Also, please remember that this assignment must be posted in APA format with at

Question

Also, please remember that

this assignment must be posted in APA format with at least two scholarly

references. Responses should be 500-700 words in length.

You are the Director of Marketing for New Balance Running Shoes, generally

perceived as the highest quality products in the class, also the most

expensive. You have been forced to raise prices, due to rising costs, and

the large advertising budget. How will you communicate this to your

customers, how will you "make it right" with them, can you somehow add value

to justify the increase? What will your competitors do? Are you prepared for

their reaction? How will the increase affect consumer buyer behavior?

Explanation / Answer

Product: New Balance Running Shoes

Price Increase : Due to increase costs and large advertiing budgets

Communication Strategy: Add "Value" to justify the increase in the price

Reaction from Competitors:

Effect on Consumer Behaviour:

===================

Since, the product is best in the class, it is assumed to cost more. Though not necessarily, but it is equally true that craftsmanship, quality product requires better R&D, better investments in tools and capital investments and other attendant factors - all this adds up to the cost. The shoes are already expensive ( expected to be) and still a price increase is required. Now, the question comes: How to inform customer for the same?

An alternative line of thought can be why? Why to inform customer? An item like Shoes will have multiple SKUs in multiple sizes. Running Shoes are available from FILA to Nike to Reebok to Addidas to Skechers and many other sports specific brands. The point is - each brand has multiple SKUs sometimes running in to hundreds and no customer will have an attention span to process this type of information. Hence, it is not necessary to communicate the price rise directly. There are ways and means to communicate it indirectly and help it in building the brand better.

Since, no " incremental value" has currently been added to the shoes which justifies price hike, it is a bit not right to show some new "value" when in fact , it has not been generated.

The focus of media communication and advertising should be to consistently focus only on its (1) premium quality (2) excellent comfort in running (3) clubbing up one and two to show that quality does not comes cheap and higher prices than industry actually justifies the "value" these shoes bring in.

The customer is a highly intelligent creature who can process the information and act accordingly. There is no need of any direct communications on price hike issue. It may be required in a B2B customer segment but not required in a B2C segment unless there are strong reasons for the same.

Communication and advertising for a premium product should not focus on price at all and neither they should justify the recent price hike. Let the customer figure it out on his own. Consumer buyer behaviour for premium products which are best in the class generally is neutral to price hikes or at best a marginal drop in sales. However, soemtimes a product which has been positioned as a premium brand will start selling more on price hikes.

The competitors depending upon the their positioning will act differently. Assuming that our competitors will also have similar cost structures ( unless they are either doing soomething extremely wonderful or extremely bad), there is a good chance that they will also raise prices like us. If that happens then it is good. However, a competitor can also act slightly different. He can highlight the price rise in a different way by positioning his products as an " intelligent" or an "economic" buy. Premium products should never get in to the game of price wars as it will dilute everything theys stands for. If the competitor reacts on the basis of prices, it will be good for the flagship brand as it will further strengthen price-quality link for the product under consideration

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