Pricing–1 Pricing Professor Carl Mela BA 460 Product Management Fuqua School of Business Brand Management System On Building A Brand Managing Across Brands

Pricing–2 Agenda Pricing to Build Equity Measuring the Effect of Price, Promotion, and Advertising on Brand Equity

Pricing–3 Pricing to Build Equity When attributes are based on experience (new camera) or belief (detergent), consumers often infer quality from price. This leads to the notion of price tiers. Quality and price determine value. Consumers will buy if value>cost. –Increase quality –Reduce price

Pricing–4 Pricing to Build Brand Equity Value pricing: Balance features and prices to satisfy objectives of firm and consumers –Design and delivery “Build a Better Mousetrap” article –Product costs Do customers really want to pay for a feature? –Product prices Willingness to pay measures (often an indicator of equity) - match prices to willingness to pay

Pricing–5 Pricing to Build Brand Equity EDLP (Every Day Low Price) –Is it better to cut price and reduce deals Train consumers to be price sensitive Inventory costs go up Production costs increase –Or increase deals and price? Increase excitement for brand Price discriminate - “Cheaper than You” paper –Jedidi, Mela and Gupta paper.

Pricing–6 Measuring the Effect of Price, Promotion, and Advertising on Brand Equity Jedidi, Mela & Gupta Brand Sales = b0 + b1*price + b2*deal b0 is brand equity b0=f (ads and discounting) b1=f (ads and discounting) b2=f (ads and discounting)

Pricing–7 Summary Price affects equity –Inferences of quality –Low price focuses attention away from brand Solutions to price competition –Fighter brand –Differentiate brand –Lower costs and price –EDLP –Charge different prices