Counterintuitive Brand Signals: Pricing in a Down Market.
|David Sherry||Apr 26, 2020|
Warren Buffet, on bear markets, said: “Only when the tide goes out do you discover who’s been swimming naked.”
What he failed to mention is that…
“And who’s been swimming with life vests and Jet Skiis.”
As I said in 2 New Brand Obsessions, when the down market hits, there is both a race to the bottom and a flight to quality.
People want to get the most bang for their buck, so they buy cheap goods, or goods that they feel are a real value for their dollar. They want to buy goods that last, or, services that provide more than just one benefit. Multi-purpose SAAS companies, for example, can do well, as they provide a whole suite of products for the same capital.
If you don’t currently have any demand, due to physical restrictions or otherwise, I recommend you adapt your business as quickly as possible to fit in the new world. This must be incredibly painful, and I’m so sorry about how difficult this must be.
But, and it’s a big but… If you do still have demand for your products…
Counterintuitive: I recommend that you think of increasing your price (+extending your benefits) and limiting your supply.
Which probably feels like the exact opposite of what you should do.
See, pricing is all about signals. Ditto for brand building.
A celebrity showing off your product is a signal. Same with a quote from a prominent investor.
But same with a 50% off sale.
And right now, the market is looking for symbols of quality to chase with their dollars.
But as the tide goes out, they get harder to find. Many signals that looked positive ended up naked. Everlane comes to mind, which cratered as soon as the market turned.
In this next short window of 12-18 months, you will see brands win by using the ultimate status symbol:
They will limit supply, showcase increased demand, and raise their prices.
A waitlist for their product
They are letting the market know that "We are so crushed by demand, that you better buy this value now." This can be real or manufactured.
So watch for these restrictions and how people flock to them. Can you say... Clubhouse?
What happens then is a self-fulfilling prophecy, in which buyers follow buyers and more follow them.
The reason this doesn’t happen as much during the peak of bull markets because, in a frothy bull market with lots of capital, you stare at the full ocean. There's so much noise that consumers can't tell who's naked and who's prepared. Who's cheap or who's valuable.
But now that the tide is out, it’s just the valuable and the naked that remain.
P.S. (not financial advice) Watch this will play out in stocks, too. Counterintuitively, you might want to buy those hitting all-time highs, not those that look cheap...
I’m David, and you can check out some of my work – Hit reply to chat more about your brand or community or anything else that you’ve got questions about.
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