Marketing Strategy

Killing your brand in one easy move?


Businesses are facing tough choices at the moment, as the UK struggles its way out of recession. And, with anything up to 1million people to lose their jobs in the next few years, it’s only going to get more difficult.

So it’s easy to understand why brand-killing panic sets in.

First the marketing and advertising budget goes – it’s an ‘easy’ saving to make.

Then when things get even tighter, in come the discounts.

Combine the two, and you’ve got a brand-killer on your hands.

In regards to the first point, I blogged about this a while back. Yes, reduce budgets if you really have to (although it’s not a good idea unless you’ve been wasting money), but take the opportunity to do something new and different.

After all, if your visibility goes, no-one will know you exist, so even if there’s someone out there with a wallet full of readies, they won’t be coming your way.

But it’s the second point that’s the most fundamental to this post – and actually the long term brand-killer.

Imagine that you’re a consumer, looking to buy a new sofa.

You’ve got a certain amount of money to spend, and you’re going to pay what you think the item is worth.

So in you walk to the sofa shop and there’s a perfect suite reduced from £1000 to £500. Delighted, you take it.

So what’s the suite worth?

You’ve got a half-price bargain. And now you’ve got money to go out for a beer to celebrate.

It’s probably worth the time you spent trawling around to find the best deal. It’s probably worth telling people about. It’s probably worth more than the old bean bag on the floor that you’ve been using up to now. And it’s certain worth avoiding the numb rump you’ve been getting from sitting on a ropey old bean bag chair.

But is it worth £1000?

No, it’s not. Because you only paid £500 for it, that’s what it’s worth. That’s what the free market system has set the worth at.

So it doesn’t matter so much if the kids crawl all over it in studded jeans. If doesn’t matter so much when you spill hot coffee on it. It doesn’t matter so much that the cat sits on the back of the chair bending it down.

Because it’s only worth £500, you could happily bank the other half of the money, gather some interest and buy a replacement suite in two years, rather than the five you’d originally budgeted.

It was half-price so it’s got half the worth, if that.

Now imagine that you’re the retailer.

You’ve got to make ends meet. And if that means selling 15 sofas at 10% of your previous profit margin rather than one sofa at 100%, then so be it.

A buck’s a buck, right?

Actually, it’s not. In a recession, consumers become more price fickle than ever before. And I believe that this behaviour will last well into the post-recession economy.

The problem is that by selling a half price sofa, the retailer has now set the expectation with the consumer that they’ll always be a cut-price retailer. And that the product was only worth £500 anyway.

So when the prices go back up, where will the customer go? Will they pay double what they did before, or will they go somewhere else to achieve the same cut-price deal?

What the business has managed to do is devalue – permanently. The free market economy will remember.

Then there’s the argument that the sofa wasn’t even worth £1000 in the first place. So the retailer has been getting fat off huge mark-ups, when in fact they could have supplied the same quality at a lower price for years.

Someone somewhere is making a lot of money against a product which isn’t even worth that much in the first place.

And this could prompt distrust in the mind of the consumer. So when the recession’s over and people are spending again, will a distrustful consumer come back?

This isn’t good for the brand.

Granted, the big players can probably suck it up for a couple of years. But what about the smaller businesses, for whom this kind of exposure could be deadly?

Ouch.

This is the time to add – not de- – value.

Devaluing product or service is a situation that’s very difficult to come back from. Once the price point has been set low, why would the consumer pay anything over and above?

So this is the opportunity to add value to a proposition. There will be many ways that a business can add some value without costing themselves their brand value, equity – or even a whole heap of cash.

Take the theoretical sofa retailer. Instead of losing £500 per customer, why not offer a ‘free’ end of year product inspection in the customer’s home?

In essence, after the customer has had the sofa a year, along comes a company rep to check that it’s holding up to wear-and-tear as it should, and maybe even give it a bit of a clean.

Of course they’ll have specialist cleaning products with them to give the customer a really great result and get the sofa looking like new again (and possibly making it last longer, rewarding the customer’s original investment).

And maybe the customer would like to buy some product while it’s available…

I can almost guarantee that each sofa inspection and clean won’t cost the company £500. Plus it could earn brand loyalty, remind the customer of all of the other great products in the shop (throws, cushions, footstools, matching chairs), and make the customer feel as if they’re getting something for nothing.

Plus they’ll feel loved by the after-care.

And if a company is willing to offer an end of year inspection service, they must take a lot of pride in their work. Which means that the sofa will be well made and built to last… (thus increasing the projected value of the product).

A little bit of added value goes a long way

Not all of the customers will want to have their inspection and clean, some just won’t be bothered.

And for each of those, the business keeps its original level of profit intact. Without devaluing the product to a point of no-return. Without damaging brand equity.

Tell me that’s not the way forward?

*Disclaimer: I have nothing against cheap sofas, I’ve got one myself. And the approach for different companies in different sectors will be different.

But adding value and not devaluing is the only way forward.

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2 thoughts on “Killing your brand in one easy move?

  1. This marketing strategy has always worked for me:

    – When things are good, cut the marketing budget.
    – When things are bad, increase the marketing budget. Yes there are fewer customers, but you have to fight for each one. You can’t do it without weapons and ammo.

    It’s worked every time, especially now during this long recession.

    MBAs and the Finance Dept, that manage by spreadsheet, don’t believe in this strategy; but, they don’t sell anything or interact with customers. If you let spreadsheets run your company, you’ll be left with nothing but empty “cells” or negative entries. If you have to cut, cut the people that are furthest from your customers. Hmmm… I think that would be the folks that make spreadsheets and internal PowerPoint charts.

    • Hi Mike

      Great strategy – can imagine how the spreadsheet types react!

      In cutting the budget in good times, would you then advocate switching delivery strategy into low or no cost to keep awareness up?
      So no spend but equal activity?

      Neil

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