Pricing for Brand Equity – Vodka

Stolichnaya

The ability to price higher than your competition comes from having differentiated products.  Your products must be better than your competitors’.

When we think of positive differentiation, we usually think of what features can we build that our competitors don’t have (yet).  However, one very powerful “attribute” of a product that can create positive differentiation is brand.  If your brand name becomes synonymous with trust and quality in your industry, you have earned the ability to charge more.  People pay more for well known brand names.

Here is one of my favorite examples:

Take a walk with me down the vodka aisle at your local liquor store.  You will likely see something very similar to what I’ve seen at my local Beverages and More.  Stolichnaya Elit Vodka is priced at $59.99 for 750 ml, Grey Goose Vodka is $26.98, and Nordic Star Vodka costs $7.99 for the same size.  Three different brands, three different prices.  We assume three different quality levels.

This doesn’t seem unusual until you read Section 5.22 of the U.S. government’s Standards of Identity for Distilled Spirits which defines vodka as “neutral spirits so distilled, or so treated after distillation with charcoal or other materials, as to be without distinctive char- acter, aroma, taste, or color.” In other words, by law you should not be able to tell one vodka from another. In this case (or bottle) it really may all be in the brand.

Brands are expensive and time consuming to build, but as you can see, they yield strong pricing power.

 

Photo by Hippietrail