Pricing Strategy and Brand Loyalty

In the last blog, I was puzzled by Google Ngram’s indication that pricing had only come to the attention of the public in the late 20 century. I continued the quest for an answer.

In their thorough and comprehensive book “The Strategy and Tactics of Pricing”, Thomas Nagle and Reed Holden explained that cost-based pricing (cost + profit) had been the historically common practice until 1980′s when companies of leading brand names discovered brand loyalty and its benefit to pricing.  A quick NGram shows that their timing is more or less accurate.

pricing strategy1 500x196 Pricing Strategy and Brand Loyalty

It is now very clear that the understanding of pricing power is closely associated with the emerging branding power.  There’s no doubt price gouging had been practices for thousands of year.  However, price gouging is likely only practical with monopoly or in association of other power e.g. government, religion, etc.

No one accepts pricing gouging willingly, especially in today’s competitive market and government controlled anti-monopoly policy.  Getting buyers willingly accept an above average cost-plus price is really the art of pricing power.