Why do people pay more?


This day and age even brands have become commodities, middle class invasion from the BRIC nations especially  China and India forced the world to give cheep and best products. This lead to a discount warfare, literally eroding margins. Holding on to margins and costumer’s loyalty had become the new change. The more you discount your brand the more margins gets eroded along with its brand equity & loyalty.

How do you get out of this rut? ask brands like Apple & Coca Cola. There are two reasons why people pay premium: 1. Aesthetics. 2. Emotions. Now look at any brand in the world which commands a price or image premium would hang on to one of the above.

Selling aesthetics. Take fashion, lifestyle or technology brands and look at the successful ones they all manage the aesthetics very well right from the product design to positioning to merchandising there will be a consistent visual or sensory appeal which goes beyond rational reasoning. While products and technologies are commodities in the market, esthetics commands premium and the consumers are willing to pay a little to a lot for this differential. Remember its next to impossible to create product differentials which makes sense to the consumers. Apple, Gucci, Armani, Swatch, Samsung, Ferrari, Puma, Fendi, D&G and more follow this path.

Building an emotional bond. Zippo to Harley Davidson to Cadbury to Coke to McDonald’s to Mercedes to J&J to Whisper their are many brands who find an emotional purpose in your life. Why do grown up men cry when they lose there Zippo? why do people kill themselves to own a Harley? why do we forgive even if there are worms spotted in your Dairy Milk Chocolate? why do we put money in a bank which just went bust? An emotional bond with the consumers buys blind faith, loyalty and willingness to pay more.

Neither Apple sells technology nor Cadbury sells glass and half of milk.