Market Oriented Pricing Strategy For Celebrity Endorsed Brands 🪩
Celebrities are no longer just famous for their acting, singing or sports skills. They have become powerful brands in and of themselves – with the ability to instantly endorse a product or service and reach an audience of millions. From beauty and fashion to technology and lifestyle products, celebrity branding is more popular than ever. Famous faces are now used by companies as part of their marketing strategies to create an emotional connection with their customers. The question is, do they have a market-oriented pricing strategy?
>Download Now: Free PDF How to Build Hiring Capability to Get The Best Pricing Team
The problem is many businesses think that just because they use celebrity branding, customers will pay higher prices without hesitation. But the reality is that to truly succeed in achieving premium pricing, there needs to be a lot more than just celebrity endorsements.
In this series of articles, we will look at how businesses use celebrity branding.
We weigh on its advantages and disadvantages. We also provide a real-world scenario in which celebrity branding and high-price marketing strategy were insufficient to justify high prices. Then we advise on how to use it strategically to maximise profits.
We argue that businesses must ensure that their product or service is recognised as high quality and can genuinely offer customers real value to have a successful premium pricing strategy. As we conclude, we provide a review of the book “Priceless” by William Poundstone, offering additional perspectives on market-oriented pricing.
At Taylor Wells, we believe that branding and positioning of a product or service are key factors when it comes to setting appropriate prices for an offering. By the end, you’ll understand how to use celebrity branding to set higher prices without losing customers.
Table of Contents:
I. How Celebrity Brands Can Develop A Market Oriented Pricing Strategy
II. Market Based Pricing: Book Review On Priceless – William Poundstone
How Celebrity Brands Can Develop A Market Oriented Pricing Strategy
Marketing is a difficult job – understanding how customers think, developing strategies that will appeal to their needs and presenting these in an accessible manner can be challenging for any marketing expert. One common strategy marketers use to attract customers is celebrity branding.
What is celebrity branding?
Celebrity branding is a form of marketing in which businesses partner with famous individuals or groups to promote and endorse their products. This type of marketing has become increasingly popular due to its ability to capture the attention of consumers and create an instant connection between them and the brand.
Some businesses will pay well-known figures to appear in commercials or other advertisements, while others make them spokespeople for their products or services. Other companies team up with celebrities to create custom collections of apparel, accessories, and other merchandise.
Companies may choose to partner with celebrities who share similar values or interests as the company’s brand. For example, if a company focuses on environmental issues, it may select a celebrity who is passionate about sustainability to promote its products or services.
What are the advantages of a celebrity endorsement marketing strategy?
Some marketing gurus argue that the use of celebrity endorsements is no longer a trend – it’s a key part of an effective marketing campaign. It provides businesses with an opportunity to reach out to more consumers, build their brand’s reputation, and create a positive association in the minds of customers.
Celebrity branding can also be a powerful tool for increasing sales and pricing power. Famous celebrities have a unique charisma to influence people’s opinions, making them valuable assets for businesses looking to boost their sales and brand awareness. What’s more, celebrity endorsement can also help businesses to differentiate themselves from competitors. This establishes credibility and trust with consumers.
What are the disadvantages of celebrity endorsement marketing strategy?
While celebrity endorsements can be highly successful, they also come with a few drawbacks. For one thing, celebrity brands are usually very expensive. Businesses have to pay celebrities upfront fees and provide them with additional benefits, such as clothing and lifestyle perks. This can be especially difficult for smaller businesses that may not have the budget to pay celebrities what they want. Additionally, if a celebrity’s reputation is tarnished in any way, it could hurt the brand’s image and credibility.
In some cases, celebrity branding can also limit a business’s ability to innovate and grow. By relying heavily on celebrities to promote your product, they may be missing out on opportunities to reach a wider audience or create more unique messaging.
Discussion On Market-Oriented Pricing Strategy For Celebrity Brands
Celebrity branding can influence pricing strategy. By associating a product or service with a well-known celebrity, companies can increase the perceived quality and value of their offerings, thereby allowing them to charge higher prices.
