Tag Archives: branding

Psychological Pricing – Payless Becomes “Palessi”

Pricing is a complex topic – it is both strategic and tactical and is influenced by a variety of factors such as demand, costs, profits, and competition. But probably the most important part of pricing for marketers is its psychological impact. After all, there is a common phrase that “you get what you pay for.” But, is that always true?

Consider a recent experiment by Payless Shoes conducted in Santa Monica. Payless opened a shoe store named “Palessi” in a former Armani store and stocked the store with Payless’ low priced shoes and boots. The shoes, usually priced at $19.99 to $39.99 were examined by a group of influencers who were invited to a grand opening party and asked their opinion of the “designer” products.

The guests, who had no idea they were looking at low-cost Payless shoes, all praised the look, materials, and style of the shoes. That might not be so surprising, but what was astonishing was the amount that the guests were willing to pay for the shoes and boots. The top offer for shoes was $640 – a 1,800% markup!

What are you willing to pay?

Group Activities and Discussion Questions:

  1. Discuss the six steps for pricing: determining objectives, estimating demand, determining cost/profit relationships, select price level, set list price, and make adjustments.
  2. Discuss the importance of psychology in pricing.
  3. Show the Palessi videos: https://youtu.be/xpqqKRlqZfU and https://youtu.be/7YR2bovjfMU
  4. Payless Web site: https://www.payless.com/
  5. For Payless Shoes, divide students into groups and have each group work on any/all of the six steps.
  6. When setting the price level, assign each team a different model to use (demand-oriented, cost- oriented, etc.).
  7. Debrief the exercise. Compare the various pricing models and discuss advantages/disadvantages of each.

Source: Stanley, T. L. (28 November 2018). Payless opened a fake luxury store, ‘Palessi,’ to see how much people would pay for $20 shoes. Ad Week.

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Singles Day 2018 – “11/11 Global Shopping Festival” Hits $30 Billion

Once again the world’s biggest shopping event has occurred. And, no, it’s not Black Friday and Cyber Monday. By far, the biggest shopping day of the year is on November 11, Singles Day, in China. The holiday originally began in 1993 by college students as a celebration for people who are single, chosen because of the connection between singles and the number ‘1’. November 11 now serves as an occasion for single people to party – and shop!

This year, sales (stated as Gross Merchandise Value – GMV) hit $1 billion in only 1 minute and 25 seconds! At the end of the first hour, the sales reached $10 billion! By the end of 24 hours, the sales were an astounding $30.8 billion!

There were more than 100 million items sold in 17 countries, with 180,000 brands participating. More than one billion packages are estimated to be shipping. Even more impressive is that a whopping 90% of sales were completed from mobile devices. Wow.

Singles’ Day is by far the largest shopping and entertainment festival in the world. Compare it to Amazon’s Prime Day at $4 billion, and Black Friday at $14 billion online to see the difference.

Singles’ Day has become an event on its own, including celebrities, fashion shows, TV galas, virtual reality, and augmented reality shopping. It started with a November 10 evening event with a live-streamed, star-studded gala show that drew in 240 million viewers (that’s the equivalent of one in five people in China). There was also interactive entertainment and sport via Alibaba’s app to increase audience and shopper participation.

Why is it so important for global brands to enter this shopping day? Consider that there are roughly 300 million middle-class shoppers in China, rising to an estimated 500 million in the next 10-15 years. While Singles Day may have originally started for lonely Chinese consumers, the shopping day now is seen as critical to driving China’s – and the world – economy.

If you are not familiar with Singles Day, there are many sources with information about the event and Alibaba, including the following:

Group Activities and Discussion Questions:

  1. Most students will not have previously heard of China’s Single Day. Discuss the shopping holiday and its importance in China.
  2. This is likely the first time students have heard about Singles Day. There are a number of videos that can help explain the event:
    1. What is 11/11?  https://youtu.be/bRv9qG75x2c
    2. Evolution of Singles Day: https://www.alizila.com/video/the-evolution-of-11-11/
    3. Highlights of 2018 event: https://youtu.be/W9JNfS0dAL0
  1. Discuss how this holiday compares to Black Friday and Cyber Monday in the U.S.
  2. How should U.S.-based companies participate in Singles Day?

Source: Wall Street Journal, New York Times, Forbes, CNBC, The Verge, other news sources

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Dunkin’ Drops the Donuts from its Branding

What’s the importance of a brand name? Brands have value. Brands help to define a company, its values and products, and branding builds an image in the minds of consumers. If a consumer hears “Nike,” or “North Face,” or “Luluemon” it immediate builds a picture in the consumer’s mind of that brand. So, when an established company undertakes rebranding, it had better be prepared for a lot of work and time to establish the new brand. The rebranding can be incredibly expensive and risky.

The latest rebranding is a move from “Dunkin’ Donuts” to just “Dunkin’.” The company claims that it has been on a first-name basis with its fan for a long time, and that its customers have long referred to the brand as Dunkin’, making this a natural fit. The original pink and orange colors of the logo, along with the original font, have been retained in the new logo, helping to retain the brand recognition.

Dropping the “Donuts” raises the question about whether Dunkin’ will be moving away from its core product in favor of a newer food menu (croissants, bagels?). The company claims that donuts are still a key focus for Dunkin’.

Dunkin’ isn’t the only brand to shorten its name. Recently, Weight Watchers shortened its name to WW, using the tagline “Wellness that Works” to help explain the rebranding. And, many people still erroneously refer to Kentucky Fried Chicken with its full name, even though it became KFC in the early 1990s.

It’s hard to change consumers’ habits.

Group Activities and Discussion Questions:

  1. Discuss the importance of branding.
  2. Using the Top 100 Global Brands list as reference, poll students about the top 10 global brands: https://www.interbrand.com/best-brands/best-global-brands/2018/ranking/.
  3. Which brands do they think have been able to gain mind share? How?
  4. View the Dunkin’ Donuts web site: https://www.dunkindonuts.com/en
  5. What should the company do to roll out the new brand standards to consumers?

Source:  Advertising Age, New York Times, other news sources

 

 

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