부산시청 도서요약
국내도서 요약
국내도서 프리뷰 해외도서 프리뷰
글로벌 트렌드 미디어 브리핑스
   글로벌 트렌드 

책표지








    • Pricing Power and Brand Polarization

    - Why the Same Cost Increases Create Winners and Losers

    Even when raw material costs, labor costs, and logistics expenses rise together, not every company suffers the same impact. Some brands raise prices while retaining both customers and profits, while others fail to remain competitive even when they keep prices unchanged. In an era of rising costs, what determines a company?  fate is not the cost itself but the ?쐋egitimacy of the price??recognized by customers.

    [Key Message]
    * Even under the same cost pressures, only brands with customer-recognized value can raise prices while protecting profitability and loyalty.

    * Pricing power is not the ability to increase the number on a price tag; it is the ability to create compelling reasons for customers to stay despite higher prices.

    * The consumer market is polarizing between premium and ultra-low-cost offerings, placing the greatest pressure on mid-market brands that lack both clear differentiation and price competitiveness.

    * Repeated discounting undermines trust in regular prices and creates a vicious cycle that weakens a brand?셲 pricing power.

    * Strong brands reduce costs that customers do not value while investing more in tangible sources of value, including product performance, trust, experience, and identity.

    ***

    The Gap in Cost Pass-Through Capacity Is More Dangerous Than Rising Costs
    Even when statistics indicate that inflation has slowed, the cost pressure experienced by businesses does not easily disappear. A lower inflation rate does not mean that prices have returned to their previous levels. It merely means that the pace of price increases has slowed. Raw material costs, wages, rents, logistics expenses, and energy costs that have already risen remain embedded in corporate income statements. Tariffs, supply chain restructuring, exchange-rate fluctuations, and geopolitical uncertainty are adding further pressure, forcing companies to decide whether to absorb the costs internally or pass them on through consumer prices.

    On the surface, every company appears to be facing a similar problem. However, the actual impact of rising costs on profitability varies significantly from one brand to another. Companies capable of convincing customers of the reasons for a price increase can pass part of the burden on to the market. By contrast, companies with numerous substitutes and weak differentiation risk losing customers as soon as they raise prices. If they freeze prices, they may preserve sales volume but suffer shrinking margins. If they raise prices, both revenue and market share may decline. They become trapped in a dilemma.

    Pricing power is not simply the authority to change the number on a price tag. It is the ability to raise prices while preventing customer defection and maintaining sales volume and brand trust above a certain level. Even within the same product category, some companies can raise prices by more than the increase in costs and protect their profits, while others cannot prevent declining sales volumes even after expanding discounts and promotions. Rising costs are a common shock imposed on all companies, but the ability to withstand that shock is not distributed equally.

    In the past, companies with large-scale production facilities and distribution networks held an advantage in price competition. Economies of scale lowered their costs. Today, scale alone is no longer sufficient. The expansion of online retail has made price comparisons easier, while retailers??private-label brands have rapidly improved their quality and design. Consumers no longer pay higher prices unconditionally for familiar names. At the same time, they are willing to accept higher prices than before when a brand delivers clear benefits and distinctive experiences.

    The gap in pricing power becomes even more pronounced during an economic downturn. As consumption weakens, customers do not reduce every category of spending equally. They eliminate expenditures they consider unimportant while spending more on products they consider essential or meaningful. Competition among brands is no longer merely a contest over who can sell at the lowest price. It has become a competition over which brand can remain within the customer?셲 limited budget until the very end.

    Brands That Retain Customers Even After Raising Prices
    Strong pricing power is not created by fame alone. Even brands with long histories and high recognition can be rejected if customers cannot find a valid reason for the price. Conversely, even a small or newly established brand can command a higher price if it offers distinctive features, a clear philosophy, and an outstanding customer experience. The key is to encourage customers to interpret price not merely as a number but as something connected to value.

    The first foundation is a product advantage that is difficult to replace. At least one element?performance, quality, design, or ease of use?must be difficult for competitors to replicate. The moment customers conclude that ?쐓witching to a cheaper product would make little difference,??the brand?셲 pricing power weakens. If technological differentiation is difficult, the company must create distinctions outside the product itself through service, the purchasing process, after-sales support, community, or content.

