From premium household products to luxury cars, lowering of prices to recoup lost sales is a generic strategy, & one that even big names in their fields set to adopt when consumer spending is not seeing a rally as the stock market.
P&G targets to cut price of its Tide laundry detergent, which costs twice as much as private label versions & at the same time test new sub-brand, Tide Basic, costing some 20% less than regular Tide (data for US market).
Likewise, at last week’s Frankfurt Auto Show, Rolls Royce introduced Ghost, a model that costs USD245,000, 30% less than the entrance price point of USD380,000 of its flagship Phantom, with the same hand-crafted interiors as well as the smooth & quiet ride.
It is an art rather than science to quantify the additional dollar consumers are willing to pay for intrinsic value of brands, granted comparable product performance. It could be testing for brands to take a price-cut / product extension strategy. Yet, for brands with strong equity & high consumer recognition, it is often a viable means to capture a broader user segment.
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