Price Functions in Promotion and Building Brand Value
Posted: Wed Dec 11, 2024 6:11 am
Basic price functions
Price has many functions, but the most basic one is the information function . It consists of informing the consumer about the established value of the offered products or services (retail prices, fixed prices). It is a direct signal to the customer who is facing the right decision regarding the choice. Thanks to it, customers are able to assess what value the seller thinks a given product or service has. Another value is the comparative function , a cheaper product theoretically has a lower value than a more expensive product.
Price also has a promotional function . It is very closely related to the information function, because it signals to customers that the price of a product or service has been reduced. Promotions work in the same way as initial prices, so I will not list all of their other features. It is necessary to mention here the Omnibus directive, which obliges companies to be transparent in the matter of promotional prices . This involves placing information about the price before the promotion in a visible place. This is intended to eliminate situations in which unfair practices occurred, e.g. inflating prices before the promotion, only to lower these prices later. These changes were not only introduced in stationary stores, but also in online stores, fields appeared informing about the lowest prices applicable 30 days before the reduction.
Price as a tool for increasing the utility value of products
Price plays a key role in increasing the utility value of products , creating a perception of quality and value. A high price is often associated with better quality, which attracts people who want to deal with premium products. A prestigious price is often a determinant of the highest quality of products.
Setting the right price is very important at the design level, because it can decide which group of recipients we want to reach.
A higher price level can also encourage the increase of the utility value of products (quality, functionality, aesthetics, etc.). A higher price level influences consumers' decisions to limit consumption (e.g. stimulants), while a lower price level causes an increase in consumption (e.g. cultural goods). With the help of prices, the state can appropriately modify the level of real income and the structure of consumption.
Building a brand
Price is a key element in building a strong and recognizable brand. High prices can help create an exclusive and prestigious brand image, while competitive prices can attract a wider group of customers, making the brand more accessible. Price affects brand perception in both direct and indirect ways. A high price can equate to exclusivity, while a discounted price can attract more customers but negatively impact the perception of quality. Finding a balance between affordability and perceived value is key to a successful pricing strategy.
For example, we have two brands with different pricing strategies: Apple and Xiaomi. The company with a bitten apple released its first phone in 2007. From the very beginning, they attracted customers with the highest quality, which is still maintained after years. The high price level is maintained to this day, and the quality of iPhones has become embedded in the minds of users. In their case, the highest price = the highest quality.
The story of Xiaomi was slightly different, as it released its fantuan database phone a bit later than Apple, in 2011. From the beginning, Xiaomi was called an Apple copycat. However, there was one thing that stood out, the price of the phones. Xiaomi entered the market strongly due to the relatively low price of its devices. Thanks to this, people who did not care about the highest quality bought Xiaomi phones because they were within their reach. Currently, Xiaomi has changed its pricing policy, but they are still associated with affordable phones.
Price as a tool for income redistribution
By skillfully using pricing strategies, companies can influence the redistribution of income in society. Fixed prices and pricing policies based on state price support can support certain sectors of the economy by offering cheaper alternatives or limiting the consumption of undesirable products.
Pricing strategies can also be used to shift income between different market segments or even from one social group to another. For example, higher prices for luxury products can help redirect financial resources to sectors offering higher margins.
Pricing strategy as a marketing tool
There is a lot of talk about prices in the context of competition these days. The example of the "fight" that the Lidl chain of stores is currently waging against the Biedronka chain has certainly not escaped your attention. Two large and recognizable companies are fighting over which one has the lowest prices. However, it is the consumers who will ultimately choose the chain that better meets their needs. However, it cannot be ignored that such a large media hype has contributed to an increase in interest and thus to an increase in the number of visitors.
Pricing Policy
Effective use of this function requires understanding your target group and adjusting your prices to their needs and expectations. The price must reflect the value the customer receives and be correlated with the perceived prestige of the brand.
Pricing strategies
Appropriate pricing strategies can significantly contribute to increasing consumption, increasing production and raising real income levels. These include prestige prices, launch prices, and promotional prices designed to quickly attract attention.
