“The ability to get information about whatever you want, whenever you want has given shoppers unprecedented strength. In markets with highly transparent prices, they are kings.
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| Rupin Jayal |
The implications for business are enormous: threatening for some, welcome for others. For instance, the huge increase in choice makes certain brands more valuable, not less.” (The Economist 2005)
“Price can be a potent element in positioning, and within a brand portfolio.” (Getting the Brand Strategy Right – Admap 2004)
“In the obsessive quest for share, even the biggest names—Miller, Kraft, General Mills and Coke—have become so addicted to low prices that some of their great brands are now little more than commodities.
Rethink the category, and price like you rethought the category. “Parity prices are not the answer.” (Marketing to the affluent new quality seekers - Jonah Bloom, Adage 2005)
Walking the malls these days is a sobering experience. Discounts are ubiquitous while bursting shopping bags are increasingly difficult to spot. Yet there are some brands that seem to hold the price line better than others. And while we might groan inwardly about paying more, we continue to patronise these brands. The question is, what makes these brands Worth Paying More For (WPMF)?
Simple answers are many and could range from “better advertising” to “better product” or “better management.” Yet the answer is very far from simple in a world where people are both better informed and more cynical. Some argue that the answer simply lies in delivering the basics well:
“You need not offer something unique to attract business. Customers rarely buy a product or service because it offers something unique. Usually, they buy the brand that they expect to meet their basic needs from the product category a bit better or more conveniently than the competition. What customers want is simply better and not more differentiated products and services.” (Simply Better - Delivering what matters most - Patrick Barwise, London Business School/Sen Meehan, IMD in Market Leader 2004)
There are categories where just delivering the basics well would in itself be a great advantage such as mobile services without constant call drops or arbitrary disconnection of services, retail stores with well-informed salesmen, restaurants with prompt service, airlines’ on-time record, utilities that were efficient, etc.
So this is a good starting point. Understand what your brand’s category expects, see whether your key competitors are delivering these basics, and if not, then there is an opportunity waiting to be exploited. There are many categories where people would be happy to just get what they are paying for and a minimal level of competence and simplicity in their dealings with that category.
However, with increasing knowledge and activism increasingly being powered by the interconnectivity of the internet, people expect more. And even if they get this “more”—opening their wallets for it is a very challenging task. So while people might want “more” safety in cars with additional safety systems – would they actually be willing to pay for them? Most automotive safety features have become ubiquitous because of regulations demanding them rather than the demand coming from people buying cars. However, people have demanded better comfort, driving experience and fuel efficiency and manufacturers have responded. WPMF is better driven by “more” positive areas rather than passive/defensive features or attributes in most categories.
The fact is that there are no simple solutions that ensure that people pay more for your brand other than a monopoly or first-mover advantage. Whole categories are now increasingly becoming commoditised as technology and white hot competition ensure rapid parity between products and where an increasingly crowded advertising environment creates a cacophony of claims and counter claims. Hence the solution has to lie in multiple layers of interaction between the brand and active buyers and in multiple activities to deliver the sense of value. Today large companies and not just brands are valued on the basis of tangible and intangible assets. With many service brands, the value of the intangible exceeds that of actual physical assets.
“Why are we willing to pay 20 percent more for the well–known brand of Walker's Crisps when we could buy the equally serviceable Sainsbury brand? Or why do consumers pay a 50 percent premium on their PCs for the satisfaction of knowing that Intel is inside? Why do we believe that, when we buy the leading brand of cereal, ointment, drink or car, we are cleverly buying health, beauty, virility and status?”
Establishing and sustaining brand identity probably accounts for half of marketing expenditure and it is money well spent for, in many well–known cases, the value of the brand exceeds or equals the other asset values of the company.
In 1988, Philip Morris bought Kraft for $12.6 billion, six times what the company was worth on paper. The price difference? The cost of one word: 'Kraft'. Similarly in the UK, Rank Hovis McDougall successfully used brand valuation to avoid a takeover by putting a valuation of £678 million on their brands (Bisto, Hovis, Mr Kipling cakes and others) in the balance sheet. Last year, Unilever bought Best Foods for its Slim-Fast Foods for £13.6 billion as well as Ben and Jerry's Ice cream. From a firm's perspective, we are in an age in which management is increasingly about 'intangibles'. In 1988 Interbrand found that intangibles accounted for 56 percent of the market capitalisation of the FTSE 100. By 1998 this had risen to 71 percent. Companies with strong brands no longer look at their tangible assets. To quote:
'If Coca Cola were to lose all of its production–related assets in a disaster, the company would survive. By contrast, if all consumers were to have a sudden lapse of memory and forget Coca Cola the company would go out of business.' (Barwise et al., 2000, p. 75)
Or, as John Stuart, former CEO of Quaker said:
'If this company was split up, I would give you the property, plant and equipment and I would take the brands and trademarks and I would fare better.' (Twitchell, 1999, p. 159)
(The Sorcerer's Apprentice? Alchemy, Seduction and Confusion in Modern Marketing - Karin Newman, Middlesex University, IJA 2001)
“All the steps that the customer takes – becoming aware of the product or service, obtaining information about it, comparing available products or services, making the purchase, using the product or service, dealing with customer service representatives and making additional purchases – must reflect the promise: a single relationship reflected across many contact points. The presence of the brand promise should be obvious in all aspects of service and operations, adding value and building loyalty during every step of the customer decision process.” (Branding in the 21st Century - Making and keeping the continuous promise, Chris Hall, The Advertiser 1999).
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written by Gucci outlet, July 03, 2010
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