‘Advertise a low price, yes; but advertise a high price, what for?’

Q:  We’re a department store in an emerging urban center north of Metro Manila.

While SM and Ayala had set up in our commercial district since five or six years ago, we’ve held on to our share of shoppers and overall sales of our tenants have not shown any signs of falling.

We think it’s because of our policy of seeing that advertised brands that tenants carry are sold at prices lower than those in other stores and even in those in SM.

We did this by some special arrangements in the contract with any particular tenant.

Most of our tenant stores carry both price brands as well as premium brands. Price brands always advertise their low price and when on sale, the store advertising is about the lower prices.

Premium brands also advertise their prices but only when they go on sale and therefore at lower prices.

Recently, several of the concession and boutique stores for sports shoes, bags and apparel informed us that they want to advertise their high premium prices.  After a meeting with our marketing director, this was our e-mail response: “To advertise the low price of a price brand, yes.  To advertise the lowered price of a premium brand on sale, yes.  But to advertise a high price of a premium brand, no …  at least not in this department store.”

The premium brands requested for a reconsideration.  Other department stores in SM and Ayala, they claimed, have already approved.

We’d like to reconsider but not because other department stores have given their go signal.  We’re loyal readers of your Marketing Rx column and we’re wondering if you can tell us the marketing logic, if any, of advertising a premium brand’s high price.

A: We understand your situation.  On the one hand, you have the need to protect your department store image of low price but guaranteed and authentic quality.

On the other hand, you also have the need to respond to reasonable demands from the segment of your tenant stores representing premium brands.

And they seemed to have presented their case not harshly but in business-like professional fashion.

The issue you have to resolve in your mind as well as with your tenants has to do with your first need.

Is it true that your allowing or consenting to the premium brands of sports shoes, bags and apparel to advertise their premium pricing would hurt your department store’s low price image?

If you had in the recent or even remote past a precedent case that did not at all damage your department store image, then you can readily give your consent.

But we seem to understand that you have no such reassuring precedent. That’s what we inferred from your response to the tenants asking for your go signal for the plan of their premium brands to advertise their high prices.

So let’s proceed to your other alternative.  That’s to search for “the marketing logic, if any, of advertising a premium brand’s high price.”  If you direct your search on the literature dealing with consumer behavior with respect to pricing, you’ll find the marketing logic.

Note that we’re talking about consumer behavior references and not pricing references.  So we’d like you to think consumer and consumer behavior.

Of course, the more well-known consumer behavior is about consumer response to low prices or decrease in price.

Lower prices or price reduction always trigger the price sensitive consumers to immediate buy.

This buying response can come from three sources. First is the decision of existing brand buyers to forward buy, that is, to buy now what they are planning of buying later, say, next month or so. Secondly, other existing consumers who already have bought may decide to still buy some more “for inventory.”  They can’t resist the bargain and so buy for storage for later use.  Thirdly and for many brands, the lower or reduced price is intended to entice consumers of a competitor brand to switch brand even for just trial purposes.

The expectation that usually happens is that some or many of those who brand switch would stay and therefore enlarge the lowered price brand’s consumer base.

Is there an analogous consumer behavior for harping on a premium brand’s high price?  In this case, there is no lowering of the premium brand’s pricing as in a sale. It’s just advertising rather proudly that this premium brand is available at this high price!

Let’s go back to the advertising of a lower or reduced pricing.  The underlying idea or what you call marketing logic here is to take advantage and to reinforce the consumers’ price sensitivity or what economists call “price elasticity” of the price conscious market segment. If you now think of the obverse of a market segment’s price sensitivity or elasticity, you have the premium market segment’s price insensitivity or inelasticity.  In other words, advertising a premium brand’s high price is meant to reinforce the premium consumer of his pride about putting the premium brand’s known high quality way above pricing.

You know there are consumers like that.  You yourself may have had the occasion to count yourself in that segment.  We recall several occasions when we got a genuine Lacoste shirt or an Armani Exchange shirt as a gift and the giver “inadvertently” forgot to remove the price tag.  The giver was obviously price insensitive, inelastic and took much more pride in the high priced Lacoste or Armani Exchange.

Advertising a premium brand’s high price has that kind of legitimate “marketing logic.”  And this is what you are looking for.  We hope you’ll think about this and accept its appropriate role in price advertising.

Keep your questions coming.  Send them to us at [email protected] or [email protected]. God bless!