Brand Value and Optimization
Do you know why the industry leader can charge, on average, 18 basis points more in MERs on its fund products than the average fund company? It’s because they carry the weight of their name — their brand. And, as long as they don’t charge a premium in their MERs, the market share gains they enjoy will continue to accrue to their company. The corresponding value can be attributed to the strength of their brand.
Credo can help you quantify the value of your brand by assessing the importance of brand in your customer’s decision to use your offering as opposed to a competitor’s offer.
Think about it: There are two different brands of mayonnaise on the store shelf. One is clearly branded “Kraft(TM).” The other is the store’s house brand. Both are priced at $2.00 per jar. The store manager finds that 87% of consumers choose the Kraft mayo and only 13% select the house brand. What’s interesting is that when the manager raises the price of the Kraft mayo to $2.40 per jar, the relative demand for the house brand increases only slightly: 84% still buy Kraft and only 16% buy the house brand. In fact, not until the manager raises the price of the Kraft Mayo to $3.65 per jar… while the house brand remains priced at $2 per jar… does he see a substantial decline in the demand for the Kraft mayo relative to the house brand. At this new price point demand shifts to 50% for the Kraft and 50% for the house brand.
The Kraft brand commands value — people pay more for it despite the fact that both jars contain (essentially) the same mayo.
Credo can simulate demand scenarios similar to this one and help you gain insight into the premium that any brand commands relative to other brands. Further, we can help optimize pricing; we can help you select the pricing that will achieve your objective… whether that’s maximizing profitability or maximizing market share.