Good brands can raise prices. Powerful brands can double their prices. But many pricing strategies rest on a dangerous presumption: if consumers love our brand, they’ll happily keep paying whatever we charge. They won’t. Brand affinity yields pricing power, but that power isn’t infinite. At some point, customers quit asking themselves, “Do I prefer Brand X?” and begin asking, “Is this purchase worth the money?” Those are two very different questions.
Apple: Loyalty Meets the Upgrade Cycle
Apple may have one of the strongest examples of customer loyalty today. When you buy an iPhone, you join an ecosystem that comes with high switching costs. You have apps to consider, photos, AirPods, Apple Watches, iCloud subscriptions and more than likely years of using iOS. Switching to another platform is possible, but it’s inconvenient. That gives Apple significant pricing power. However, that power isn’t absolute.
The greater risk to Apple isn’t that someone with an iPhone will switch to Android. The real risk is that they won’t buy another phone at all. Perhaps a customer who used to upgrade every other year will stick with their phone for three. Someone who upgrades every three years might hold off for four. See how that works? When you sell a durable good, your competition isn’t always another brand trying to steal your customers. Sometimes your biggest competitor is the durable good your customer already owns. Smartphones are faster, more reliable, and updated with only incremental improvements each year. Raise prices too far and keep that value perception lower than the price increases and customers will more readily keep the phone they already own. Apple loses the sale, but keeps the customer.
Starbucks: When the Habit Becomes Too Expensive
Starbucks applies this principle across an entirely different category. Coffee is a habit-forming purchase. Starbucks has created significant competitive advantages with convenient locations, mobile ordering, customization and its rewards program. But customers still do a mental calculation.
A Starbucks customer may gladly pay a premium over brewing coffee at home. But increase the effective price high enough and suddenly the competition sounds pretty good. The consumer doesn’t need to swear off Starbucks forever. They may simply go five mornings a week instead of seven. Or three instead of five. That slight shift in behavior is insignificant at the single-customer level. But it adds up to a massive impact when millions of customers cut back. I think this is one of the most overlooked dangers of aggressive pricing. Customers don’t always revolt. They learn to ration. And rationing can be much harder for management to detect than outright customer defection.
Nike: A Famous Logo Doesn’t Eliminate Substitutes
Nike has worked for decades crafting one of the most valuable brands in the world. That brand has real financial value. But when consumers buy athletic shoes, they aren’t choosing Nike or going barefoot. They’re choosing between Nike and Adidas, New Balance, Hoka, On, Brooks, and dozens of others. The better those competitors get, the less unassailable Nike’s pricing power is. This is a simple economic lesson: Brand loyalty matters only if the alternative is perceived as substantially worse. Once competition narrows that gap in quality, design or status, a premium brand must continue to earn its premium. Past doesn’t automatically earn future margins.
Disney: Loyalty Doesn’t Mean Buying Everything
Disney is another great example because it doesn’t have intellectual property that many companies can claim has a deep emotional connection. Customers don’t just know Mickey Mouse, Marvel or Star Wars movies. Many customers have relationships with these brands that span decades. But that doesn’t give Disney carte blanche on pricing.
Parents still make tough choices on what streaming service to use. Whether or not they can afford a theme park vacation. If they need to cut back on a hotel stay. Or have to decide between Disney merchandise and going to a movie. Just because a consumer loves Disney doesn’t mean they won’t be pushed over the fence by price. Many brands make the mistake of thinking that when they conduct customer research, and someone says, “I love this brand.” That translates to: “I will buy this brand no matter what.” Loyalty and price are related. But they are not the same thing.
Luxury Brands Aren’t Immune Either
Luxury goods may seem like a different story. To some extent, they prove the point. Exclusivity can be reinforced by higher prices. Scarcity. Even the price itself can be part of the brand promise. But luxury brands have their limits too. Comparisons are made between similar products in the same category. Aspirational buyers can wait to make their purchases.
Rich people still decide whether a product is special enough to be worth the price. The point isn’t that charging a premium doesn’t work. It obviously works. The point is that charging a premium can’t be separated from providing value. When customers feel like they are paying more because management decided they would accept it, the relationship starts to erode.
The Pricing Spreadsheet Has a Blind Spot
Price increases often look very compelling on a spreadsheet. Assume a company sells 10 million units at $100. Revenue = $1 billion. Increase price by 10% and the easy math says revenue will rise to $1.1 billion. But customers respond. They may delay purchase. They may trade down. They may buy from competitors. They may buy less often. They may even decide they no longer need the product. That’s why management should never ask, “How much more can we charge?” Instead, they should ask: “How much more can we charge before we alter customer behavior?” That is the difference between pricing and pricing strategy.
Watch Frequency, Not Just Retention
Companies often use customer retention to justify price increases. It can be deceiving. Customers can stay loyal while spending less. The Starbucks customer keeps buying—but less frequently. The iPhone customer stays with Apple—but upgrades less often. The Disney fan keeps Disney+—but cancels the ticket package for next summer’s theme park visit. The Nike customer still has Nike shoes—but buys the next pair from another brand.
Few of these customers would say: “I abandoned the brand.” Yet their economic actions have shifted. That’s why companies should look past typical loyalty measures and track purchase frequency, replacement cycles, unit volume, trade-down behavior and share of wallet. These metrics can uncover erosion in pricing power well before you’ll see it in customer satisfaction.
Brand Loyalty Is an Asset, Not an Entitlement
The best way to build pricing power is to become a brand that offers value customers can’t easily get elsewhere. Quality. Convenience. Trust. Design. Status. Ecosystem. Service. Innovation. But pricing power is something that should be earned by companies on an ongoing basis – it shouldn’t be viewed as something that is automatically granted to a company because customers have consistently purchased from them in the past.
Customers will always reach a price where they re-evaluate the relationship. And the worst response a company can fear from a price increase isn’t necessarily an irate customer vowing to never purchase from you again. It’s the loyal customer that doesn’t feel strongly one way or the other deciding, “I still like the brand. I just don’t need to buy it right now.” If you’re a company that has consistently translated loyalty into ever-increasing prices, that sentence should terrify you more than a customer threatening to take their business elsewhere.
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