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How “easy to pay” fuels brand growth

fabian-blank-pElSkGRA2NU-unsplash Credit: Fabian Blank on Unsplash
The objective of marketing is to make it easier for people to choose the marketed brand. The basic recipe for brand growth is easy to mind, easy to find, and easy to pay. And of the three perhaps the most important is easy to pay.

Easy to mind, easy to find, and easy to pay
Originally, my encapsulation of the guiding principles detailed in How Brands Grow consisted of just the first two phrases. Easy to mind refers to the principle that brands must be salient in relation to category entry points: the needs, occasions and desires that cause people to buy the category in which a brand competes. Easy to find refers to the principle that a brand be easily available for purchase. So why add easy to pay?

Price is a barrier to purchase
To my mind, price is conspicuous by its absence from the principles detailed in How Brands Grow. The first moment of truth in marketing does not just refer to checking out whether the product fits someone's needs; it also refers to whether the price fits someone's budget. I think most people can think of an occasion when they were enthused to buy a brand, only to realize that the price was more than they were willing or able to pay. So, for a brand to grow, it must be easy to mind, easy to find, and easy to pay.

Price is a signal of quality
However, the role of price in determining purchase decisions is complex. Price is not just a barrier. Price is also a signal of quality that people intuitively "validate" against the available cues and their prior experience. And how a brand sets its price versus competition and manages that price and its assets over time signals a lot to consumers (Dan White offers us the example of Fever Tree here). And that is important because in the absence of cues or knowledge, price alone will decide which brand is chosen.

16 choices, no cues
Let me give you an example. A few weeks ago, I had to buy a Day 2 Lateral Flow test for a trip to the UK. I checked out the requirements on gov.uk and found 16 approved choices ranging in price from £4.99 to £19.20. None of the companies listed were familiar to me and there was minimal information to help me make a choice between the different options.

Price anchoring in action
Which one should I choose? £4.99 seemed so cheap I had to wonder if it was inferior in some way or going to take longer to get the test result. And paying £19.20 when you know there many cheaper options seems a bit daft. My decision was a classic example of behavioral economics. I had two anchoring prices: low and high. Those anchors pushed me to choose an option somewhere in the middle.

(Of course, I could have researched my choices at length to try to identify the optimal combination of ease, speed, and cost. But I did not want to spend time researching, so I asked a friend who I knew had already done their homework. I still ended up paying a middling price.)

Avoid making price the basis of comparison
In the absence of any meaningful cues or experience, buyers will default to using price itself as a guide to making a purchase decision. And, unless your brand's business model is designed to deliver consistently low prices relative to the competition, the last thing you want potential buyers to do is fixate on why your brand is more expensive than an alternative.

Instead, you must manage the marketing mix to ensure that people can easily justify the price asked. Ensure that your brand is perceived to be different from the competition in a way that potential buyers will value. Offer payment terms that facilitate purchase, do not offer discounts.

Hopefully you will agree with my proposition so far. But, when it comes to sustainable brand growth, why might easy to pay be more important than easy to mind and easy to find? In short, it is about leveraging income to fund future growth.

Easy to find is no longer the advantage it once was
I start with easy to find because our increasing reliance on e-commerce means that availability is no longer the barrier to purchase that it once was. Every brand is easy to find.

If someone knows what brand they want to buy they can do so quickly and easily. Even if someone makes a generic search, the algorithms – paid or organic - will ensure relevant brands appear in the search results. And reviews from media or peers, promoted search results, and "people also bought" recommendations often highlight brands people would otherwise not have thought of.

Easy to mind favors big brands
Being easy to mind – salient in relation to specific needs, occasions, or desires - is still important. If nothing else because cannot search for a specific brand unless you can remember its name. But easy to mind is closely associated with penetration not price paid. And while any brand can pay to play the salience game, but it is inherently biased to big, incumbent brands. Big brands come easily to mind when a need arises, and they have more money to spend on advertising to keep things that way. Which is why big brands stay big until a competitor disrupts the category.

Easy to pay helps bootstrap growth
Today's retail ecosystem has also made it easy to check out and compare prices. Even when shopping in a physical location, people can use their smartphone to check prices at other retailers. But what makes easy to pay so important is that it offers a brand increased ability to fund future marketing investment. Making it easy for people to pay is how smaller brands bootstrap themselves into growth when the salience deck is stacked against them.

To grow, brands must fund paid advertising
To grow, brands need to spend more on share of voice than they have share of market to attract new buyers. Initially, small brands can leverage their fan base for recommendations and word of mouth, but, as they grow, they must switch to paid media to extend their footprint beyond their existing users and followers. And to do that they need good cash flow. If new buyers pay a price that delivers a good margin, the additional cash helps fund future advertising and innovation.

Over time, better margins fund more advertising
Few brands are strong enough to maintain a big price advantage over their direct competition, but even a slightly better margin on sales can add up to a lot of money over time. Spend the additional money wisely and next year's market share will be slightly higher. Higher market share improves the probability that people will buy the brand again. Assuming a constant advertising to sales ratio, higher market share funds more advertising. The brand continues to build sales momentum. But the leverage does not come from selling more stuff, it comes from selling more stuff at a better price.

But what do you think? Please share your thoughts. 

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July 12, 2024