Brand Pricing Strategy – High or Low?

This article delves into the importance of brand pricing strategies and their impact on the market and industry ecology. By analyzing multiple successful cases, it guides readers to understand the business logic behind high-price and low-price strategies. I hope it will be helpful for your decision-making in brand building and market positioning.

After Bosideng turned to high-end down jackets priced over 1,000 yuan, Xue Zhongfei failed to take over the original mass market, which gave YaYa a huge development opportunity. In 2019, YaYa's sales scale was only 90 million yuan. By 2022, YaYa's revenue scale has exceeded 10 billion yuan, and it is expected to exceed 15 billion yuan in 2023.

Ren Zhengfei once said in an interview that Apple is great. Its pricing is very high, which leaves opportunities for other brands. Otherwise, once Apple lowers its prices, other brands will not be able to compete. Understanding pricing from the perspective of the industry will be like looking at the top of a cloud and looking down on all the other mountains.

Pricing is not just a matter for one company; it even determines the industry ecology.

1. Low price itself is not a strategy

The scale advantage can mobilize the entire industry chain. Your competitors charge 1 yuan for raw materials, but you charge 80 cents. Your competitors pay cash on delivery, but you can have a credit period. The quantitative change in scale leads to a qualitative change in costs, which is reflected in the market price competition: the same product, lower cost; the same price, greater profit.

3 yuan for an ice cream, 4 yuan for a cup of lemonade, and rarely milk tea costs more than 10 yuan. You can call it low price, but when the store scale reaches a certain level, qualitative change will occur. In fact, the value of this business is not low at all. (From the perspective of valuation: Mixue Ice City is about 20 billion, Heytea is 16 billion, and Nayuki is 6 billion) Between scale and price, Mixue chose a completely different strategy from other brands . Becoming the first is not a goal, but a means.

A business that looks sexy and one that really makes money are two different things. Do you want to run a profitable business or a sexy business? For 90% of business owners, they may not have thought it through. According to the financial report: Naixue's revenue in three years was 5.7 billion, and it lost 138 million. In 2020, Naixue's net profit was 4.484 million yuan, and the overall net profit margin was only 0.2%.

Simply low prices are not a strategy; the low cost behind them is the strategy. The low-price advantage brought about by total cost leadership can enable your organization to form a strategic advantage.

2. Dongpeng: Low price + flank, focusing on advantages

Following, imitating, and price (low price) cutting strategies have always been one of the business tactics. Red Bull is not only the pioneer of the category, but also the well-deserved category leader. The follower Dongpeng Special Drink adopts a low-price flanking and focused approach.

• Visual differentiation of products: Red Bull canned VS Dongpeng Special Drink bottled
• Low-price alternative: Dongpeng 3.5 yuan VS Red Bull 6 yuan a can
• Channel focus on local advantages: Dongpeng third and fourth tier VS Red Bull first and second tier
• Competition in promotion scenarios: Red Bull focuses on sports scenarios VS Dongpeng Special Drink focuses on non-sports scenarios such as overtime and staying up late

Dongpeng Special Drink was created through the reflexive product, price, channel and promotion, focusing on the Guangdong market and fighting a beautiful low-price flanking war. It made a breakthrough in the local market and accumulated a certain amount of funds. It is said that before the launch of Dongpeng Special Drink, it was piloted in Dongguan, and the Lin brothers also issued an order: they would not enter the national market until the sales exceeded 100 million.

After the local market exceeded 100 million, Dongpeng began to move towards more markets. In 2013, Nicholas Tse was invited to be the spokesperson, and the slogan "When you are tired, drink Red Bull" was imitated by Red Bull, and the "When you are tired, drink Dongpeng Special Drink" was launched. Red Bull entered the Chinese market and spent ten years to portray the consumption scenario of "When you are tired, drink Red Bull" in the minds of consumers. Even though the imitation is so simple, direct and crude, it is really effective. Dongpeng Special Drink has become the second largest in the industry.

3. White T-shirt: Price parity

Before Bai Xiao T, the T-shirt that attracted widespread attention was Vancl 10 years ago, which sold T-shirts for 29 yuan. For the same category (T-shirts), Bai Xiao T and Vancl chose different pricing. One sold cheap products at a lower price, while the other sold expensive products at a lower price. The former sold cultural T-shirts (29 yuan), while the latter sold technological T-shirts (99-299 yuan).

The difference is that Vancl seized the PC era, while Bai Xiao T rebuilt Vancl's business based on mobile Internet + short videos.

Bai Xiao T’s anchoring is different from Vancl’s, and the anchoring object is the international big-name T-shirt. A big-name T-shirt that costs 1980 yuan, but you can buy the same product at one-tenth the price. This is the logic of NetEase Yanxuan. Bai Xiao T’s pricing logic: big-name quality + Yanxuan’s price + Xiaomi’s sense of technology

4. Xiao Guan Tea: High price, empty seats

According to data from the China Tea Circulation Association, China's tea production reached 2.616 million tons in 2018, and domestic sales reached 266.1 billion yuan, and continued to grow. Until 2010, the old industry leaders Tianfu Mingcha and Dayi only had 3.72% and 3.61% of the market share respectively. The low brand concentration, high industry ceiling, and high-priced and high-end vacancies gave Xiaoguan Tea the opportunity to seize market share.

Demand and product innovation:

• Pain points: I don’t know how to choose when buying (too many categories, lack of brands), I don’t know what to choose when giving (prices are not transparent), and it’s cumbersome to drink a lot or a little.
• New group: those who have high quality requirements for tea and are not experts in purchasing
• New segmentation scenarios: high-end and business gift scenarios
• Solution: "One can, one brew", eight famous teas, weakening the category concept

Product and product line layout: In 2015, the gold can/silver can, which is positioned as a high-end business gift, was first launched on the market, including 8 types of tea; in December 2017, the limited edition black can series with a higher-end positioning was launched, including 3 types of tea; in August 2020, the business series in the form of multiple brews was launched, including 4 types of tea with specifications ranging from 40g to 100g; the top limited appreciation model was launched, including 4 types of tea.

However, the six words "A distinguished guest has arrived" and "Little Can of Tea" are good, but they lack a verb.

If it is changed to: A distinguished guest has arrived, serve a small pot of tea, then the feeling will be different.

In advertising slogans, anything can be missing except verbs.

Author: Houshan Guest House

Source: WeChat public account “Lao Gao Business and Brand”.