any business

2, Mass market pricing for Premium Brands: With examples from Pizza Express

Price affects people’s opinions of brand often they won’t be aware that they are making the connection but they are. Low prices generally mean low quality in the consumers mind, often price is the only way a consumer has to gauge what the quality of a product or service is.

Businesses spend huge amounts building brand values and having their products or services sold at a low price can damage this. As such many businesses won’t sell to businesses which they think will offer low prices and so won’t supply for example people selling on ebay or to Supermarkets. Levi refused to supply Tesco with their Jeans fearing they would cut prices using them as a loss leader, Tesco bought Levi jeans on the Grey Market instead (from excess stock from another business), and sold the Jeans at £30 compared to an RRP of £ 55 Levi took legal action against Tesco [1].

There are many ways around the problem of having a premium brand but wanting to compete on price with competitors, constant or frequent special offers for example, consumers will be aware of the normal or recommended retail price and gauge the quality of the product on this however the discounted or offer price will mean that there is little difference in price between it and other lower quality brands meaning most consumers will buy the better quality brand at the same price or only slightly more than another brand therefore feeling they have got better value for money.

Pizza Express use these kind of strategies almost to perfection. Pizza Express have a premium brand when compared to places such as Pizza Hut, Pizza Express is seen as a ‘proper restaurant’ with decor and service to match, this does have an extra cost compared to Pizza Hut and the quality of the ingredients will also be slightly higher, however these costs are fairly negligible.

If you look at the Pizza Express menu the prices are higher than Pizza Hut and reflect the brand values, this also allows for Price Skimming as those who are not Price Sensitive will pay these prices. However Pizza Express almost constantly have offers available that bring prices down to a level where they are similar to the prices of Pizza Hut etc. Consumers are now getting to use a premium restaurant for the same price as what they perceive to be a lower quality restaurant. Furthermore the fact that many of the offers are available through quality newspapers such as the Times gives further positive associations to the brand and the fact that the offer is available to the consumer only through having bought the newspaper means they feel they have in fact paid for this offer so that they feel more inclined to use it and are less likely to assume that if Pizza Express are giving an offer they must be making too much profit, many will assume the newspaper has had to pay Pizza Express for this offer for its readers.

So if you own a restaurant the way to use this strategy is quite clear, if you have the one restaurant or a localised chain you may want to use offers in local newspapers, varying the offer and discontinuing for periods of time will help stop consumers becoming wise and associating your business with being a discount brand. Similar strategies can work for other services as well though from Dry Cleaning to Car Servicing.

Also try using offers that aren’t so obvious half price and buy one get one free can work but consumers associate them with the constant special offers in supermarkets. Special offers such as a free starter or desert with any main course or get four tyres and only pay for three are still discounts but without negative associations joined to them.

These strategies can work for products as well and for retailers, a shop which has a premium brand can use exactly the same strategy to compete on price with competitors, for example an independent butchers with a premium brand will have to compete with the supermarkets, the products the butcher offers are likely to be more expensive and the level of service will be higher so there will be limitations so they may need to focus on offers for products where they can afford to drop prices or offer different but comparable products at low prices, it is also important to remember that the premium brand may not need to drop prices quite as low as the lower quality brand: many consumers will choose based on value rather than price, so the butchers rump steak at £15 per kilo reduced from £18 per kilo may be seen as better value than Tesco’s rump steak at £13 per kilo.

Please contact me, Dave Cousin with any thoughts and queries via my website at www.trig-point.co.uk

Next time I will be looking at using multiple brands at different price points with examples from Tesco and Sony.

[1] Information on Levi and Tesco taken from: Brassington ,F. and Pettitt,S(2003) Principles of Marketing. 3rd Ed. Lombarda, Italy : Prentice hall