Your Brand Scorecard Improves When You Cut Price

Every brand budget is defended with the same sentence. The brand lets us charge more.

It is the right argument. Brand equity has one financial signature, and it is the price a buyer accepts without hunting for a reason to hesitate. Affection is not the asset. Pricing power is, and pricing power lands in gross margin.

The serious brand measurement frameworks already know this. Kantar builds Pricing Power into its brand equity model, defines it as the ability to command a premium, and has validated it against market outcomes. Most companies never bought that measurement, and plenty that did used it to defend awareness spend instead.

The problem is where it stops. Pricing Power tells you what a brand could charge. It says nothing about what the business actually collected.

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Cut price and the scorecard improves

Picture a quarter with a gap to plan. No campaign has changed and nothing has been repositioned, but someone decides to cut the price 10 percent to move volume.

Favorability rises. Consideration rises. Purchase intent rises. NPS rises. Volume share rises.

Nothing on the monthly brand scorecard moves against you. Price is among the largest inputs to perceived value, so the fastest route to a better score is a worse P&L.

NPS is the clearest case. It is a useful tool for catching unhappy customers and following up with them. On a brand scorecard it runs backwards.

This is not a measurement gap that better methodology would close. It is an incentive defect. A brand team can post a winning scorecard through a year of margin erosion, and nothing in the instrument will say a word about it.

It is worth being clear about who that indicts, because it is not Marketing. A brand leader working from these numbers is being asked to prove value using an instrument that cannot see the value they create. They are the ones the tracker fails.

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One question, two owners

If brand equity is observable as pricing power, the scorecard collapses into a single question. How much more can we charge, and how much of it do we collect?

That question has two halves, and the halves have different owners. This turns out to matter more than any individual metric.

The first half is the gap between what a buyer will pay for you and what they will pay for the next best alternative. Call it headroom created. It is what brand work produces, and Marketing owns it.

The second half is how much of that gap survives the price you actually set, and everything that gets given away after that. Call it headroom captured. Pricing and Sales own that.

Where the giving away happens depends on the business. A shelf price negotiated with a retailer. A menu increase walked back with an offer. A fare sale. A subscriber who renews at a promotional rate. A quote that gets matched. The mechanism changes and the question does not.

Measurement arguments between Pricing and Marketing are usually ownership arguments wearing a methodology costume. Marketing cannot be held to realized margin, because Marketing does not control the discount that gets given to hit the number. Hold Marketing to the gap it creates. Hold the commercial organization to what it keeps.

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How to measure the gap

There is a long version of this involving price ladders, transaction-level price waterfalls, and records of what the price actually was at the moment a buyer decided. Much of it runs on data companies already hold.

The short version is one instrument. Ask a buyer to choose between you and your closest competitor at the same price. Then ask again with your price 15 percent higher, or whatever premium is live in your market. The gap between those two answers is the brand, and it works the same way in every category.

A modeled premium score is a useful proxy for that. A measured tradeoff is the thing itself.

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Three questions

The point is not to win an argument with Marketing. It is to end up with a scorecard both sides believe. Three questions get you most of the way:

·        Does our brand measurement tell us the premium we could charge, or the premium we actually collect?

·        If we cut price 10 percent next quarter, which numbers on our brand scorecard would get worse?

·        Who owns the gap between our price and the next best alternative, and how would they know if it narrowed?

The second one changes the room. It is not rhetorical, and the answer is usually none.

Brand teams have spent two decades making an argument about pricing power. Measurement caught up on the first half of it, the premium a brand earns. The second half, how much of that premium survives contact with the market, usually has no owner at all.

Give that number an owner and the argument goes away.

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