Article: Internet Profit

equals Branding plus Pricing

The Internet and its promise of instant profitability is potentially the biggest problem in the coming years for many businesses in the retail and hospitality industries.

Revenue managers want to use the Internet as a distribution channel to sell more product or in the case of hotels, put more heads in beds, yet at the same time an over reliance on the Internet could actually have the opposite affect, eroding already faltering profits. The fact is that by aggressively competing on features and price, it’s difficult for your business to create meaningful and lasting differences from your competitors.

Your customers benefit from price wars by saving money, but also get confused when choice is confined to price. In many instances the customer is in effect buying a commodity and has no sense of brand loyalty because little is known about the company making the product or about service after the sale.

As such, branding has never become more important, and its time your Internet pricing models need to be addressed. There is a danger of your product or hotel being perceived as a commodity. In the Internet world, if you can make your product different from a commodity you can get the pricing differentiation.

Branding should therefore be a key aspect of every business Web site, but remember your brand is not just your logo, tagline, packaging or the “look and feel” of your ads and your website. These are all graphical parts of your brand identity and are often narrowly, and incorrectly, referred to as “branding”. Your brand resides within the hearts and minds of your customers and prospects. It is the sum total of their experiences and perceptions of your product, company and service, some of which you can influence, and some you cannot.

We are all aware that the Internet has caused price transparency and made it harder to raise prices, but when it comes to either retail stores or leisure travel hotel operators, you can create pricing power by offering the intangibles the competition can’t compete with.

Without that differentiation for the product you are selling, it will be viewed as homogenous by the consumer, thus a commodity and consumers will be driven solely on the price factor and by offering a differentiated product you will create pricing power even over the transparency of the Internet.

By employing a direct branding strategy from your website, you will be able to get out in front of the profit siphoning discount websites and make a pitch directly to people viewing websites for information on your product or geographic region and offering them the information, differentiation and comparisons necessary to influence their purchasing decisions.

For too long we have been training customers to look for deals and lowest price online and as businesses we need to smarten up and begin to focus on a direct web channel marketing strategy as a means to educate potential consumers into what exactly they are getting for their money. – John Shenton – November, 2002