Price has many functions, but the most basic one is the information function . It consists of informing the consumer about the established value of the offered products or services (retail prices, fixed prices). It is a direct signal to the customer who is facing the right decision regarding the choice. Thanks to it, customers are able to assess what value the seller thinks a given product or service has. Another value is the comparative function , a cheaper product theoretically has a lower value than a more expensive product.
Price also has a promotional function . It is very closely related to the information function, because it signals to customers that the price of a product or service has been reduced. Promotions work in the same way as initial prices, so I will not list all of their other features. It is necessary to mention here the Omnibus directive, which obliges companies to be transparent in the matter of promotional prices . This involves placing information about the price before the promotion in a visible place. This is intended to eliminate situations in which unfair practices occurred, e.g. inflating prices before the promotion, only to lower these prices later. These changes were not only introduced in stationary stores, but also in online stores, fields appeared informing about the lowest prices applicable 30 days before the reduction.
Price as a tool for increasing the utility value of products
Price plays a key role in increasing the utility value of products , creating a perception of quality and value. A high price is often associated with better quality, which attracts people who want to deal with premium products. A prestigious price is often a determinant of the highest quality of products.
Setting the right price is very important at the design level, because it can decide which group of recipients we want to reach.
A higher price level can also encourage the increase of the utility value of products (quality, functionality, aesthetics, etc.). A higher price level influences consumers' decisions to limit consumption (e.g. stimulants), while a lower price level causes an increase in consumption (e.g. cultural goods). With the help of prices, the state can appropriately modify the level of real income and the structure of consumption.
Building a brand
Price is a key element in building a strong and recognizable brand. High prices can help create an exclusive and prestigious brand image, while competitive prices can attract a wider group of customers, making the brand more accessible. Price affects brand perception in both direct and indirect ways. A high price can equate to exclusivity, while a discounted price can attract more customers but negatively impact the perception of quality. Finding a balance between affordability and perceived value is key to a successful pricing strategy.
For example, we have two brands with different pricing strategies: Apple and Xiaomi. The company with a bitten apple released its first phone in 2007. From the very beginning, they attracted customers with the highest quality, which is still maintained after years. The high price level is maintained to this day, and the quality of iPhones has become embedded in the minds of users. In their case, the highest price = the highest quality.
The story of Xiaomi was slightly different, as it released its fantuan database phone a bit later than Apple, in 2011. From the beginning, Xiaomi was called an Apple copycat. However, there was one thing that stood out, the price of the phones. Xiaomi entered the market strongly due to the relatively low price of its devices. Thanks to this, people who did not care about the highest quality bought Xiaomi phones because they were within their reach. Currently, Xiaomi has changed its pricing policy, but they are still associated with affordable phones.
Price as a tool for income redistribution
By skillfully using pricing strategies, companies can influence the redistribution of income in society. Fixed prices and pricing policies based on state price support can support certain sectors of the economy by offering cheaper alternatives or limiting the consumption of undesirable products.
Pricing strategies can also be used to shift income between different market segments or even from one social group to another. For example, higher prices for luxury products can help redirect financial resources to sectors offering higher margins.
Pricing strategy as a marketing tool
There is a lot of talk about prices in the context of competition these days. The example of the "fight" that the Lidl chain of stores is currently waging against the Biedronka chain has certainly not escaped your attention. Two large and recognizable companies are fighting over which one has the lowest prices. However, it is the consumers who will ultimately choose the chain that better meets their needs. However, it cannot be ignored that such a large media hype has contributed to an increase in interest and thus to an increase in the number of visitors.
Pricing Policy
Effective use of this function requires understanding your target group and adjusting your prices to their needs and expectations. The price must reflect the value the customer receives and be correlated with the perceived prestige of the brand.
Pricing strategies
Appropriate pricing strategies can significantly contribute to increasing consumption, increasing production and raising real income levels. These include prestige prices, launch prices, and promotional prices designed to quickly attract attention.