    The second foundation is trust. The more expensive a product is, the more consumers want to reduce the possibility of making a failed purchase. Trust in a brand functions as a form of insurance that lowers the perceived risk of a decision. Brands that maintain consistent quality, respond responsibly when problems arise, and avoid exaggerated promises can partially escape direct price comparisons. Customers are not purchasing only the product. They are also purchasing peace of mind after the transaction.

    The third foundation is identity. Today, brands do more than provide functions. They help customers express who they are. The clothes people wear, the cars they drive, and the food they choose have become a language through which they reveal their tastes and values. A brand connected to the person a customer wishes to become gains stronger loyalty than an ordinary product. The price of such a brand is not determined simply by adding a fixed profit margin to manufacturing costs. The symbolic value and emotional satisfaction perceived by the customer raise the upper limit of what the brand can charge.

    The fourth foundation is habit and ecosystem. When one product is connected to other services, or when the user experience accumulates over time, switching costs increase. If data, membership, content, accessories, and community form a single ecosystem, customers do not move simply because a cheaper product appears. However, repeatedly raising prices by relying only on switching costs can generate resentment. An ecosystem should not be a fence that traps customers but an environment in which they want to remain.

    Even strong brands cannot raise prices without limit. Pricing power is not a license to test the limits of customer tolerance. If products and services do not improve despite repeated price increases, customers will eventually feel that the brand is exploiting their loyalty. Even when a price increase produces higher revenue, pricing power may already be weakening if sales volume, repurchase rates, and willingness to recommend are falling at the same time.

    A Consumer Market Divided Between Premium and Ultra-Low-Cost Offerings
    One of the most prominent recent developments in the consumer market is the simultaneous growth of premium and ultra-low-cost offerings. On one side, demand remains strong for high-priced experiences and superior quality. On the other, products emphasizing the lowest possible price and practical utility are spreading rapidly. Although these two movements may appear contradictory, they often occur simultaneously within the choices of the same consumer.

    Consumers no longer purchase only high-priced or low-priced products consistently according to their income level. They may ordinarily buy private-label foods and discounted products while choosing premium offerings in areas they consider important, such as health, hobbies, travel, and pets. They scrutinize unit prices when purchasing daily necessities but spend generously on special experiences. A value-conscious consumer and a premium consumer coexist within the same individual.

    The competitiveness of ultra-low-cost brands does not come simply from offering lower prices. What matters is that customers can clearly understand what they are giving up and what they are receiving. These brands reduce elaborate packaging, unnecessary functions, and excessive services while consistently providing acceptable basic quality. When consumers are convinced that the low price results from an efficient structure rather than inferior quality, affordability itself becomes a brand philosophy.

    Retailers??private labels also demonstrate this transformation. Private labels were once regarded as inexpensive imitations of well-known products, but they have evolved into independent brands that emphasize quality, design, health, sustainability, and distinctive flavors. In a 2025 NIQ survey, 53 percent of consumers worldwide said they were increasing their purchases of private-label products. At the same time, sales momentum among the world?셲 leading brands also recovered. The result was a polarization in which low-cost offerings and powerful brands grew together. [NIQ](https://nielseniq.com/global/en/news-center/2025/niqs-global-report-reveals-challenges-and-opportunities-for-private-label-and-branded-product-growth/)

    Premium brands do not succeed merely by attaching high prices to their products. The greater the economic uncertainty, the stricter the standards consumers apply to expensive purchases. They examine what justifies the price difference?materials, craftsmanship, technology, scarcity, service, or brand narrative. A famous logo alone can no longer justify a premium. The higher the price, the greater the value the brand must explain.

    For this reason, consumer polarization does not refer only to the separation of income groups. It is closer to a phenomenon in which consumers rearrange their spending priorities across product categories. More money flows into categories selected as important, while competition for the lowest price intensifies in less important categories. The business model of assuming an average consumer and offering moderate quality at a moderate price is steadily losing its strength.

    The Collapse of the Middle Ground Squeezes Indistinct Brands
    The most dangerous position amid the polarization of price and value is the middle. This does not mean that mid-priced products will disappear. It means that brands without a clear reason for customers either to pay more or to spend less will face increasing difficulty. When consumers cannot perceive a difference, a middle price is no longer a reasonable choice. It becomes an ambiguous one.

