Devil's Advocate: Match Competitors' Prices - or Take the High Ground?

Robert Joseph makes the case for taking the high ground, whether you're a 13th-century monarch or a 21st-century brand owner.

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Robert Joseph - the Devil's Advocate
Robert Joseph - the Devil's Advocate

There’s a very good reason why castles were often traditionally built on hills. It’s a lot easier to win a battle from above than below.

Hilltop castles have a downside, however. Being visible from a distance increases the likelihood of being attacked and, unless you have plenty of resources (and confidence that help from your own side will eventually arrive), you are very vulnerable to being besieged.

Even so, as I say, castles tend to be on hills, offering a clear lesson to businesses and brand-owners: there’s a lot to be said for the high ground which, in real terms, tends to mean charging higher prices.

Rumours of the death of luxury...

Over the last 15 years, since the financial crash of 2008, there have been repeated predictions of the imminent demise of luxury. People, it was confidently asserted, would tire of conspicuous spending that was bad for society and the planet. No one foresaw that in 2023, Bernard Arnault, head of LVMH, would have become the wealthiest human being in the world by making and selling luxuries.

The traditional wine industry tends to dislike the term ‘luxury’, considering itself to be culturally above such stuff. But few rational human beings would argue that a 75cl bottle of fermented grape juice with a price tag running into hundreds or even thousands of dollars could be described in any other way.

Been around long enough?

Many of the wines commanding these prices have the excuse of having earned their stripes. Chateau Latour and Romanée-Conti have been around for centuries and even Biondi Santi – the ‘first Brunello’ dates back to 1888. But what of the ultra-costly Johnny-Come-Latelies that first hit the streets a few decades ago, or the wines like Sacha Lichine’s Garrus or Gerard Bertrand’s Clos du Temple or any number of efforts from California that have a three-figure price from their very first vintage?

And what, at a more modest level, about the non-alcoholic vermouths and spirits with price tags similar to beverages that, in some countries, carry huge excise tax burdens?

What right do the people behind any of these beverages have to price them so highly?

To which I’d respond with another question: what right does Giorgio Armani have to ask £350 for a ‘stretch viscose jersey t shirt’? The answer is simple: Armani charges what its customers are prepared to pay.

Competing with Armani

Now, let’s assume you wanted to compete with Giorgio Armani. What would you do? Offer something similar for half the price? Then you’d only be setting yourself up against Emporio Armani’s £115 t shirts or the Armani Exchange ones on offer for £55. Armani understands segmentation, and the value of allowing different consumers the chance to buy into its brand at a cost that works for them.

So, if Giorgio Armani was your target, you’d take care to be in the same price range and to target the people who the Italian brand might see as its customers. What you would not do, if you were sensible, is launch your brand with attractively ‘good value’ prices in the hope of raising them to Giorgio levels over time. As any brand owner knows, once a product or service has a perceived price in the mind of the potential purchaser, it is very hard to shift that number upwards.

Diageo apparently claims to be making no more profit from its zero-alcohol Gordons and Tanqueray than from its similarly-priced 40% versions of the same brands, because of the costly research and development required to produce them. This may or may not be true; in any case, it is an investment that, like the purchase or planting of a vineyard, will be amortised over time. After which, these products will be very profitable indeed.

Provided the target consumers still like and trust the brands enough to pay a premium for them.

Emotional, not rational

And that’s the beauty of successful brands. Everything about them is emotional rather than rational. Few first growth fans stop to consider the difference in production cost between Château Latour and any of its less illustrious neighbours, any more than they worry about the relative costs of manufacturing those t shirts. Or indeed the going rate for viscose jersey cloth.

Castles are tangible stone constructions of course, but they’ve always had an emotional role too as, centuries ago did the coats of arms of the kings and dukes who had them built. Even more than the logos of modern brands, these symbols inspired extraordinary levels of loyalty. And perching those castles high on the top of hills where everyone could see them – a little like an Armani advertisement at an airport – was a pretty effective way to make this happen.



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