During downturns as price sensitive customers move out, one option is to yield market share to protect profits. Another option comes from Nestle’s playbook, “move your customers within your brand family, from premium priced brands to value brands without reducing the prices on your premium brands.
Victoria’s secret known for its brand and premium prices on its products, facing 11% drop in sales and 27% drop in profit, is taking the play out of Nestle’s playbook and introducing lower-priced items in their product mix. Versioning helps protect price premium and the high reference price on its products and makes it easy to move the customers from lower-priced to premium products when the economy turns around.
Victoria’s Secret is going one step further than Nestle, developing super-premium brands. This is also another play from the CPG playbook, this time it is from P&G which developed super-premium Tide Total Care that is priced 60% more than regular tide. This helps offset drop in profit from lower-priced items from increased profit from these super-premium items.
After all it is easier to up-sell to your customers than selling to new customers. If one price is good, two prices are better!