Smarter Pricing: How to capture more value in your market

Different segments, different brands

Where customers in different segments cannot be separated into ‘watertight compartments’, lower prices offered to one segment would be obvious to customers in segments who derive greater value from the product. This reference price effect limits the ability to capture this potential value. In these circumstances, separate products with separate brands are necessary. These may be lower-priced ‘fighting brands’ which appeal to the price-sensitive segments.

Tesco have three own-brand ranges. The ‘Tesco’ standard version is a mid-market offering. The ‘Tesco finest’ is a premium-priced luxury proposition with sales of £600 million in its own right. ‘Tesco Value’, launched in 1993, is a price-fighting offer. How ...