Pricing Power: Why Building Your Brand is Essential
The Importance of Brand Building
If you want pricing power, you need a brand or a monopoly. The CEO of LVMH recently claimed they don't do marketing because it's against their ethos, but marketing is precisely what they excel at. They make high-quality products, but take the same artisans and materials and try to sell a $2500 handbag without the brand. Good luck with that.
For the hospitality industry, this concept is equally critical. At Minor Hotels we've developed eight powerful brands, each with a clear identity and value proposition.
Contrast this with other chains that have over 30 brands, making it difficult even for their own sales teams to differentiate and market them effectively. Can you segment your customer base so finely that you need that many brands? The challenge is real, and often, simplicity and clarity win over complexity.
Understanding Pricing Power
Pricing power is the ability of a company to raise prices without reducing demand for its products or services. In the hospitality industry, this concept is pivotal as it directly impacts a hotel's revenue and profitability. Here's a closer look at what pricing power entails and how it can be harnessed effectively.
What is Pricing Power?
Pricing power is the leverage a brand has to set prices higher than the competition while maintaining or increasing customer demand.
This ability stems from several factors, including brand strength, customer loyalty, perceived value, and market positioning. Essentially, it reflects a brand’s capacity to influence its market and drive premium pricing.
Brand Building: The Ultimate Marketing Activity
Brand building is the ultimate marketing activity. Without a monopoly, it should be your main long-term goal in marketing. It's essential for growing profits and expanding your market presence.
A strong brand not only drives higher room rates but also allows for premium pricing on ancillary servicessuch as dining, spa treatments, and experiences.
A well-established brand provides a consistent message and experience that guests can trust and are willing to pay more for.
The Process of Creating a Strong Brand
Building a brand is a meticulous process that involves several key steps. To strategically develop a brand that stands out in the competitive hospitality industry:
1. Identifying Your Niche
The first step in brand building is identifying your niche. Understand the specific segment of the market you want to target. This involves thorough market research to uncover gaps in the current offerings. Look for underserved areas where your brand can meet an unmet need or provide a unique experience.
2. Finding the GAP in the Market
What are travelers looking for that they aren’t finding? This could be anything from personalized service and unique local experiences to innovative technology integration or sustainable practices.
Understanding this gap allows to position the brand as the solution to this unmet need, thereby creating a compelling value proposition that attracts and retains customers.
3. Developing the Operational Promise
The operational promise is the cornerstone of the brand. It’s the commitment we make to our guests about what they can expect from the brand. This promise should be clear, consistent, and aligned with the brand’s values and niche.
4. Executing the Operational Promise
Execution is where many brands falter. It’s not enough to make a promise; you must consistently deliver on it. This involves training the staff to embody the brand’s values and ensuring that every aspect of the guest experience aligns with the brand promise.
The Role of Consistency in Brand Building
Consistency builds trust. When guests know what to expect and their expectations are consistently met or exceeded, they are more likely to return and recommend your hotel to others.
This consistency extends beyond service to include branding elements such as logos, color schemes, and marketing messages.
A consistent brand image and message across all platforms reinforce the brand’s identity and make it more memorable to potential customers. This, in turn, drives higher rates and premium pricing.
A Brand is More Than a Logo
A brand is far more than just a fancy logo. It's the overall perception that your customers have of your business, shaped by every interaction they have with it. Take the example of Steve Jobs and the logo for NeXT, the computer company he founded after leaving Apple.
Steve Jobs famously spent $100,000 on the NeXT logo, a significant amount those days standards. He enlisted the help of renowned designer Paul Rand to create a logo that would encapsulate the essence of the brand. Rand didn’t just deliver a logo; he delivered a complete brand identity, with a clear vision and strategic direction.
The result was a simple yet powerful logo that conveyed sophistication, innovation, and a premium quality product.
But the logo alone wasn't what made NeXT different. It was Jobs' relentless focus on innovation, design, and quality that truly built the brand. The logo served as a visual representation of these values..
Building a Brand Takes Time
Building a brand takes time, persistence, and constant repetition. Brand building requires patience to establish quality predictability in the market.
Conclusion and Final Thoughts
In conclusion, building or having a strong brand is essential for gaining pricing power
and achieving long-term success in the hospitality industry. It’s not just about having a fancy logo but about creating a consistent and compelling identity that resonates with the target audience.
This involves identifying a niche, finding gaps in the market, and delivering on the operational promise consistently.
Pricing power
stems from a well-established brand, allowing hotels to command higher rates and premium pricing on ancillary services.
The process of brand building requires strategic positioning, meticulous planning, and relentless execution. It’s about creating a perception of value and trust that drives customer loyalty and repeat business.