This type of premium pricing strategy can be especially effective when the celebrity in question has a strong public image and is seen as an authority on the subject matter. For example, a company selling a high-end fashion line could employ the services of an A-list celebrity to promote its products and increase its perceived value.
However, excessive prices in the midst of celebrity endorsement can sometimes backfire. Overleveraging celebrity branding can have the reverse impact on pricing, profitability, and volumes.
Lionel Messi’s restaurant, for instance, has recently received severe criticism from fans due to its expensive prices. Football fans are unhappy about the £18.30 price tag for macaroni. Ravioli costs a whopping £39.20. The restaurant also serves a Ballon d’Or chocolate dessert for £30.90.
Fans bantered that they would only pay for the dessert if the former Barcelona icon himself personally served it. Another fan joked that eating at Messi’s restaurant would require two kidneys, eight lungs, and two hearts.
Following this incident, Messi’s team should concentrate on developing a market-oriented pricing strategy. This starts with tailoring their food to their target market. Do they understand what each segment values, wants, and consumes? They should also compare pricing bands to the market. Another critical step is to collect elasticity data from customers and modify menu prices.
A celebrity endorsement marketing strategy is only one driver of why customers pay more for goods and services.
It is important for companies to understand that celebrity branding only works as a strategy if their product or service truly offers value to customers. If customers feel like they are being taken advantage of because a company is charging an inflated price due to the presence of a celebrity, then it can do more harm than good in terms of customer satisfaction and loyalty.
Companies should focus on creating products or services that offer value, and use celebrity branding as a way to promote their products and draw attention to them, rather than relying on it as the foundation of their pricing strategy.
Implications Of Market-Oriented Pricing Strategy For Celebrity Brands
Businesses that use celebrity branding should still prioritise customer value and experience. This can make them more likely to accept higher prices. Making sure customers are informed of the value they will receive from their purchase is also important, as this helps create a sense of worthiness in their spending. Offering loyalty programs, discounts or other rewards can also help build customer loyalty.
A high-performance pricing team is key for an effective market-oriented pricing strategy. 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.
Businesses with celebrity branding should also ensure that their internal organisation is up to date. Streamline operations. This makes it easier to manage pricing structures. Our findings show that when a business builds and embeds commercial capability across the business; bolstering its internal pricing skills and capabilities to build a sustainable pricing system, it can generate at least 3-10% additional margin each year while protecting hard-earned revenue and volume. This is at least a 30-60% profit improvement straight to the bottom line.
〉〉〉 Get Your FREE Pricing Audit 〉〉〉
Conclusion
A market-oriented pricing strategy is key to a successful business. Companies should create products and services that offer value to customers rather than relying on celebrity endorsements when pricing their products and services. Doing so will help ensure customer satisfaction and loyalty, which is essential for long-term success.
Celebrity branding can be used as a promotional tool to draw attention to certain products or services, but it should not be the basis of any pricing strategy if companies want to remain profitable. Understanding the importance of offering real value to customers is essential for any company that wants to succeed in today’s competitive market.
Market Based Pricing: Book Review On Priceless – William Poundstone
Market based pricing: at Taylor Wells, we regularly read new books on pricing and keep abreast of the latest academic and technical research with trends in the sector. Today, we are reviewing a book that is much more focused on the general reader but which we believe can be a very useful aid in getting “buy-in” for pricing transformation programs.
Priceless: The Myth of Fair Value (and How to Take Advantage of It) – William Poundstone
When we speak to pricing professionals, one of the major concerns and roadblocks to both career progression and delivering on pricing transformations is a general lack of understanding as to what market-based pricing or Revenue Management entails.
This book can serve as an informative and non-technical introduction to the topic. Hopefully, it can bring a light-bulb moment where people realise that simple cost-plus approaches to pricing may not be the best option.
At Taylor Wells, we refer to the light-bulb moment as when someone realises pricing optimisation is actually possible.
