How To Build Innovation with Price

The Relationship Between Innovation and Price

Innovation is determined by how thought-leading and original people feel your brand is. Driving your Innovation through Price involves looking at the cost your brand is prepared to charge people for what is new and different, or for additional product features. 

Increasing your Innovation through Price can be done by exploring all parts of your category’s price “piano,” launching new and innovative products at various price tiers to capture different consumer segments who have a range of prices that they feel comfortable paying (price elasticities).  

When determining how your brand can drive Innovation through Price, consider these points: 

1. Better products with better features can charge a premium: When something costs more, people wonder about the “extras” that they will receive by shelling out the extra cash. They want to know what the added benefits are. If your product is thought-leading, new, and brings something that people haven’t experienced before, it is possible to charge a higher price. In fact, higher priced products can naturally command the feeling of being premium and more emotionally seductive, so this can serve to reinforce the Innovation perception of a brand.

2. New formats can create new price tiers: Innovation can be tactical to ensure that you have a product available at all different price tiers. This enables you to offer a set of products available for any shopper, no matter what their price elasticity is. People will feel your brand is innovative when you are available in multiple formats, in multiple sizes, and across multiple price points. This serves two purposes – strengthening your brand’s innovation and increasing your mass appeal. 

3. New things don’t need immediate discounts: When it comes to new product launches (which naturally drive your brand’s momentum), keeping prices stable in the short term is key. Launching something new to market often gets your brand featured on promotional display units, so discounting or changing the price of your product from the onset is not necessary. When your product is new and brings something different to the market people will pay in full for it. Repeat will often be a result of whether your product’s performance and whether its value lived up to expectation.

What should you do next?

• Take a close look at your price-product architecture versus what prices and products exist in your category. Determine if there are any price gaps that your brand could innovate into. 
• Lay down your new product development roadmap to determine whether the products you have up and coming could or should command a premium. If they contain new and innovative product benefits, people will pay more for them. 
• Explore the launch strategy alongside the promotional calendar of your new innovations. Ensure price discounts do not happen in the early stages of your launch so your news can saturate the market at the price it ought to be purchased at every day. 

How to determine if it’s working.

• As you develop and launch more products into market at different price tiers, look at how your Innovation driver changes over time. Dig into the more premium innovations for your brand, as your Innovation driver should increase more quickly the more advanced your products become.  

• With activity on the Innovation driver, there is likely to be an increase in Value for Money too, as long as the pricing is right. As people see you as more thought-leading, they will see you as worth paying more for.

• Keep an eye on consumer conversations around your brand, specifically with regards to your new product launch. People should be talking about your features more than your premium price.

  
  
  Guidance from:
  Jim Brennan | Managing Director, ProQuo AI
  
  Jim is a master of brand management. With over 10 years at Unilever as a brand leader, he knows how to make a brand grow.