Pricing

bought by different consumers, with different incomes albeit all can be categorized as affluent consumers.

However, ECCO has to think about which kind of products they offer in their stores. As it is today ECCO has a wide portfolio of shoes, which is at one hand good as it offers the consumers many choices, but on the other hand it has also led to ECCO having different products both in quality and price. Though it might be good for a company selling very expensive goods such as Gucci to have entry level products, it is not the same as having many mass-market products - affordable to most consumers. If a brands becomes affordable to the masses it may risk losing its luxury status and for a brand that is not yet linked with luxury or top of the premium it can also prevent a brand from reaching this status. Therefore, ECCO should seek to raise its price point. However, such a thing must be done with manner. A good way to do this could be by introducing new and better products with special designs or innovative products and outface the old and cheaper products.

products e.g. the Signature line where it makes good sense. However, being a high-end brand is not just about high prices, it is also about being part of a dream and the creation of distance already mentioned³⁰¹. Hence ECCO needs to reposition their brand in the minds of the consumers to become more luxurious. The price of luxury products is radically higher than those of products with comparable physical benefits (between 30% to over 100%), however, the higher prices can be allowed for due to the high-end brands intangible attributes and remunerations³⁰² as the pricing equation works primarily in the emotional area³⁰³. Luxury consumers hunt for an experience or a feeling which is very symbolic. Consumers pay for the perceived value and they will pay a premium for that little extra. For the luxury companies adding this “little extra” crave only modest additional costs, but enhance the products value markedly. Luxury brands, with their premium prices, have their center of attention on profitability and return on investment³⁰⁴, making the right price the maximum that the luxury consumers are willing to pay³⁰⁵. However, one has to make sure that there is a sufficient consumer base that is ready to pay the proposed price³⁰⁶. As examined in the chapter on the Chinese clothing market the growth will be strongest in the premium segment – allowing companies such as ECCO to expand into the clothing business.

Though the affluent consumers can afford to pay full price for just about anything as they do not have to save money to be able to get food on the table³⁰⁷, many affluent consumers do not see themselves as affluent or rich. Moreover, the Chinese always fear their future conditions and are scare that they might lose their job or something else which could damage their current position.

Therefore they are careful about what to buy and how to spend their money and concurrently they are saving money for e.g. their children’s education and their old age. Many luxury consumers are economically vigilant, risk averse and very protective of their hard earned money. It therefore makes good financial sense for them to look for the best deal³⁰⁸. Affluent consumers also buy on sale (mostly because they can)³⁰⁹ and haggling is not unusual, as luxury consumers do not want to be cheated. Moreover, price is more important when shopping for fashion then when shopping for e.g. cars and antiques³¹⁰.

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301 Kapferer and Bastien 2009, p. 183

302 Okonkwo 2007, p. 140-141

303 Danzinger 2005, p. 169

304 Okonkwo 2007, p. 140-141

305 Danzinger 2005, p. 165-166

306 Okonkwo 2007:140-141

307 Danzinger 2005:153

308 Danzinger 2005, p.158.

309 Danzinger 2005, p. 155

310 Danzinger 2005, p. 168-169.

However a good brand should avoid too many discount arrangements. What may happen if the product price is too low is that the product will lose its status. Hence, it would be a mistake for a high-end brand to lower its prices to sell more, as it would mean departing the high-end category in the long run.

10.3.1 How to price a high-end product:

Comparative pricing is unusual in the luxury industry. This is mainly due to two aspects. One is that products are bought only occasionally and therefore the price paid is rapidly forgotten. The other is that the products are quite unique making it hard to weigh products and prices³¹¹. When pricing luxury products and partly premium products it is central to remember that luxury sets the price - price does not set luxury³¹². However, using price ranges makes it easier to find the price for a new product. The price of the product should be based on the experience it offers rather than on the product itself. In this particular case ECCO in line with the premium shoe collection could on the same terms have an exclusive clothes collection, the Signature line, using a high scale price and the sports and business line introduced at a lower, but premium price.

What is first to be done is to locate the price range that your consumer segment are used to consider and to paying³¹³. If ECCO wants to compete against casual premium brands such as Ralph Lauren and Lacoste this is the price range ECCO should be situated within. ECCO should use this range as an opening to plot out the exact features, benefits and values that the product delivers at each price point, and then find a place that enhances the products’ value proposition greatly. At this point there are several opportunities, according to Danzinger (2005), the product should be priced in the upward end of the scale, but not out of limits. Danzinger (2005) states that the opportunity is to triple the value while only doubling the price - making the pricing equation in favor of the consumer³¹⁴.

However, where exactly on the price range ECCO should position their clothing line, depends on what this line has to offer of special attributes and on the strength of the ECCO brand at that point in time.

It is common in the luxury business that an increase in price leads to an increase in sales volume;

this is one of the specific of luxuries³¹⁵. Therefore luxury companies should keep rising the average

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311 Kapferer and Bastien 2009, p. 185

312 Kapferer 2009, p. 177

313 Danzinger 2005, p. 169-170

314 Danzinger 2005, p. 170

315 Kapferer and Bastien 2009, p. 180

price of the product range. In fact, the price of a luxury brand should always increase. A good idea is too set the price “low” and then little by little raise the price while upgrading the product until the right balance is found between volume and margin³¹⁶. However, prices cannot be raised markedly without adding value. Adding value does not necessarily means adding costs to the product³¹⁷. A higher price cannot be justified by adding some extra gold and diamonds- the clients dreams must be further satisfied to allow for this augmentation in price³¹⁸. This is what ECCO has done with their Premium shoe collection introduced this year. Here ECCO has added more value in terms of special materials and a very classic and luxurious look which adds to the consumers dream by making them feels special when wearing these shoes, since these are shoes that will definitively be noticed. Hereby augmenting the price on these shoes compared to a normal pair of ECCO shoes does not seem like cheating the consumer and it is still in line with ECCOs philosophy about offering value for money – these shoes just have that extra value. In the same way the new clothing line could reach a much higher price point than ECCO’s normal products, but it would require that the clothing line had something special to offer and that it could be part of the consumers’ dreams.