    In the past, mid-market brands grew on the strength of widespread recognition and stable distribution networks. Their quality was above average, and their prices were not excessively high. At a time when consumers could not easily compare detailed product information, familiarity itself was a competitive advantage. However, the spread of search engines, customer reviews, price-comparison services, and social media has reduced information asymmetry. Customers can easily discover cheaper alternatives of similar quality and identify small specialist brands that offer higher satisfaction.

    When a mid-market brand raises its prices in response to rising costs, the problem can become even more serious. The price gap with premium brands narrows, while the difference from private labels and low-cost products widens. Customers begin to ask whether they should pay a little more for a better product or pay considerably less for similar utility. If the brand cannot provide a convincing reason to be chosen in either direction, sales volume declines. It then increases discounts to compensate, further weakening its brand value.

    Not every mid-market brand must move toward either the premium or the ultra-low-cost end of the market. Strong competitiveness can still be built at a middle price point. Instead of offering a generally acceptable product to everyone, however, the brand must solve a specific problem for a particular customer more effectively. It can establish value by reducing the time required for use, lowering maintenance costs, decreasing the risk of a failed purchase, or improving accessibility.

    ?쏛ffordable premium??can also be a viable position. Such a product may not be as elaborate as the most expensive alternative, but it does not compromise on core performance and offers greater reliability and service than low-cost products. For this strategy to work, customers must be able to recognize what has been removed and what has been preserved. Resources should be concentrated on the functions customers consider important rather than spread thinly across a broad collection of features.

    The collapse of the middle ground signifies the exit of brands without identity rather than the disappearance of a price range. A brand with a clear value proposition can survive at a middle price point. By contrast, even a famous and large-scale brand will be among the first to face pressure in a polarized market if its reason for being chosen becomes unclear.

    The Vicious Cycle Created by Dependence on Discounts
    When cost pressure and declining sales occur at the same time, the easiest option for a company is to offer discounts. Discounts can generate an immediate customer response, reduce inventory, and increase revenue. Repeated discounting, however, teaches customers that the list price is not the real price. Customers postpone purchases and wait for the next promotion, while consumers who paid the regular price feel that they have suffered a loss.

    When discounts become routine, profitability deteriorates even if sales volume is maintained. If the company cuts costs to compensate for lower profits, quality and service may weaken, making the brand less attractive. As customers leave, the company must offer even larger discounts, and the wider the discounts become, the less convincing the regular price appears. A brand that has lost pricing power becomes dependent on discounts, while its dependence on discounts further damages its pricing power. This creates a vicious cycle.

    Not every price promotion is harmful. Discounts can be useful for encouraging customers to try a new product, concentrating demand during a specific period, or managing inventory efficiently. The problem arises when discounts have neither a clear purpose nor a defined end point. If a company repeats the same promotion whenever sales decline, customers begin responding to the discount rate rather than the product?셲 value. The purchasing rule taught by the brand changes from ?쐀uy it when you need it??to ?쐗ait until it becomes cheaper.??/div>

    Instead of relying on excessive discounts, companies need to segment their pricing structures. They can distinguish between basic and premium versions, offer both small and large packages, and provide subscriptions or bundles suited to different budgets and purposes. This approach adjusts the barrier to purchase without reducing prices across the board.

    Small-package products are a representative example. They lower the amount consumers must pay at one time, allowing them to continue experiencing the brand. However, if a company conceals the reduction in quantity or raises the unit price excessively, it may provoke a backlash over ?쐓hrinkflation.??The more a pricing structure changes, the more important transparency becomes. Customers should feel that they have gained a choice, not that they have been manipulated into paying more.

    To strengthen pricing power, companies must measure not only the discount rate but also customer behavior after the discount ends. They should examine regular-price repurchase rates, customer lifetime value, brand-switching rates, and profitability by product rather than looking only at sales volume during the promotion. If a company cannot distinguish between customers who generate lasting revenue and customers who merely consume discounts, its outward scale may grow while the brand?셲 fundamental strength deteriorates.

