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Why brands increase price in an economic downturn

Brand_core_2_23_09 My wife and I are big on ground turkey breast. The other day she came home and told me that the brand we buy (Jennie-O) had raised their price from about $5.25 to $7.50.

This price increase in a growing economy would make sense. But that’s not the case, we’re in an economic downturn. Gas is even going down, so why the increase?

This is usually the strategy premium brands take. It’s because these companies spend more to own a positive positioning in the mind of their consumers. This costs more and increases their overhead per product.

So when a market becomes price-driven the premium brands lose their fringe customers to lower priced companies. Then these premium brands raise prices depending on their Brand Champions (loyal customers) to pay the increase to carry them through the hard time.

 

This sound backwards, but the strategy is proven.

 

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