Does price reductions threaten brands?

Dear Namrata,

Thanks for referring this debate to me. Well, conceptually; I would agree to your statement that PRICE REDUCTION threatens your brand in generic terms; but again it depends upon the nature of the product and target segment. At times , let's take example of electronic gazettes like mobile phones, once they have remained on peak for a while and next generation has crept in to replace, price cut is the only way out to endure in market and survive. So this theory does not apply. At times , consumer starts developing a notion that price cut is the reason for good or service being giffen in nature. In case of blue ocean strategy it is again a threat to your brand. So impact varies , as per situations.

When a product is suppose to be in the peak performance, no one will give the price reduction. An outdated product will attract such price reduction and schemes, etc. So obviously, a good product need not comes down in prices. Only thing when a product is get into the market as sampling marketing, the prices may be reduced to some extend as Penetrating pricing market. Once a price has been reducing means, the brand will automatically reduced its image among people. But the exemptions are with Electronic articles which are always going downwards in prices due to lot of alien entries and product up gradation.

So, the price reducing brand will have threat among competitors or less quality in the market.

Any thing that alters the product position interms of pricing and service level will always confuse a brand.

For example Nirma as a washing powder is clearly not the best but it has its own sets of power cards in terms of loyalty from Rural market and semi urban market aka value consious market. Now if you suddenly rebrand the brand NIRMA into a niche washing powder costing more than 100/kg , then it will confuse people without a doubt.

Price reduction will 100% effect the brand value and it will effect the brand positioning.

Men's garment is specially facing this problem with manuf's giving month on month discount on pertext of different excuses , what has been the result is that people who buy them no longer feel special.

The 'wow' effect in terms of overall product purchase in terms of pricing will never work in favour of the brand. Instead of reducing the price they should increase the service level and then introduce a brand to cater to a lower segment.

In case its not viable to introduce a new brand then the price should be reduced over a period of time.

Sudden increase and decrease has short term gains but in long term perspective , its always detrimental for the brand value.

Price off as a limited period offer may bring in more trial purchases.Price is always matched with the quality.If the price difference between 2 existing Brands with near equal quality will be the benefit for price reduction.On the other hand price reduction for a Brand of inferior quality will attract the relevant target segment.

Price reduction does threaten a brand which is at the same level or in the same market segment as compared to other brands as it influences customer buying behavior. However, for some brands like Gucci, Louis Vuitton, etc., price does not matter as it is a lifestyle brand and the brand itself is the key selling point and not the price.

However, for most of the other brands, apart from the brand value, price is also another factor that is responsible for the brand sales. Hence, if the price of the brand is reduced, it may impact the sales or other aspects of the brand....

Thanks for the referral, Natteraja...

Thanks for invite Mr Arikrishnan,

It is the strategy and handling of price reduction that would decide weather it can boost or mar the reputation. It can surely be turned into huge advantage there are no two thoughts in my opine.

When a brand reduces the price on a short term it may help the brand garner higher sales but if it is done on regular basis it creates a misunderstanding about the brand and its quality among the regular customers and  brand may loose its regular customer base but the sales are maintained with those customers who they are price conscious but will not be a regular customer and thus the brand takes a beating.

Dear friends I am not against quality products. I am a strong believer in quality. But I support the point that price reductions threaten brands.Kindly note that the competition will be there for similar category of products or same level products only and that is why I have taken the stand supporting this side. The important point to be noted is that every competitors will claim their products are good with quality standards and manufactured as per the relevant BIS specifications.Hence these products are for similar applications but with different price tags. The large scale company may keep the prices little bit higher than their competitors in view of their overhead expenses, where as the small scale or medium scale manufacturers may price their products lesser than the former. Under the circumstances, it will be a dilemma for the large scale manufacturers who may be forced to match the prices, during competition, that offered by the small/medium scale organizations with a view to run the show. Because it is question of survival for big companies. This is happening in all electrical equipment manufacturing companies. In view of the above, the price reduction will definitely threaten brands which are in the same line of activities/similar type products. At present it is a price oriented market ans buyers market who know each and every thing about the products, the buyers can not be made fools.

Yes, of course the prices plays the dominant role. Sometimes we can notice the price war among competitors to get the project orders. In most cases the high end product's prices are being matched by the marketers to the low end products. Obviously, it is a question of survival for all marketers and moreover it is a price oriented market at present. In other words it is a buyer's market.

Thanks for the referral Mr.Namrata.