What Pricing Says About You

Two stories caught my attention this Easter weekend.

The first was an International Herald Tribune article about the plight of the humble Japanese beef bowl. Long considered a staple meal of the journeyman worker, the broiled-beef-and- rice bowls from the big-three bargain restaurant chains Yoshinoya, Sukiya and Matsuya have had their prices slashed from about 400 yen to 280 yen over the past four months -- in response to Japan's faltering economic recovery and as a desperate measure to hang on to their customers.

Granted, price wars were made for this: two or more competitors engaged in a deadly game of 'chicken', eyeballing each other over successive price cuts designed to decimate profits and drive the weak out of business.

But the hard-won gains come at a price. Infuential economist Noriko Hama has warned that "if we all get used to spending just 250 yen for every meal, then meals priced reasonably will soon become too expensive. When you buy something cheap, you lower the value of your own life."

Now I'll confess I've wrestled with that last sentence from the moment I read it -- even posted a question on LinkedIn to seek other viewpoints -- but I suppose that taken in context, it may not seem quite so ridiculous as it initially appeared: One could argue that sustained price wars will spark a deflationary cycle and indirectly lower workers' wages through some trickle-down effect ... which in turn may lower one's perception of contribution to society.

But I'm still straining to wrap my head round the logic of that argument (you can tell I'm no economist). So let me instead think aloud about the subliminal messages a price point can send out about a product or service:

The perception people have of a product is often dependent on the first price they associate with that product -- which in turn exerts a psychological influence on the actual benefit they derive from its use. In his book Predictably Irrational, professor Dan Ariely writes about experiments in which students were better able to complete word puzzles after drinking an energy drink that was regularly priced. When other students consumed the drink after buying it at a discounted price, they were never able to do as well at the word puzzles as those who had paid the full price.

So brand champions: think twice, think three times before you allow your brand to be irrationally (or predictably) depositioned by a price reduction. The move can retain your competitive advantage in certain circumstances. But too many trigger-happy marketers yank the price down, then are surprised when the 'value gap' is stretched and snaps. Instead of thinking, what a great deal, customers start wondering, what's wrong with it?!

So why not focus on delivering value through a standout brand experience. You may be able to sell for more. The difference between the price that you can sell, and the price that you eventually do sell at, is the value of your brand.

This is, in fact, the cornerstone of the second article which caught my attention this weekend. It was a snippet really, in TIME magazine, about restauranteur and chef Shoichi Fujimaki who charges US$110 for a bowl of his ramen (yes, that's US dollars, there are too many zeros in the yen equivalent) which takes three days to prepare. Asked to justify his price, Fujimaki explains that "it's my 25 years of experience distilled into one bowl".

I don't know how Fujimaki-san is doing, with his ramen going at 35 times more than the beef bowls around his restaurant. But I'd love to make it up to Tokyo one day for a slurp. It must be one heckuva (brand) experience.

What Kind of Lighthouse Identity is This?

If December 31st marked the end of a decade we'd rather forget, then the official opening of the world's tallest skyscraper on January 4th seems intent on heralding the dawn of a decade to remember. (Watch a YouTube clip of the opening ceremony's awesome fireworks display by clicking on http://www.youtube.com/watch?v=qe304CiT6zo&feature=related) The question is, for what will we remember this year and this decade?

Hold that thought for a second. First, the facts: Burj Khalifa, with its 160 stories served by 57 elevators, tops off at 828 metres, surpassing by far the previous tallest tower in the world, Taipei 101 which stands at all of 509 metres. (Wonder how much they have to pay window-washers to entice them up to clean the 24,348 external windows.) The building can accommodate 25,000 people at any one time. Five years in construction, it is a symbol of Dubai's endeavour to diversify from an oil-based economy to one that is tourism- and service-oriented.

Indeed, the world's tallest skyscrapers all seem to be built in tandem with a country's growing economic ascendancy and the local government's efforts to garner international recognition and investment. Just think about Taipei 101 and a previous record-holder, the Petronas Towers.

But here's the thing: The Burj Khalifa could not be launched at a more awkward time in Dubai's history. The city-state has fallen on hard times over the past year or two, caused by the twin torpedoes of the global financial implosion as well as the collective (over)ambition of Dubai's leaders and an expat community paying over-inflated prices for the good life. (You can read a vivid account of Dubai's troubles in a Fast Company article at http://www.fastcompany.com/magazine/38/exodus.html). This latest landmark had to be renamed (it was formerly known as Burj Dubai) in honour of the current ruler of Abu Dhabi and President of the United Arab Emirates, which has had to inject billion-dollar bailouts at critical junctures to keep the project alive. The current massive real estate collapse means that the Burj Khalifa is likely to stay empty for the forseeable future.

I blogged in an earlier post about the competitive advantage of projecting a lighthouse identity -- so that others can know what you stand for, unequivocally. So what kind of lighthouse identity is this signature tower projecting? An iconic, aesthetically attractive and functionally superior symbol of a nation's stature ... or, as a recent Los Angeles Times article more bluntly describes, "the latest in a string of monuments to architectural vacancy"?

Two thoughts occur to me:
1. This is the perfect commercial address for marketers with a long-winded elevator pitch.
2. What are their contingency plans to evacuate someone from the 160th storey in an emergency? (Note to brand marketers: Have a crisis management plan in place.)

On a more grounded note, timing and credibility have as much to do as the nuts and bolts of brand identity (what you say and do as a brand, and how you say and do it) when it comes to crafting and communicating a sustainable brand image. On one level, I can empathize with the building's owners: What would you have done in their shoes? (Post a comment and share your views.) The Burj Khalifa would probably have been universally well-received five years ago ... but the brand story of the Burj unravels for me in these turbulent times; and I, for one, would not want it to be the posterboy for this new decade.