Can Rebranding Make Price Increase More Acceptable To Customers? 🎭
Price increases are sometimes necessary to offset rising costs. Companies must implement strategies that appeal to customer value drivers at this time or risk experiencing margin loss. There are different ways to say price increase. We’ve found one successful company that has used branding in announcing a price increase and signal price transparency while increasing the price ceiling by a factor of ten using advanced price optimisation techniques. We’re talking about the budget retailer, One Beyond.
In this article, we discuss how One Beyond — previously known as One Below — is using strategic pricing and marketing to effectively communicate value to customers during the risky stage of announcing a price increase. We will also be cross-referencing other real case examples to show examples of what to do and what not to do when you take a price rise.
At Taylor Wells, we argue that customers are likely to accept price increases when coupled with the right marketing and branding strategies. We believe that in the face of inflation, businesses can turn price transparency to their advantage. By the end, you will understand how to strategically raise prices while maintaining customer loyalty.
How Rebranding Can Make Announcing A Price Increase More Acceptable To Customers
When One Below raised its price points last year, it changed its marketing slogan from “everything £1 or less” to “4,000 products £1 or less.” Now that it has raised its prices even higher, with nearly everything costing £1 or more, it has wholly rebranded as One Beyond, with the strapline “Amazing value from only £1.” What urged the company is announcing a price increase?
A Shift In Marketing Strategy When Announcing Price Increase
Chris Edwards and his son of the same name, the same duo behind Poundworld, launched One Below in early 2019.
Following the demise of Poundworld under TPG Capital ownership, the pair hopes to demonstrate that the pound shop model is still profitable, but with a twist.
Selling at prices up to £1, as opposed to only at £1, meant competitors such as Home Bargains would not be able to undercut by a few pence.
One Below is the only brand on the high street that sells everything for £1 or less, with branded and imported items starting at 29p.
But thanks to rising costs, only a small percentage of items remained under £1. Approximately 70% of products now cost £1, with the remainder costing more, up to about £10.
The new approach is a good practice of future-proofing and a way out of the inflationary trap of a £1 ceiling.
For instance, if they kept everything for £1 or less, they would have to remove far too many items from the store. This would be impractical. They can make it work for a while, but it will not sustain their profits for long. The truth is that with all of the inflation, it’s nearly impossible.
So far, about eight stores have opened under the new One Beyond label. While the new pricing strategy has been implemented across 90 stores.
The new model is succeeding, with like-for-like figures up by double digits. They plan to introduce the new brand throughout the country in the first quarter of next year.
So, what’s behind this success? How to inform customers of a price increase? The key point is how the company communicates value to its customers.
Discussion on Announcing A Price Increase and Rebranding
Fixed pricing and broad price increases, like many budget retailers with large inventories priced within a slim price bandwidth, are not sustainable solutions; in fact, the opposite is true.
One Below’s rebranding to One Beyond, and announcing a price increase was not coincidental either. It was well-planned and strategic. In reality, the business’ mix of rebranding, marketing approach change, and pricing strategy embodies the benefits of price transparency.
For example, if they implemented a price rise under their old proposition, customers would instantly reject the increases and lose trust in the brand. On the other hand, they would not have made enough money to cover their costs if they had kept their prices the same. The company had to do something else or risk losing money or, worse, going out of business.
Hence, ‘One Beyond’ basically used their new branding as a platform to communicate the value of their new proposition to customers while escaping the £1 price ceiling that had for long capped their profitability.
They strategically optimised 7,000 SKUS until about 70% of their highly visible products cost £1 while increasing the price band for all other products to £10, optimising in turn price points within that band.
There are several circumstances where an increase in price becomes controversial for customers – as shown by the recent Ticketmaster and Netflix price rise strategy. Some say that pricing changes are dismaying, inconvenient, and disagreeable.
One of the most recent price increase outrages was when Ticketmaster used dynamic pricing to sell a significant portion of tickets for Bruce Springsteen’s upcoming tour for more than $4,000 (£3,300). Many people thought this was absurd.
Netflix is another example of what not to do when announcing a price increase. After a decade of rapid expansion, the streaming platform lost 200,000 users in April for the first time since 2011. Netflix expects to lose another 2 million subscribers in the current second quarter. This puts the company on track for its worst year yet. What is the cause of this decline? Hiking prices.
The basic plan for the service is now $9.99 per month, up from $8.99. Its standard tier now costs $15.49 per month, up from $13.99 previously. Finally, Netflix’s 4K tiers have increased in price from $17.99 to $19.99 per month.
Membership growth has slowed in the last year and remains below pre-pandemic levels. Price increases exacerbated the situation.
These kinds of negative outcomes are the reason why most business owners are hesitant to clearly communicate their pricing. If not addressed immediately, public outbursts and negative customer feedback may occur, influencing the inability to retain customers.
But what they didn’t realise is that the price increase isn’t the real issue. It’s a loss of balance between pricing and value.
One Beyond ensured that they would be able to provide reasonable justifications for price increases that are in line with customer values. For example, by rebranding and being open about price increases, they demonstrate to customers that they are not willing to sacrifice product quality just to keep prices low.
Customers are well aware of rising costs, and by increasing its prices, One Below gives the impression that it is still offering the same value in the conduct of raising its prices.
Another key marketing strategy One Beyond applied to raise its brand profile and prices at the same time was by emphasising the quality of its product portfolio. For example, they explained how their price increases benefited their customers. They also pointed out how price increases would enable the business to continue to deliver value to customers.
Customer value related to ‘quality’ revolved around several researched and proven customer value drivers. Things like: product range and breadth; household brands that are known for their effective performance and safety; and continued supply of customers’ favourite brands.
This value-based price rise communication is important because it reminds customers of why they buy from One Beyond. Not just bland quality assurances or price match guarantees that create more work for the customers. What’s more, value-based communications gave their customers a valid and justified reason for the price increases. Which otherwise may have been perceived as profiteering or price gouging.
So, what lessons can businesses take away from One Below’s initiatives? Can other businesses use value-based price rise communications?
Implications of Announcing A Price Increase And Rebranding
Marketing, branding, and pricing are all powerful business forces that influence customer perception. Thus, businesses must take their time developing strategies for how these three aspects can work together effectively.
Implementing transparent price increases and communicating it, along with the value that your company offers, is a wise move. It instils confidence in your customers that you conduct trustworthy business and get the value they pay for.
Transparency in price increases, when done correctly, enables companies to negotiate with confidence. This way, they can maintain good relationships with customers and suppliers. This is what One Beyond is trying to do.
Retaining competitive pricing on bestsellers while optimising the long tail is an untapped pricing opportunity for businesses with a large product inventory.
A full review of your product price architecture enables retailers like One Beyond to introduce a new higher-priced range of products into the store, attracting a new set of customers willing to pay higher prices.
One Below makes good use of value-based branding, pricing, and obviously advertising from One Beyond to maximise margins. It’s brilliant to see retailers trying and succeeding with strategic pricing and marketing strategies. The good news is that this success in announcing a price increase can happen to you. No matter what industry your company is in. Or how big your company is. You simply need to work with the right pricing team.
Our findings show that with the right set-up and pricing team in place, incremental earnings gains can begin to occur in less than 12 weeks. After 6 months, the team can capture at least 1.0-3.25% more margin using better price management processes. After 9-12 months, businesses often generate between 7-11% additional margin each year. As they identify more complex and previously unrealised opportunities, efficiencies, and risks.
For a comprehensive view and marketing research on integrating a high-performing capability team in your company,
Are you a business in need of help to align your pricing strategy, people and operations to deliver an immediate impact on profit?
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