Harris Interactive’s latest EquiTrend study bears out conventional marketing wisdom in a recent MediaPost article: Poor Economy Heightens Brand Equity. The gist: when the economy turns sour, consumers “tighten their grip on brands they are loyal to; they don’t run to the label with the lowest price.” Couldn’t have stated this more succinctly if I tried.
When the economy forces consumers to hold onto their wallets, product companies tend to slash prices, often turning out products with diminished quality to be able to do so. What does that approach do to their brands in the long term? As many smart marketers know, value doesn’t only correlate to pricing. In fact, many other factors do–quality and trust among them. To ignore those has the serious potential of undermining brand equity, which, we all know, takes time and effort to achieve.
In the Harris Interactive study, 1000 brands across 39 consumer product categories were measured. Some of the parameters:
* Brand familiarity
* Quality
* Purchase consideration
* Brand value for the cash outlay
This won’t come as a surprise to savvy marketers: comfort foods and staples were clear winners in the survey, conducted during March and April 2009, which included 24,446 consumers, aged 15 and up. Just over 1200 brands were included in the study and respondents were asked to rate 60 “randomly selected brands”.
Not surprisingly, brands in the financial services and insurance sector scored poorly; a direct consumer response to their violation of public trust in recent months.
The winning brands comprised a mix: from premium to mass-marketed brands, as well as niche ones.
* M&M’s Plain and Peanut Chocolate Candy (comfort, anyone?)
* Hershey’s Kisses & Milk Chocolate Candy bars
* Reese’s Peanut Butter Cups
* Arm & Hammer Baking Soda
* Campbell’s Soups
* Crayola Crayons
* Kleenex
* Google
* Honda–Automobiles
* Subway–Fast Foods
* KitchenAid–Appliances
* Coca-Cola–Beverages
* Sony–Consumer Electronics
* Microsoft–Software
* Southwest–Airlines
* Grey Goose–Liquors
All of this is not to say that consumers aren’t forced to sometimes forgo their favorite brands if they simply can’t afford them right now. But, many are equally reluctant not to pony up a bit more cash to purchase what they like, and what they know works for them. They ask themselves whether saving a few dollars for alternatives might not lead to disappointment. . .so they tend to stick to the brands they know and like.
Memorable article quote comes from an L.A. analyst, Wes Brown: “Loyalty that is driven by value isn’t about price.”
Questions:
* As a consumer, do you have specific brands you continue to buy even though there are cheaper alternatives?
* Which categories will you sacrifice favorite, more expensive brands for cheaper ones to save money in this economy?
* Which brands are you most loyal to and what makes you loyal to them?
* What kinds of brand “values” matter most?
I’d love to hear from you.
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Even though it is not a secret, several of these brands have had the mind of the consumers for years. Some I feel are able to be replaced, but many of them have no real close 2nd.
Interesting observation, KJ. Heritage brands may have considerable equity, but missteps in managing them can lead to great vulnerability. Did you have any particular brands in mind that you think might be especially vulnerable to strong competition right now, KJ? I’d love to get more of your input on this.
Thanks very much for weighing in.
Ted,
Just my perspective and not backed up by science. I think when consumers’ finances are tight and a down economy has impacted them in real terms, such as losing their job, they will not remain brand loyal if they can get similar quality at a lower price.
The facts are that except for our investments, most Americans have not been directly affected by the down economy–they haven’t lost a job, their home or their savings. I suspect those Americans remain brand loyal to purchases they need and often delay buying those they want.
Lewis,
I can’t disagree with some of your insights here. However, there’s another component here. I do think there’s validity to the idea consumers stick with brands in spite of slightly higher pricing even in a down economy at times. If they are unsure about getting the same quality for less money, consumers sometimes balk at buying something they may not like as well. Also: if consumers have strong, positive associations with specific brands, they just might continue to pay more to “treat” themselves. Let’s face it: comfort figures prominently in times like these.
