The way retailers choose to position their brand often justifies different price points.

These three brands are proof of that.

 In ecommerce, differentiating yourself from the competition is no easy feat. The most simple way of doing so is finding a way to uniquely position your brand.

Once a brand is established, you can move forward with any marketing tactics you may have. This includes promotion, place, and price. 

Brands like Brooks Brothers have successfully positioned themselves as a luxury brand for the whole family. However, they are missing out on a large chunk of their potential market, namely lower and middle class families, in return.

brooks brothers.jpg

Successful positioning doesn’t always have to carry an opportunity cost. While Brooks Brothers has been incredibly successful throughout its nearly 200 years in business, and their prices are in line with their strategy, many retailers may not want to lose such a large part of market share.

One umbrella company that mastered brand positioning in retail Gap, Inc. Gap has succeeded in segmenting the market with their three different retailers: Gap, Old Navy, and Banana Republic.

Each store has its own brand, and each brand is positioned a little bit differently.

Gap 

Gap’s namesake retail store was founded in 1969. It is known for its assortment of simple clothes such as t-shirts and denim, and has launched other stores for children and babies. Its target audience is young professionals.

The shopping experience on Gap’s site is a mirror of its in-store experience. Neat, modern, and clean.

Its clothing is the same way. Not too flashy with designs, just simple colors and patterns. At the top of the website, a limited-time only discount is offered with a checkout code to encourage the shopper to purchase.

If we look at the “essential” t shirt, we see it’s slapped with a price of $16.95.

gap shirt.PNG

A young model is used, reflecting the hip positioning Gap has taken for its brand. The price isn’t too high, but it isn’t exactly a bargain either.

Since Gap has existed for a long time, it has developed useful brand equity to enable an above average price. To capture sales from bargain shoppers looking for similar clothes, Gap introduced an entirely different brand.

Old Navy

Old Navy is another brand owned by Gap, Inc. It’s a store that is known for its incredibly low prices and frequent discounts on hip and fun clothing.

Unlike Gap, it does not have separate stores for children or babies, and instead advertises their clothing alongside clothing for adults. 

When you arrive on Old Navy’s site, you’re greeted by bright colors and diverse age groups modeling clothes in various settings. It’s a warm welcome, and at the top, in big letters, it reads “30% off discount at checkout, no code required”.

 

Old Navy’s low prices are great for people of all ages. If we look at a basic t-shirt on Old Navy, we see a $9.94 price tag with “everyday steal” underneath it.

old navy shirt.PNG

Old Navy wants to be synonymous with discounts and low prices, unlike other Gap brands. Its prices and layout suggest that anyone can shop there for hip clothing at a decent price.

However, one Gap brand holds a position that is more sophisticated than the other two listed, and it uses its prices also reflect that.

Banana Republic

Banana Republic is Gap’s most luxurious brand. It is targeted at young professionals like Gap, but positioned with luxury and business-friendly clothes to rival retailers such as J Crew or Brooks Brothers. It has just begun to sell clothing for babies, but is not known for selling children’s clothing.

When I visited Banana Republic’s website, I was greeted by two models standing in a dirt road with what appeared to be an old luxury sedan. It offers a couple of different discounts for cardmembers and other shoppers with a discount code. Its layout is very basic, and lacks flashy images like Old Navy.

A t-shirt on Banana Republic goes for $19.50. It uses “pima” cotton, which is known to be very soft and comfortable.

banana republic shirt.PNG

It is the most expensive t-shirt out of the other two brands, and the least expensive on the Banana Republic site. The fancy cotton justifies a premium price, which fits perfectly in its sophisticated positioning. 

What retailers can learn 

The way Gap has introduced separate brands for different customer segments shows the power of brand positioning.

The way you can position your brand can affect the amount you’re able to charge for something as simple as a t-shirt. Gap is proof that different merchandising techniques for different brands can have direct effects on several factors of your business, such as price.

Introducing three different brands isn’t something all retailers can do right away, but it provides great examples of capitalizing on the importance of customer segmentation. The ultimate winner in this example is Gap, Inc. They have mastered attracting different customer segments with these three brands, as well as a couple of others omitted for the sake of simplicity.

It is proof that the power of branding and merchandising can shape your pricing, and pricing can reinforce your brand position as well. 

What other factors can shape retailers’ prices?

(Contributing Writer: Brian Smyth)

Ari Shpanya

Published 31 March, 2015 by Ari Shpanya

Ari is the co-founder of HomeShare and Zent , Graduate of the GSB Stanford Ignite program, and a contributor to Econsultancy.

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Comments (4)

James Hart

James Hart, Digital Account Manager at Key Multimedia

The age and how well-estabished the brand is can prove challenging when pricing a product. It's been my experience that SME's don't always price their products according to their preferred positing but more towards a costing basis.

The price transparency and the proliferation of choice of the internet means that brand equity is diluted and for those relative unknown businesses, is almost entirely negligible.

over 2 years ago

Ari Shpanya

Ari Shpanya, co-founder at HomeShare.com

Hi James, I think you have a good point. Smaller companies often do need to price on a cost basis, but I think it's important to remember that pricing can influence positioning. Companies can build their brand around their price to help differentiate themselves. With the rapid expansion of ecommerce, companies have to compete on factors beyond price, since they aren't always going to be the lowest.

over 2 years ago

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Marcus Chadwick, Marketing Manager NZ at Sivantos

Interesting article Arie. I admire your straight forward approach and use of examples as evidence. If you perhaps included one more simple dimension to the pricing and positioning discussion, perhaps it would be that of value. Value creation through the manipulation of perceived benefit is the cornerstone of brands that generate desire, often as a result of status anxiety.

over 2 years ago

Ari Shpanya

Ari Shpanya, co-founder at HomeShare.com

Thanks, Marcus. I totally agree.

over 2 years ago

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