A lot of people talk a lot about brands as impressions: brands are how you are talked about when you are not in the room; your brand is the sum of the prompted and unprompted associations that people have of you; your brand is expressed in the ways that you are remembered. All of these definitions accurately describe the associative advantages of a powerful brand. But the critical aspect for me is that a brand today must not only look the part, it must also function as an asset – by definition that means it must be “Something valuable that an entity owns, benefits from, or has use of, in generating income.”
In order to do that:
- A brand must be tangible – there must be something identifiable to offer, and that something, whether it is a product or a service, must have value.
- There must be a distinctive and viable business model – a brand requires an efficient and competitive commercial delivery model in order to get into market and to meet demand.
- A brand must differentiate itself from other offerings like it in order to prosper – brands require a competitive environment in which to thrive because without such an environment the concept of a value equation means nothing.
- A brand must be visible to the people that matter to it – a brand must take conscious and measured steps to gain and retain their attention.
- A brand must engage with the people it seeks to work with – so it must have a personality that people are attracted to and it must tell a story that people want to hear more of.
- A brand exists to earn margin beyond the going market rate – and a brand that fails to do so joins the ranks of the commodities.
- It must create expectations – and those expectations must underpin the promises the brand makes in market and the values that it works by.
- Brands must capture who they are through a distinctive identity across a full range of touch-points – great brands are symbolized in ways that people know and that graphically capture their character.
- A brand must offer experiences around the goods or service it offers expressly to generate trust, connection and distinction with its audiences.
While these characteristics will be familiar to many, the implications are wide-ranging:
If I buy something on sale, what should I get? 40% less – or 40% off? They are very different things.
If I purchase something for 40% off, that means I get what I would have got if I’d paid full price but I get a 40% reduction on the asking price for the very same goods or services. The result, as we’ve discussed many times, is that the brand’s perceived value deteriorates and, if enough retailers participate, the actual market value of the brand also drops.
40% less on the other hand means I pay a lesser price but I get less for that price. How can that be? Surely a pair of shoes is a pair of shoes, right? Not necessarily. One of the first rules we were all taught in direct marketing is that it is much more economical to give than to take away. In other words, it is much more economically sensible to add services to a product in order to make it more valuable than it is to discount the asking price.
That’s because the price I can pay to add perceived value is generally much less than the cost of taking money away. Airlines are very good at this. You pay a lot more for a Premier seat than you do for an Economy seat – and in exchange the airline gives you a bigger seat, a different menu and perhaps more movies. They add to what you get, at a lower cost to them, than the revised price they ask you to pay.
The problem with Brand Value is really simple: no one agrees on it.
The GE brand, for example, in 2011, was variously estimated to be worth $30.5B, $42.8B, and $50.3B by different brand valuation services. That’s a difference of about $20B between the high and low estimates. It gets worse. One firm estimated that GE’s brand value was rising, while the other two calculated a declining brand value.
These are not small numbers. In fact, they’re large enough to qualify as annual GDP numbers for many small countries — like Uganda. And GE isn’t the only example of the problem with Brand Value.
In a recent article on the issue of Brand Value, The Economist noted: “…arguments rage about how much brands are worth and why. Firms that value them come to starkly different conclusions.”
It’s obvious that brand valuation has a “starkly” real issue. None of the firms estimating brand value agree on the same value for a given brand. And if none of them agree on the value of brands, how can CMO’s and CFO’s begin to understand the brand value they’re creating with their Marketing spending?
Take a look at the diagram below courtesy of Ryan Jones (thanks for the point Marc Abraham). It shows how Apple spans its offerings over a surprisingly wide range of price points.
By introducing new lines, retaining older lines at degraded prices and through the use of provider subsidies, Apple delivers an impressive range of ‘step-in’ opportunities for customers to join its ecosystem.
As technology and globalized business models continue to deliver efficiencies and new opportunities, every sector will face disruptive pricing that in effect re-costs what the market would otherwise pay. Many of those movements will naturally be downward; others will lift the entry point. Amazon has effectively reframed the cost of books; Samsung and others are resetting the cost of owning a tablet; Tesla has redefined what an electric car is and also the cost of owning one.
But in response to competitor moves, so many brands make pricing changes without making changes to the brand at the same time. They simply react. As a result, their brand either ‘loses value’ or ‘becomes more expensive’ for no good reason – or at least none that the consumer can see. By simply shifting what Tim Smith has referred to as the “value exchange” without repositioning the premise by which they compete, these brands have in fact deteriorated both: there is less sense of value; and there is therefore less sense of exchange. Consumers are either getting more or less value than they were getting – for no reason that has been clearly articulated to them.
Rebranding your price is a useful strategy for brands who find themselves needing to adjust their pricing in competitive landscapes and who have the ability to improve, adjust or diversify their offering quickly so that brand, value and pricing align. It works because it effectively links what you’re asking with what you’re offering and what your consumers value.
If you are going to price up, you will of course need to use what you have access to in terms of innovations and value-adds to make the purchase feel more valuable. Or if pricing down, look for ways to actively make your brand more attractive to more people. Because as Seth Godin so rightly points out, “Every great brand (even those with low prices) is known for something other than how cheap they are.”