As to the down economy itself, I might disagree a bit with you. Unemployment continues to rise and more Americans are defaulting on their conventional mortgages as a result. Few have/had substantial savings to ride out the storm, so people are saving more than they have in recent years. They’re also consciously choosing to purchase less as they reduce their debt.
Fear of potentially losing jobs also accounts for many consumer decisions to postpone larger purchases for desired items. That we can both agree on.
Thanks for weighing in, Lewis. Your insights are always appreciated.
Ted, had the same dilemma yesterday, looking at a blow-out priced box of store brand corn flakes vs. paying a slightly discounted price on the national brand. Although I arguably might have liked the store brand (and saved some money), if I didn’t like it I’d have to go thru the hassle of returning it. For my decisioning process, the money saved by buying an unfamiliar brand must also be weighed against the time taken to return the product(if the brand doesn’t meet expectations) or in worse case, the money wasted if the product is thrown away.
Hi Paul,
Thanks for sharing your most recent purchasing experience with us. I suspect many of us feel exactly the same way. What if we do opt for a less expensive brand, but aren’t sure if we’ll like it? Is it worth our time–and gas money yet–to return it? Do we just throw it away and buy the known and liked product next time, wasting money in the bargain? These are legit questions. Consumers in cases like this will go with the “tried and true”, I believe. If DF readers disagree, feel free to opine here.
Thanks, Paul, for getting to the heart of the matter here. I think you’re onto some important considerations.
This makes sense. If you’re going to buy something during a recession, you definitely want to go with the sure-thing.
The challenge is will we buy at all? Yes, if I’m flying, give me Southwest. But I think I’ll skip the vacation this year. Yes, if it’s a drink I want, then give me the Grey Goose. But I probably just won’t buy anything.
To Lewis’ point, when and if the recession does get bad on the day-to-day level for the majority of us, then I agree that the loyalty could be thrown out the window. Of course, it’s interesting that in many of the examples listed, they are already seen as the high-value brand.
Nice post -
@bdunc1
Hi Brett,
Thanks for adding your insights to my post. You’ve said lots of sensible things. I’ll say this: store brands have done well when consumers perceive little difference in quality between them and national brands. . .but favorable differences in price. I think in the case of unfamiliar brands, consumers might stop and think, reverting back to their favorite heritage brands. That point probably ought to be emphasized.
I appreciate your input, Brett.
Hi, Ted. I think purchasing decisions can be motivated by a number of options, one being brand, another being price. As consumers, I think we can be one type or a combination of types depending on the product category and our situations.
Product companies have choices in this economy. They can lower prices and make or import lesser quality products – something that will erode their brands; lower prices with the same quality products for a smaller profit margin; or hold tight, sell less and downsize until things recover. Did I miss any other options?
Hi Elaine,
Thanks for chiming in, here. I appreciate your insights very much.
“Did I miss any other options?” I would answer your question this way. Value in consumer perception doesn’t only correlate to price. Smart companies find ways to increase brand value. They might add a feature/benefit to their product consumers are clamoring for, making their brand more desirable than any other on the shelf. They might seek consumer advice and act on good suggestions. They might engage the consumer more meaningfully than their competitors, making their brands more desirable in that regard. They might promote their heritage assets, as suggested by the article cited in my post, to great advantage. And as Lewis Green often reminds us, they might focus on inbound marketing opportunities more now than ever to be successful.
The more companies can build brand values that don’t rest solely on price, the better it is for them in the short term and the long.
Hi Elaine,
Thanks for chiming in, here. I appreciate your insights very much.
“Did I miss any other options?” I would answer your question this way. Value in consumer perception doesn’t only correlate to price. Smart companies find ways to increase brand value. They might add a feature/benefit to their product consumers are clamoring for, making their brand more desirable than any other on the shelf. They might seek consumer advice and act on good suggestions. They might engage the consumer more meaningfully than their competitors, making their brands more desirable in that regard. They might promote their heritage assets, as suggested by the article cited in my post, to great advantage. And as Lewis Green often reminds us, they might focus on inbound marketing opportunities more now than ever to be successful.
The more companies can build brand values that don’t rest solely on price, the better it is for them in the short term and the long.