Tuesday, February 26, 2013

Price Always Trumps Brand, But It Shouldn't Matter To Marketers

Let me preface this article by saying categorically I believe very much in the power of branding. I myself (isn't that redundant?) have worked on many branding campaigns for marketers and advertisers of all sizes and shapes. I know first hand the value of branding done right and done on a consistent basis i.e. staying true to a given brand's tone and voice over time.

But I also have been witness to a growing trend. 

A revealing trend that is bringing to the light the fact that more and more consumers are sacrificing brand loyalty for the best price on a given product, service, etc.
brand loyalty
Exhibit B
Consider the above Exhibit A and the following to be, well, you get the idea.
The following (below) relates to a little something I like to call social media. Perhaps you've heard of it.
The lines have been skewing for some time now when it comes to brand loyalty and social media and with each passing day that line is skewing more toward the almighty dollar or if not currency in the monetary form, some other form of currency for sure.
From a Chief Marketing Officer (CMO) Council and Lithium survey in 2011.
price and consumers
Then there's this (below) from a report put out by Forbes Insights and Turn late last year called “The New Rules of Engagement: Measuring the Power of Social Currency":
price trumps branding
And finally and most recently, this below, from a survey conducted by PwC:
marketing considerations
Not So Breaking News
If there is a marketer out there who finds all or any of this news to be "breaking" he/she may need to start considering other employment for this should come as no surprise to anyone.
Consumers are people, people. Get it?
In general they want the best deal, period. Now juxtapose that thinking over a failing or still-recovering economy depending on who you speak to, and price just becomes all that more important in the pecking order.
'Ah but Steve, what about those brands who can never win a price war for any number of reasons? Are they doomed to fail?'
Good question.
No, of course they are not doomed to fail.
If, if they realize that there's more than one way to skin a cat or in this case win a consumer's heart, that is - which ties into the "why it shouldn't matter to marketers" part of the title of this article.
Obviously many brands consistently thrive and survive just fine without being the cheapest on the shelf. They do so for a myriad of reasons including something I like to call "quality." Remember the old "you get what you pay for" adage? Yeah, that kind of goes hand-in-hand with this thinking.
So there are plenty of marketers, brands and so on who wake up every morning knowing they cannot possibly win a price battle but they know there's a quality product so all is well in the world.
Not So Fast 
The real winners in ALL of this will be the brands who come to grips with the fact that while price and quality will always play a role in a consumer's decision making process, it is the relationships they create with a consumer that will ultimately determine success or failure.
Make no mistake about it, we are or already are, in what Responsys CMO Scott Olrich referred to as "the relationship era" in an end-of-the year piece entitled Looking Back, Looking Ahead - CMOs Weigh In.
His exact quote was "We will see the beginning of what I refer to as “the relationship era” whereby marketers will move away from an acquisition first mentality to a relationship first one. Marketers will focus more on the entire consumer experience to build and foster a long term relationship with a consumer as opposed to just that initial purchase phase."
The brands who understand how to cultivate and maintain relationships with consumers will be the ones who reap the biggest rewards.
Photo credit: Wikipedia
Named one of the Top 100 Influencers In Social Media (#41) by Social Technology Review and a Top 50 Social Media Blogger by Kred, Steve Olenski is a senior content strategist at Responsys, a leading global provider of on-demand email and cross-channel marketing solutions and a member of the Editorial Board for the Journal of Digital & Social Media Marketing.

1 comment:

  1. Not so fast on "The End of Brands."

    Of course people want a good deal, but price NEVER Trumps True Brand Value. What are people buying --- Apple or Acer?, Coke or Big K Cola, Oil of Olay or K-Mart facial cream? Honda Accord or the Tata Motor's Nano (the world's cheapest car)?

    Of course, most people want a good deal and the economy is putting price pressure on many product purchases. There has always been a "value segment" in every product category. Analysis shows that across many product categories about 30% to 35% of the market is "Price or Store Brands" and target to people who primarily buy on the lowest cost. In hard economic times, this segment grows a bit bigger, but typically returns when the economy stabilizes.

    But the rest of the market, representing about 65% of consumers, typically buys on "value" which is defined as "benefits less dissatisfiers" divided by "price". Brands compete in this market segment. Some brands are premium and some are mid-value, but these brands compete on ideas and benefits, not price.

    True brands add value that consumers recognize and these brand will "weather the storm" and emerge after the pricing wars are over. They may incur temporary price and profit scars during the battle, but they will survive. It is the "imposter brands", the one's with more sizzle than substance, that eventually fall during pricing wars. That is because, upon close inspection, the product lacks the requisite value and cannot justify the price.

    True brand value is not easily achieved. It is build up over time and is comprised of real substance and meaningful differentiation. Real brands fight every day to add value and provide meaningful differences that people recognize and are willing to pay for.

    Having said that,every brand needs to understand how much additional value their brand provides and must maintain a price premium that is within an acceptable range.

    For example, I may be willing to pay 15% or 25% more for my favorite brand in order to get it's particular benefit, but I am not willing to pay 30% more for it. So, if I get a 50% off coupon for a competitive product, I may switch for price on that occasion, but it does not change my brand loyalty. It only changes my behavior for that purchase occasion.

    This is why I submit that True Brands, that compete on ideas and provide noticeable benefits will NEVER fall prey to inferior products that compete only on low price. Offering real value is why companies like Apple are killing it even during a tough economy.