While writing How much brand premium does your firm command? I was reminiscing about Margaret and my last visit to Chicago. Allow me two minutes to explain; I hope you'll be pleased with the time you invest.
What comes to mind when you think about Chicago? Gangsters Bugs Moran and Al Capone? The Windy City, where former President Obama started out as a civil rights attorney? Jazz, Nat King Cole? Phillip Kotler of Northwestern University, author of 50+ books on marketing? Nobel Laureate Ronald Coase, author of The Nature of the Firm?
None of these, for me the memory was basketball; specifically, the Chicago Bulls and Michael Jordan. Herein lies the moral in my story about how much brand premium your firm commands.
The premium in a brand
Margaret and I planned to buy Bulls’ memorabilia for our grandsons at home. Here’s an approximation of what we founders we shopped around:
A plain white T-shirt in a Chicago tourist store cost $9.95
For a plain Bulls jersey with no player name or number cost $21.95
Add the name Doug McDermott and 3, his number cost $27.95
Use the name Michael Jordan and 23 instead cost $79.95
An ‘authentic jersey’ from the game when Jordan made ‘The Shot’ during Game 5 of the 1989 Eastern Conference First Round against the Cleveland Cavaliers cost $299.95
And you'd pay $3,999.95 for a Jordan-autographed 1997-98 Bulls jersey.
The brand premiums were:
Doug McDermott, 3: $18
Michael Jordan, 23: $70
The Shot: $290
Chances are all six of these items were made in China, quite possibly in the same factory. The distribution and marketing costs probably vary quite a bit, but nowhere near the range of prices for essentially the same functional benefits of wearing a jersey, namely keep the sun off your skin and conform to dress norms.
The moral in this jersey story
The $12, $18, $70, $290 and $3,990 premiums in five red jerseys with writing on them represent the monetary value of increasing emotional benefits, namely ‘what wearing a Bulls’ jersey says about me'.
It’s a great example of consumer marketing 101 and one of the many B2C marketing principles about which Phillip Kotler has educated us all.
How much brand premium does your firm command?
Truth is, the same principle applies in B2B marketing.
Here’s the rub, How much brand premium does your firm command? Is it more than the vanilla white T-shirt in the tourist store? Is it large, perhaps like that of ‘Michael Jordan, 23’ or is it rarified like The Shot or the autographed on?
Have you thought about measuring your firm's brand premium? Does it vary by client segment or work type? Are you earning the right to a premium that you're not extracting? If so, how much money is your firm leaving on the table?
As a leader in your firm you should be able to answer these questions. Your firm should have a strategy for being differentiated. If you are differentiated your clients will be willing to pay a premium for your services. Perhaps not as large as The Shot, let alone the autograph, premium, that’s only available to the Michael Jordan equivalents – very scarce. But some premium none-the-less.
And the more your firm is differentiated, the larger the premium you will command.
Our beatonbenchmarks surveys include measurement of the size of the fee premium that clients are willing to pay for each of the 160 accounting, law and consulting engineering firms we cover.
This question is used to indicate the extent to which clients are willing to pay a premium for a specific firm's service, and how that premium compares with close competitors'.