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Category: Brand Value & Pricing

Airline Brand Strategy Brand Value & Pricing

Transaction Mode: Danger For Brands

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Airline Brand Strategy

The response by airlines to customers’ demands for lower and lower fares has been to do exactly that, lower seat costs, but at the same time to strip more and more of what is included in the fare out of the price.

This process – referred to by Time as “the unbundled skies” – points to a business model that I see becoming more prevalent, and not just in the heavens, as price-sensitive brands lower entry points in order to get customers to commit, and then use “upgrades” to restore margin and, according to the article, add another 50% or so to the real price. Pay less, get less. Want more? Pay more. Ryanair have even suggested, somewhat controversially, that “more” could include access to the toilet. In fact, according to one consultant quoted, there are up to 35 add-ons available when you fly, ranging from baggage and food fees to flight-delay insurance and keeping the middle seat empty. You literally get what you pay for.

This seems like an expedient answer to customers’ demands for cheaper goods. Lure them in – then trick them into paying more. It’s not exactly customer-friendly but at least, some would argue, it’s a way to compete.

True, but changing the competitive model this way is not without its consequences. One is that as the product itself becomes less valuable and valued, service now comes not just at, but with, a price. That in turn shifts the emphasis from what customers get to what do they not get, and what shortfalls they are prepared to do without.

For the moment what’s happening in the aviation sector amounts potentially to a complete economic rebalance of the product at that end of the market. As the article points out, “In the unbundled world, airfare is merely the price of admission to get on a jet. If you crave comfort, convenience, less stress, decent food — what was once called good service — expect to pay up.”

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Brand Value & Pricing

Why People Buy Products, Services And Brands

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Purchase Decision Strategy

Why do people purchase the products, services and brands that they do? At a minimum, marketers should think about this periodically. Ideally, marketers should always be thinking about this. So, why do people purchase specific things?

  • They solve problems. They make my life easier or safer or more pleasant.
  • They are whimsical. They make me smile or laugh. They make me feel playful. They entertain me.
  • They are beautiful. They are a source of awe or wonder. They calm me. They make me feel good about my life. I love to be surrounded by beauty.
  • They surprise me. I love their unexpected nature. They fulfill my need for mental stimulation and variety.
  • They make me feel important. They give me status. They feed my ego.
  • They are addictive. They fulfill a deep craving. They are pleasurable. They are satisfying.
  • They provide me with information or knowledge or access.
  • They give me more time. They increase my freedom. They reduce my workload. They release me from mundane tasks.
  • They reduce my anxiety. They increase my peace of mind. They give me one less thing to worry about.
  • They stimulate my senses. They look, smell, taste, sound or feel good.

Think about this. What are some other reasons people buy things? Why do you buy what you buy? What was the most recent product, service or brand that you purchased? Why did you purchase it? Why did you choose it over the competitive alternatives? What was your most memorable purchase? What made it memorable? What product, service or brand do you value the most? Why do you value it?

This sort of thinking should be second nature to marketers. After all, isn’t marketing the art and science of motivating people to buy specific products, services and brands?

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Brand Value & Pricing

Why Brands Drive Financial And Business Results

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Brands Financial Impact

We are often asked about the impact of brands on financial, business performance and growth. Enough research has been conducted on this over time throughout the world that one could write and entire book on this subject. I will not do that here. But I will be a bit more detailed than I have in the past about this.  The bottom line is that strong brands have a very strong positive impact on financial and other business results. Following are data points on some of the ways in which this occurs.

A recent Nielsen study demonstrated that strong brands command higher loyalty rates. Consider the lifetime value of more loyal consumers. The study also showed that strong brands generate three times more market share than brands with moderate reputations.

Millward Brown Optimor reported that its BrandZ Top Most Valuable Global Brands significantly outperformed the S&P 500 in 2013.

In another study, Feng Jui Hsu, Tsai Yi Wang and Mu Yen Chen examined the relationship between brand value and stock performance using Interbrand’s Global 100 Brands ranking. The brand portfolio outperformed the S&P index in various holding periods and generated a significantly positive risk adjusted alpha.

An earlier study (for the period 1994-200) reported by Thomas J. Madden, University of South Carolina, Frank Fehle, Barclays Global Investors and Susan Fournier, Boston University, found that firms that have strong brands create value for their shareholders by yielding larger returns with less risk than industry benchmarks.

Another study conducted by Andrea Guerrini, PhD, assistant professor at the University of Verona and Francesco Zaffin, management consultant, looked at the top 60 brands in Interbrand’s annual ranking between 2006 and 2010 and identified positive correlations between brand value and share prices primarily in the intangible product categories such as business and financial services. 

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Brand Value & Pricing

The Role And Value Of Branding

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Brand Value

So many people misunderstand the role of brand. They think it’s a synonym for marketing, and marketing is a synonym for media spend.

  • A brand tells people who to value and why.
  • Marketing tells them how the brand is valued, and where to access it.

The purpose of your brand is to use that perceived value to provide you, through marketing, with sustained sales at a greater level of return than the market is inclined to give you over the longer term.

The objective of every brand should be to lift what people are prepared to pay, to motivate people to value you more than they would do otherwise. It doesn’t matter whether you’re a discount brand, a scale brand, a luxury brand or a cult brand, that’s the goal. It doesn’t matter whether these are boom times or bust.

If you’re not a brand, you’re a commodity. You are only worth the value that the market assigns. And in good times, many companies are happy with that. They stop spending, ride the commodity wave and bank the organic growth. They allow themselves to believe the increases are all their own doing.

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Brand Value & Pricing

Commanding A Premium Price

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Samsung Apple Brand Strategy

In a recent post on iMedia Connection, Millward Brown Optimor’s Pandora Lycouri and Dmitri Seredenko conclude that Samsung can’t buy love. In “Can Samsung Buy Love?” they contend that simply outspending Apple is not going to overturn the strong emotional connection with users that Apple has earned through consistent innovation and iconic style. Maybe not, but it might help Samsung charge a price premium over other brands.

I have recently spent some time exploring how some brands manage to charge a price premium. Premium is the ability to command a price premium in any product category; it is not the same as luxury. Luxury brands practice an extreme form of premium marketing and additionally leverage the power of scarcity. Limited supply helps convey a perception of exclusivity.

In the course of my exploration, I have spent some time exploring the mobile phone category in the USA using BrandZ data and Euromonitor. Given the fast-paced nature of the market it is the marketing equivalent of studying how fruit flies evolve. Brands enter the market with something new, they evolve to fend off competition and then, like as not, die. Anyone remember Palm?

The fascinating thing about the entry of the Apple iPhone to the category was the way the brand immediately supported a price premium over the available brands because it was clearly seen to be different from them. Functionally and from a design viewpoint, it was unlike anything else and so it commanded a price point unlike anything else. This was apparent in our data from 2008 onwards even though the brand took a while to establish widespread salience.

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