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Customizing Your Branding & Pricing Strategies to the Needs of Your Customers
Branding and pricing are two of the most important strategies driving success in business-to-business (B2B) markets. Unlike consumer markets, B2B markets usually have complex customer chains, with direct customers such as distributors or OEMs and end customers/users.
Where the Good-Better-Best spectrum is relatively straightforward in consumer markets, in B2B markets direct and end customers often disagree about what “best” even means. Navigating this complexity of decision-makers with brand messages and pricing is both challenging and rewarding to shareholders.
Blue Canyon’s experience over many years shows that in most B2B markets there are four distinct business environments (Brand Dominance, Brand Pull, Direct Customer Branding, and Private Label), each with its own needs that point to different branding and pricing strategies. To summarize, direct customers and end customers can each make their decisions either based mainly on price or non-price factors.
Figure 1: Market map branding and pricing strategies
Suppose, for instance, that both participants in the customer chain are price-driven (the upper right). Here, brand is not a major factor and commodity pricing tends to be the rule—this is where private label products win. Where brand can make a difference is in creating an “anti-brand” that connotes economy. Seeing the private label brand Great Value at Walmart tells the shoppers that they’re not paying for any expensive brand-building, regardless of the supplier. Examples of supplier-created “anti-brand” brands for this market environment are Motel 6 and Southwest Airlines. The goal of these brands is to connect the product or service and its pricing to the direct and end customers desires for low prices.
At the other extreme, where all customer chain participants are not price driven, brands dominate and the goal of a supplier is to give both end customers and direct customers reasons to favor the brand, by offering the end customers differentiated products and the direct customers systems supporting their business model. Brands, therefore, are called upon to speak to both uniqueness and high levels of support. Again, brands supporting the value created will win the day; premium prices can follow.
Succeeding in a range of markets with different levels of price-driven decisions, without muddling the message to direct and end customers, can be achieved with a Good-Better-Best offering. To support that offering and communicate to buyer segments with different behaviors, a thoughtful brand architecture is required.
An excellent example is Marriott, with brands ranging from Ritz Carlton to Renaissance to Courtyard by Marriott to Ramada to Fairfield Inn. Each brand is distinctly positioned along the Good-Better-Best spectrum, communicating to travel agents and end customers what will be expected at each property. The Marriott brand promised consistent high quality and friendly service at the high end. This promise was designed to appeal to both the direct customer (corporate travel departments) and the end customer (travelers). Marriott backed its promise by integrating with corporate travel management to support the direct customer and with a friendly staff and a quality room to appeal to the traveler. Both promises were made by the Marriott brand and were kept by Marriott’s actions. When Marriott extended to “better” offerings with the “by Marriott” brands, it was able to create comfort with a Marriott guaranteed experience, while not mixing the “best” with the “better” offerings.
In other environments, pricing and brand need to support success with direct customers and end customers having different buying behaviors. The huge success of Intel in creating final customer demand for its product with “Intel Inside” branding of computer products that’s the focus of consumer buying, is an example of the upper left quadrant in Figure 1: end customers that are not price driven, while direct customers (computer OEMs) would otherwise be price-buyers. Were it not for Intel’s strong branding, backed up by its processor quality, reliability, and compatibility, computer manufacturers would have attempted to treat Intel as a commodity supplier with no pricing power. In this ingredient branding strategy, the direct customer (the computer manufacturer) also effectively leveraged the brand message from the supplier’s brand (i.e., faster, better quality) to enhance its own brand. Concurrently, Intel created a pull from the end customer to purchase its products by convincing the end customer to be aware that Intel’s microprocessor matters to the performance of the computer.
Where end customers are price-buyers but direct customers have other value-drivers, effective branding is directed toward the direct customers, reminding them of the systems and services that support their business model of offering attractive prices to end customers.
Branding and pricing strategies are important parts of the big picture of B2B business success by understanding what drives purchase decisions, not only by the direct customer but also by the end customer.