Now With 30% More Emotion!
Any Brand Manager worth his or her salt knows how to predict purchasing behavior. An increase in price will lead to lower demand while a decrease in price will lead to higher demand. It’s Economics 101. However, a definitive body of science tells us that human beings don’t like to be described by a simple equation. We are unique and complex and the reason we buy something isn’t because it’s cheaper or more expensive. It’s because we want it. The reason this Economics 101 theory works more as a generalization and less for your brand is that it’s in the wrong classroom. Demand is anything but economical. Demand is emotional and predicting the price of an emotion takes a lot more Psychology than Economics.
Speaking of salt, how much did you pay for a container of these common crystals the last time you were at the grocery store? If you purchased the name brand of salt, chances are you paid more than a 30 percent premium. I’d like to take this moment to remind you that salt is a commodity. Its recipe is identified in high school Chemistry classes as sodium chloride or NaCl and it can be found washed up on beaches and across desert plains. So why on earth are you paying so much more for the salt with the little girl and the umbrella?
Brands Are Like Hugs
In short, everyone wants to feel good. You know the brand name salt you buy is packaged in the cleanest of facilities and is safe for your family. It is perhaps the same salt that was present on your parents’ and grandparents’ dinner tables. The 30 percent premium you paid is the price of emotion. So let’s start pricing emotion, shall we?
What are you really selling?
Imagine you have two consumers. We’ll name them Laura and Nancy. Laura has been loyally using your brand for years. She is an advocate, a zealot and a poster child. Nancy barely knows who you are, rarely thinks about your product and purchases it even less than that. How do we price your product in order to keep Laura happy and get Nancy to flash her magnetic stripe?
Price Doesn’t Matter to Laura
Thousands of qualitative interviews with people like Laura have revealed an extremely consistent pattern. Laura the loyalist doesn’t care about price. When she reveals the deeper motivations behind why she buys and re-buys and re-buys, price is almost never discussed. Instead, Laura describes her experiences with your product. She tells us about the memories that, for one reason or another, have remained in her head because of how much she enjoys the brand and how much it rewards her. She rarely talks about price. That’s because Laura isn’t buying a deal, she’s buying an emotion. And emotions rarely come with price tags.
Price Is Everything To Nancy
On the other hand, all Nancy will talk about is price. This is because Nancy isn’t buying your brand for how it makes her feel. To be clear, she is also motivated by emotions, but they’re not emotions that connect to your brand. Nancy is getting her reward from the deal. Her actual brand choice pales in comparison to the satisfaction she gets from knowing she forced you to price your product 11 cents cheaper. And as soon as your price normalizes, she’s out hunting for a new deal. Probably from someone else. The problem with selling to Nancy is that it’s so exhausting. Negotiating with her on price ends up being a lose-lose for you: margins drop and brand loyalty isn’t any better for it.
What Price Love?
Every brand sells more than what the receipt might show. As Laura’s story illustrated, in order to price the product you sell, you have to stop thinking about the product you sell. Brands sell emotions, experiences, and rewards. So after you’ve figured out how to cover the basic costs, start asking your customers how your brand makes them feel. Ask Laura and other loyalists like her what they’re willing to pay. How much is the emotion, experience and reward worth to them? You don’t need to make your brand cheaper in order to get Nancy to buy, you need to make it so emotionally rewarding that Laura can’t stop telling Nancy about it. When we get emotions involved in our brands, we often see the price is just right.