How can a manufacturers brand influence its pricing?

30 January 2017

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Have you ever wondered why Ferrari can co-exist in the same marketplace as Ford? They both sell four-wheeled engine-powered vehicles. Both their products can drive on the same roads as each other and are subject to the same speed restrictions. Both companies are trying to build the best vehicles they can (after all, who would want to build a stinker of a car just to charge less for it?).

The real difference comes from the fact that both companies know their target markets and understand how to connect with them.

Ferrari don’t want to compete with Ford

They don’t need to. They understand that there is a relatively small market of highly wealthy individuals who want their product because it is expensive and desirable. The process of owning and buying a Ferrari has been made entirely about the experience. Yes, the process of building a Ferrari is likely to take much longer and involve a rigorous quality control procedure, but no doubt Ford have their own high standards for products that leave the factory floor.

The truth is, if you buy a Ferrari in the UK, the fastest you can drive it on public roads is 70mph – exactly the same speed you can in a Ford. If you just want to burn a few people at the traffic lights, then you could buy a £30k Ford RS that does 0-60 in 4.7 seconds. A Ferrari Berlinetta does the same in 2.8 seconds. Yes, there’s no doubt the Ferrari is faster, but it will also set you back over £250k – approximately £110k per additional second.

Most people who buy a Ferrari are likely to be successful business people and entrepreneurs – the type of people who know when they are getting a good deal. I would argue that unless you are a professional racing driver, £110k for a 1 second performance improvement that you will hardly ever get to use does not represent good value for money.

Emotional Connection

It’s pretty clear that whilst performance of the product will play a part, it isn’t the main reason why there is such a huge price difference between the two cars. What really sets the two companies apart is the emotional connection that the brand has with the audience.

When you buy a Ford, you know you are buying a reliable family automobile, that’s well built and probably fun to drive. When you buy a Ferrari, you are buying a slice of its brand image – the heritage of the company, its racing pedigree, its attention to detail, its super-slick image and stunning product design.

If you can afford one, you buy a Ferrari precisely because it IS expensive.

The Limited Few

Everything Ferrari do to market and sell their products is carefully considered to amplify this emotional connection. The language, photo and locations, descriptions, videos, celebrity endorsements are all designed to speak to the limited few who can afford their products. Ford do exactly the same, but their approach targets their ideal customers – the mass market who want a reliable vehicle that offers great value for money.

Ferrari don’t need to sell the 3+ million cars that Ford sell each year – in fact, that would completely undermine what they do. They are an exclusive brand for a highly selective audience. The fact that only a few are produced each year reinforces the point that owning one makes you a member of a very select club.

Clearly understanding their own customer market and staying true to their brand values at every decision, means they can be very confident that each year there will be 9-10k wealthy customers who are more than happy to pay whatever it costs to get their own slice of the Ferrari brand image.

Charging more for their product has significant benefits to Ferrari. It means their engineers and designers have the time and space to focus on the finer details and deliver an even better product. It gives their R&D team the time and space to engage in a continual process of product development and their customer care team to look after individual customers in ways that simply wouldn’t be possible if they were producing in larger numbers. It’s a positive cycle of reinvested value in their product which means Ferrari are always able to justify the price tag.

Brand Image

It’s always important to remember that no matter what product or service you are offering, your brand image gives you the opportunity to position it inline with your ideal customers and the type of service you want to be delivering. That is the true power of a brand. Yes, what you are offering must be able to live up to the promises you make, but if the right people see enough value in what you do, then history tells us they will pay for it, regardless of cost.

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