    Design the Reason for Being Chosen, Not Merely the Price
    Pricing power is not the responsibility of the marketing or sales department alone. It is an organizational capability jointly created by product development, procurement, production, logistics, distribution, customer service, and finance. No matter how effective the advertising may be, a high price cannot be sustained if the product experience is weak. Even an excellent product can lose value if frequent discounts are repeated throughout the distribution process.

    Companies must first identify why customers actually pay. Internally, a business may regard its technology and features as points of differentiation, while customers may be paying for time savings, convenience, reduced risk of failure, social recognition, or emotional satisfaction. Price research should not merely ask, ?쏦ow much are customers willing to pay???It should discover, ?쏻hat are customers willing to pay more for???/div>

    Companies must also move beyond the habit of viewing customers as an average. Even people purchasing the same product differ in their price sensitivity and reasons for using it. If a company distinguishes between customers seeking core functions, those seeking convenient service, and those wanting the highest level of experience, it can diversify its pricing and product structure. Creating multiple layers of selectable value is more sustainable than offering every customer the same price and using discounts to manipulate demand.

    Cost management cannot be separated from pricing power. A strong brand cannot continue passing inefficiencies on to customers through higher prices. Reducing unnecessary product variants, packaging, and complex distribution structures can protect profitability while limiting the scale of price increases. Costs that customers do not consider important should be removed, while greater investment should be directed toward value they can clearly perceive. The standard for cost reduction should not be indiscriminate cuts but the reallocation of resources according to customer value.

    The way a price increase is implemented also matters. Companies tend to explain that they raised prices because raw material costs increased. However, a company?셲 cost circumstances rarely constitute a compelling reason for customers to buy. A company must demonstrate what has improved along with the higher price, how quality and service will be maintained, and what new benefits customers will receive. The legitimacy of a price increase is created not by the company?셲 hardship but by the value delivered to the customer.

    The polarization of pricing power is likely to intensify in the years ahead. As AI-based price comparison and purchasing agents become more widespread, products with weak differentiation will be exposed more rapidly to lowest-price competition. At the same time, increasingly sophisticated recommendations tailored to individual tastes and circumstances will create more opportunities for specialist brands with distinctive value to reach customers. The crucial divide will not be between large and small brands but between ?쐀rands with explainable value??and ?쐒eplaceable brands.??/div>

    Private labels are also likely to expand beyond the low-cost market into premium territory. Retailers possess both customer data and direct sales channels, allowing them to respond quickly to changes in demand. Traditional manufacturers will find it increasingly difficult to maintain a price premium through recognition alone. They will have to build assets that retailers cannot easily replicate, such as product innovation, distinctive experiences, and communities.

    Price is the most direct message a company sends to its customers. An excessively low price creates doubts about quality, while a high price without justification breeds distrust. Repeatedly alternating between discounts and price increases blurs what the brand promises. By contrast, a brand with consistent alignment between price and value reduces the customer?셲 decision-making burden and builds long-term trust.

    The reason winners and losers emerge under the same cost pressures is not determined solely by how much additional cost each company must bear. Some companies respond to rising costs by changing the price tag first, while others first strengthen the reasons customers should continue choosing them. Pricing power is not the ability to raise a number. It is the ability to prove that value remains even at a higher price. The brands that survive in a polarized market will be neither the most expensive nor the cheapest. They will be the brands that show most clearly why they deserve to be chosen.

    Reference
    McKinsey & Company, June 2026, Anna Pione, Clarisse Magnin, Danielle Bozarth, Jessica Moulton, and Kari Alldredge, State of the Consumer 2026: When Tech Acceleration and Cost Pressures Collide
    Bank for International Settlements, November 2025, Fiorella De Fiore, Marco Jacopo Lombardi, and Giacomo Mangiante, The Asymmetric and Heterogeneous Pass-Through of Input Prices to Firms??Expectations and Decisions
    NIQ, March 2025, NielsenIQ Research Team, Finding Harmony on the Shelf: 2025 Global Outlook on Private Label and Branded Products
    Circana, February 2025, Circana Research Team, Circana Global Research Illuminates New Era of Private Label Transformation
    McKinsey & Company, December 2024, Brian Henstorf, Pieter Reynders, Sheldon Lyn, Stefano Zerbi, and Leigh Phillips, Harnessing Revenue Growth Management for Sustainable Success