Thursday, September 23, 2010

Secrets of a Valued Brand

In a market where clutter defines the present and competition is religion, What should Drive a Brand – Pricing Advantage or Benefit Package?

A brand is a promise. As a variety of competitive claims assail the consumer’s senses, he uses his personal gestalt of each competing brand to compare one with another. He is looking for a uniquely beneficial package of attributes. A marketer must make an offer at such a price as the customer’s expectations are exceeded. We may add that a successful brand is an identifiable offer augmented in a manner that the customer perceives it in a promise that is full of uniquely relevant values which match his needs. And a valued brand is one which delivers the added values in a sustained manner, in the face of competition.


Though the marketer designs his offer, the customer is the arbiter. When buying a new brand he seeks clues about the capabilities of the brand. He evaluates the brand through a menu of perceptual evaluations so that it becomes his idea of the product. Good branding results in perception of the values of a brand interpreted and accepted so clearly that the brand acquires a personality (Coke, Thums Up, Pepsi, et al). Indeed, products with little apparent functional differences are regarded differently because of the unique brand personality (for example: Kingfisher Airlines vs. Jet Airways).

A study of 1036 brand communication enables us to typify brands in the following eight categories:

The table above shows that marketers interpret brands in different ways. Thus, they place different emphasis on resources that they need to commit to support the brands. While some treat brands as functional devices (Colgate dental cream), others treat them as primarily differentiating devices (Close Up toothpaste). But the really successful ones – the valued brands – adopt a holistic perspective by treating their brands as strategic devices.


Such brands acknowledge that customers are the promiscuous lot. Love for a brand is not unrequited. At times the frame (Packaging) may sell the painting (Product), but often, consumer declines to oblige. Wise marketers analyse the forces that can influence the profitability of their brand, identify a position for their brand that majors on the brand’s unique advantages and guard it against competitors. Maruti does it. Ford did not, until it introduced the Figo in India. The marketer does not emphasise on design or advertising (Fiat Palio did, with miserable results); instead he coherently employs company resources to support competitive advantage (LG, Nescafe).

Of course if the competitive advantage is not sustainable, the brand will disappear from the market (Stencil) or will be outmaneuvered by more aggressive rivals (CCD vs. Barista). A brand’s competitive advantage gives it a basis for beating competitors, since it creates superior value for its customers. These customers perceive value in brands when it either costs less to buy these brand than competing brands offering similar benefits (Micromax offering Push mail facility), and/or when they have unique benefits which offset premium prices (Honda City).

So what should drive my brand – pricing advantage or benefit package?

Cost-driven brands can cut costs through economies of scale, faster learning, more efficient raw material sourcing, bulk-selling, cost-cutting tech innovations, or streamlining of product range. By understanding what the target market wants, unnecessary frills can be eliminated (Nirma in a polythene pack, Subhiksha stores without air conditioning) and an attractively priced proposition can be developed (Udipi restaurant). However, given the market price, if costs cannot be contained so as to give acceptable profit margin, the strategy will boomerang (Coke at `5 for a 200 ml bottle met this fate). Value added brands on the other hand offer bigger/superior benefits package than the rivals, and charge a premium in lieu (Angioplasty at Max vs. AIIMS). To be sure it need not be functional excellence that establishes the superiority of such brands. A strong image itself can offer a powerful competitive advantage (Heritage hotel properties of ITC Group). Value-added brands differentiate themselves using a variety of techniques – a unique component (Carl Zeiss lens in a Sony handycam), superior technology (iPod), incomparable end product (buildings designed by Hafeez contractor), distinctly superior service (Emirates Airways), or simply image perception (Color Plus).


Each brand has a cost-driven component and a benefit-oriented package. A brand therefore could be predominately cost-driven (Zenith computers) or predominately benefits driven (Sony Vaio). Accordingly, we can draw a brand matrix that classifies brands on a strategic basis.

Commodity brands offer vanilla, undifferentiated products. The seller lacks the ability and/or inclination to help the customer. The services offered are of indifferent quality, either because of an absence of significant competition (BSNL) or because of low revenue per customer (Government-run schools). If and when new efficient competition arrives, the sluggish brand will have to either pull up its socks (SBI after the arrival of ICICI bank) or it is likely to suffer from a cardiac arrest (yellow top taxis). Bargain basement brands are cutprice offers which care little about establishing features/image superiority; they concentrate instead on passing on the benefit to customers in the form of ultra low prices (Big Bazaar). Unique brands on the other hand are able to charge a premium for their particularly unmatched benefits. These focus less on cost management and more on value addition. Nature’s basket from Godrej, the Gourmet foods supplier, for example offers choicest selection at premium prices. Platinum lounge in PVR complex will leave you poorer by `400-500 per seat.

Finally, the benefit brands are those successful monikers which offer customers many relevant extra benefits (Hyundai i10 and i20). As a consequence of high consumer satisfaction, they enjoy a high relative market share, enabling them to enjoy economies of scale (Hero Honda). They pass on some of the cost savings to customer so as to also enjoy price advantage over rivals (Maruti).

So which cell should a marketer strive to occupy? For sure, commodity brands indulge in mutually destructive rivalry. Relative weaklings are ousted in due course, as consolidation takes place, and then the remaining players find their niche. This is what has already happened in many segments of the consumer durables industry in India. This is what is currently happening in the aviation industry.

Bargain basement brands can survive as long as they can exercise tight cost control. Product portfolio rationalisation, Standardisation et al, need to be undertaken. Many garment exporters have forayed into domestic market, since they were already used to running a tight ship. Vishal Megamart has faced difficulties, because it expanded beyond its limits.

Unique brands survive on constant innovation. Microsoft has launched version Windows 7 through planned obsolescence and iPod is in its fourth incarnation. On the other hand, Facebook has successfully challenged Orkut. These are high-margin brands almost monopolising a specific subsegment of the market.

Finally, benefit brands like Nokia, Frito Lays, Haldiram fast food and their ilk, thrive through being very responsive to changing market needs and continually attempting to improve their offerings, while simultaneously looking for opportunities to shave costs. These brands enjoy a large market share and keep their shareholders happy. So if one has a choice, one should join the league of Valued – unique or benefit – brands. But then, the contest is truly fierce. For most, it would be, like they say, “If only, wishes were horses...”