This book is an easy and entertaining introduction to pricing as a profession. It can be used in many areas of business. It is not a textbook that has very enjoyable introductions to the topic, aimed at the general inquisitive population.
The book gives a nice introduction to numerous market-based pricing topics and provides easy-to-understand and interesting examples. Topics covered include:
- Why are food packaging boxes getting smaller?
- How anchoring can work in surprising ways.
- Why companies can launch premium brands such as beer, only to increase the sales of a cheaper product?
- Why do people choose flat pricing options for items such as mobile phones, even if a cheaper option would suffice?
- An intro to what pricing consultants such as Simon Kucher do.
- How prices can be relative – and in cases can only be compared vs. something else.
- The power of influence – and how simply drawing attention to a product can increase sales.
As you can see – the book covers a great many topics in the realm of price management and makes them accessible to non-specialists.
You can read an excerpt from the book here.
Market-based pricing: Can you leverage this book?
We believe the big advantage of this book for the pricing community is how it conveys a message about what “pricing” is. It would certainly be a good read for many CEOs, sales teams, marketers etc. I personally have given copies of the book to people who would benefit from the topic and approach.
We would certainly recommend it to anyone with even a passing interest in pricing models, commercial activities, sales, and commercial activity etc.
See our blog for questions people ask when they do not understand pricing methods.
What is market-based pricing?
When you set your pricing by considering current market trends and competitor prices, you’re applying a market-based pricing method. Say, you developed a product that is similar to a competitor but still has other features and advantages that customers can’t find in others. That gives you room to set yourself apart as a brand and price in a way that speaks to customers.
Market based pricing allows you to competitively price higher or lower depending on the current market trends, product design/quality, and buyer behaviour. It establishes value with customers that will help you set the maximum price.
Conversely, a price-based marketing strategy correlates pricing to the target market segmentation and promotion. To define market based pricing, one must come up with pricing theories and concepts that have undergone data analysis.
Some of the ways that market based pricing can be done are:
I. Gauge price elasticity and demand
Implementing tactical discounts or annual price increases. Then, watch how your customers respond to these price changes. This helps check how in-demand your service or a product is. If a price drop increases customer demand and raising the price decreases demand, this means it is elastic. However, if there’s little to no impact of a price change in relation to demand, then your service/product is considered inelastic.
II. Use A/B testing or user experience research
This is done to get an idea of the suggested price according to customers. A/B testing checks on customer demographic performance, their digital engagement and location, acquisition platform, and product mix. This can help determine market based pricing models with price changes that can bring as much as 40% growth in revenue.
Price based models can get complicated without a strategy. If done correctly, they are the key to product marketing dynamics and ultimately, a source of profits. Pricing simply needs to correlate with supply and demand plus the perceived product/service value from customers.
A pricing model that fails to define market based tactics will have you end up either underpricing or overpricing an item. As a result, these items won’t generate a lot of sales or profit.
〉〉〉 Get Your FREE Pricing Audit 〉〉〉
Bottom Line
A price-based marketing strategy must reflect current trends and be done with the right timing. Taylor Wells believes that half of the fun is in pricing too, besides product and marketing innovations.
How you set the price makes a dramatic impact on an organisation’s activities and can even counter or disrupt a competitor’s schemes. The best part is with careful planning and research, modifications can be done anytime. Of course, pricing decisions should begin with the market and product analysis. That ensures a positive product perception and brand impact.
As William Poundstone puts it, the price may be just a number. This is what most companies fail to recognise that it’s a powerful psychological unit that can either bring revenue or close down a business. It’s a channel for innovative ways to position a brand, develop a product, and create value. Ultimately, it’s a timeless platform to translate our needs and desires.
For a comprehensive view of integrating a high-performing pricing team in your company, Download a complimentary whitepaper on How to Build Hiring Capability to Get The Best Pricing Team.
Are you a business in need of help aligning your pricing strategy, people and operations to deliver an immediate impact on profit?
If so, please call (+61) 2 9000 1115.
You can also email us at team@taylorwells.com.au if you have any further questions.
Make your pricing world-class!
