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Why brands need to talk price
Communicating price increases to customers is an unwelcome task, but it’s better for brands to be upfront about it, says US academic Utpal M. Dholakia.
Why it matters
Writing on the Harvard Business Review site, Dholakia, George R. Brown Professor of Marketing at Rice University’s Jesse H. Jones Graduate School of Business, argues that if brand managers can bring the same focus to explaining a price increase to customers that they bring to introducing new features or extending product lines, then they are more likely to be rewarded with a price increase that sticks, while “customers will feel like valued partners of an authentic brand with their interests in mind”.
His advice is directed towards products and services unable to engage in below-the-radar activities like shrinkflation, but there are also lessons for CPG brands.
Here’s three actions marketers can take:
Call it what it is: a price increase. It’s not a price adjustment, a price change, or any other euphemism you might come up with. Such messaging can damage customer relationships in a number of ways – it may arouse suspicion, be seen as patronising or lead to an angry social media backlash. “Attempts to obfuscate bad news rarely pay off for brands,” Dholakia notes.
Explain the reasons clearly and simply
“After the size of the price increase, the perceived fairness of the motive for it is the second-biggest driver of how customers react,” Dholakia says. So don’t hide behind wordy messages that may seek to distance the brand from the action being taken. People know about inflation and rising input costs and won’t be hugely surprised if you raise prices – just keep the explanation short and to the point.
Have a customer-centric value narrative
A price increase is easier to accept if there’s something in it for the consumer. That might mean telling them that the brand has to raise prices in order to continue to provide the current level of benefits. If the alternative is degrading product quality, then that can reinforce the brand’s values to the customer.
“A well-crafted value narrative conveys to customers that the brand has undertaken the effort to understand how its customers derive value and factored this knowledge into the pricing process,” Dholakia advises.
Sourced from Harvard Business Review
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