Tag Archives: Brand Equity

Strong brands do not need discounts

The impact of discounting products on the short and long term. 

The Black Friday & Cyber Monday sales are almost over. Consumers who got some deals are happy, and so are businesses. 

For companies, sales discounts are a great way to boost short term sales. It is an approach with guaranteed success. If you want to increase the sales bonus, then start offering discounts! When your product is in demand, you will notice that even people who do not need it right away might buy it because of the deal. 

Like with everything, there is a flip-side to the discount deals craziness – I like to call them deal traps, and here they are:

Postponed purchases of higher value items in general

If your product is NOT a fast-moving consumer product but a substantial investment for consumers, you must consider any possible discount you are providing. Imagine if I am in the market for an expensive bed, I could easily wait till Black Friday to purchase if it saves me 30% of the new price. Believe it or not… people are willing to wait till the next round of discounts. And at the same time, they do know the room to negotiate.   

Artificial purchase cycles, esp with higher value items 

A great example of this discounting is FujiFilm. In Spring, Summer, and Winter, they run pretty steep discounts on cameras and lenses. Now how often do people buy cameras and lenses? If you are in the Fuji camp, you should make your purchase three times per year! And what happens when a camera or lens is you like to purchase is not on sale? Then wait -if you can- till the next seasonal offers. Changes are your dream kit will show up at some point. 

Suggested retail prices do no longer exist.

Discounts reduce the suggested retail sales prices of the products in the mind of the consumer. Once you have seen a printer in a special offer for 69EUR, you won’t pay that 99EUR suggested retail ever again. Perception is why strong brands never engage in discounts – because discounts perceptually make the brand and product positioning weaker. 

Apple only recently engages in discounts, but they are never direct discounts – always in Apple Gift cards, to be used in the Apple Stores. You pay the full price and get rewarded with Gift cards. This way, the value perception of the product in the mind of the buyer won’t change.

So, what is the alternative to consider?

Never discount your core product but provide perks around it. For example, if your business is, let’s say, Music composition software, then never create a deal on the software. Instead, provide perks and packages of items people get when they buy the software. For example: buy the software get a plugin for six months for free. 

Whatever you do, keep in mind that strong brands never do discounts and never need to do discounts. 

 

Brand appeal among student

During the past couple of months, I had the opportunity to teach Global Branding to second-year international students at Avans University of Applied Sciences in the Netherlands. A great opportunity to test the appeal of some of the leading brands of today.

It is always fascinating to see how different age groups react to brands. It is especially interesting talking to students in their 20’s as they will become the generation of tomorrow.

One valuable lesson I learned while being employed at Nokia is that for brands to be successful in the future, they will need to be able to pass from one generation to another.

When looking at some of the leading brands of today according to, e.g. the Interband top 100 and using this group of students as a sample, there are some interesting observations. I did a similar test when teaching in 2016, and interestingly the ‘winning’ brands have become stronger.

In German cars, students want the brand Audi a lot more than BMW or Mercedes-Benz. In Interbrand Top 100, Audi is #42, BMW #13, Mercedes-Benz #8. In other words, the student appeal is in reversed order. This result is similar to 2016.

In social networks Facebook clearly had its peak, the sample group uses Facebook only to browse posts, not to engage or post updates. The reason? Instagram is more appealing because it is clear what it is all about. In Interbrand Top 100 Facebook is #9 (Instagram is not listed as a separate brand). The result is following the trend of 2016, with the exception that back then, some students were still very active on Facebook.

Coca-Cola(#5 in Interbrand) is hardly consumed, in fact, just a small percentage is drinking any of the Coca-Cola variants once per week … the alternative? Water! This is very much in line with the global trend of the decline of the soda category and growth of water.

In productivity apps, it is clear that Evernotehas trouble – just a very few students were using Evernote or had heard about it. In the Apple AppStore, Evernote is also slowly declining in the ranks.

What is happening? 

Some of the brands listed have perhaps grown too much with their audience, think BMW, Mercedes-Benz and Facebook and lost appeal with the younger generation. While Evernote has lost focus and evolved from taking notes to an all-round capture everything and anything tool and Coca-Cola is clearly in the middle of fighting the perception of soda drinks.

The lesson?

Brand appeal is not forever – even for the remarkable brands discussed in this post the battle between Brand identity (what the brand desires to stand for) and the Brand Image (how it is perceived) remains one of constant fine-tuning.