What is the Real Value of a Brand?

John Krautzel
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Most companies use branding to influence how customers perceive the value of a product, motivating them to pay higher prices. Yet, a small movement of retailers are hoping price transparency can show buyers a brand is worth the sum of its parts. Whether or not price transparency is another marketing ploy, it may give smaller retailers a chance to steal much-needed market share from high-end brands.

The Myth of Value

The saying "you get what you pay for" has long indicated that higher price equals better value. As a result, clothing designers and retailers traditionally justified high price tags as necessary to deliver high-quality items made to last. However, companies such as Honest By, Oliver Cabell and Everlane, are challenging the integrity of companies that reduce costs without lowering their prices.

During his time working for a major fashion house, Honest By founder Bruno Pieters was unsettled by the common practice of moving production to developing countries. Designers could pay lower wages to these workers while increasing markups, an ethical dilemma that often weakens brand value and favorability among millennial consumers. Suddenly, the myth of skilled tailors and textile artists creating high-end garments is shattered and replaced with the image of poor, uneducated workers toiling in unsafe factory conditions.

The Anatomy of Pricing

Advocates of price transparency believe they can win loyalty by educating customers about the logic behind pricing. A typical product page shows a meticulous cost breakdown with categories such as transportation, research, design, intellectual property rights and marketing. The primary goal is to change how consumers think about price markups. In theory, price-transparent, sustainably made clothing have both inherent value from the production quality and ethical value from the straightforward business practices of the brand.

Price transparency targets young, socially conscious customers who are often less receptive to traditional marketing and highly empowered in their shopping decisions. Young consumers have grown up in a world of choices, where a wealth of online retailers make it easy to find a wide range of similar products at different price points.

Price transparency has one major obstacle. Although it is a consumer-focused business model, it doesn't mean customers can expect lower prices from brands that adopt the practice. One jacquard skirt from Honest By retails at $516, even though it only costs $172 to make. Of course, everyone understands that businesses can't survive without making a profit, but only customers with high income have the luxury of paying three times the cost of a product, simply based on its perceived value.

Opponents of price transparency are fearful that being completely upfront with customers can dilute brand value. Once customers see the similarities in cost between high- and low-end products, they may make purchasing decisions based on price, even when the expensive item offers better manufacturing quality. However, companies have always needed branding to set themselves apart. With or without price transparency, successful businesses have to demonstrate how they deliver a better experience than competitors.

Photo courtesy of Andypiper at Flickr.com


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