MarketingProfs

To what extent should a company react to the poor economic condition in order to stay relevant to their customers? Alter messaging? Create new products? Adapt the brand?

Last week I wrote about “The Benefit of the Benefit.” That is, getting to the core of what actually motivates a customer – not necessarily the features, nor their benefits – but the end result, the benefit of the benefit.
Among the many and interesting comments was one from Karin Koonings, from The Essential Orange brand blog. Her comments were broad enough they warranted a response post.
Karin asked three key questions. Below are my thoughts. Please chime in and add your own.

Should I Alter My Message?

Karin asks: In light of the current economic environment and consumer trends, would you or others agree that you have to alter your message (the benefit of the benefit) to stay relevant?
To be relevant to your customers you first must empathize – understand them and their needs. If priorities have shifted for your customers (money, work, home, family), the benefit of the benefit you offer may have changed as well.
Customers buy from you because they rely on what you’re good at. Right now, they second guess if they can still afford it, or need it, or need it at your price. They wonder if the value is still there.
Provide that value.
If you do want to communicate something, let your customers know you stand behind your products and services and will not cut corners. Their money’s worth is more important than ever. Be an anchor during these rough economic seas.

Should I Reposition My Brand?

Karin: Do you reposition your core brand or product offering or do you come out with flanker or fighter brands to do this?
I love what L.L. Bean has said and done in response to the economy. Among other tactics, their stores posted a banner-sized letter from CEO Chris McCormick to customers. He speaks about their “Tradition of Values.”
A few quotes…
Today, while many families are looking for ways to stretch their budgets, they’re often challenged to make the difficult decision between quality and price. At L.L.Bean, we’ve never offered a choice – we’ve always insisted on both. All of our products are of the highest quality for the best possible price. That’s how we’ve defined lasting value for nearly 100 years…
Even with today’s rising costs, it’s important that we stay true to L.L.’s Golden Rule. We’re continuing to offer popular L.L.Bean products at steady prices to help you save.
I love this approach. L.L. Bean stands for quality and value. They’re not going to monkey with their product or their prices. They’re promising to keep delivering on their promise.
The challenge happens when you have a brand that has “offering so uncompelling that customer prefer to keep their options open.” [Marty Neumeier, in The Designful Company]
If you have to offer mega-discounts or incentives to keep customers coming in, chances are your products/services aren’t compelling in the first place.
The recession is a good thing for you in that it has helped you realize this before a competitor put you out of business.

Does Lowering Prices Indicate We’ve Been Over Charging?

Karin: Starbucks is discounting it’s core breakfast offering – is that saying “we empathize with the current economic struggle and it’s impact on your latte consumption” or are they telling their customers they’ve overpaid all along?
Generally, I think most customers understand that a company has had to tighten their belt to lower prices.
If you can’t follow the L.L. Bean model (above) , instead of lowering prices and potentially the perceived value of your product/service – offer something additional. Don’t lower the price of gym membership – throw in an iPod loaded with great music to exercise to. Don’t discount a cut or style at the hair salon – assemble a basket of free (relevant) hair products. (This also creates trial and may acutally increase average ticket when this person decides to buy these products the next time).
I talk about this a bit in my DailyFix Can Your Brand Afford to Discount? post.
Price Re-Wind
For those who have cut their prices, offering a discount or extra value to maintain traffic and sales – what they have actually done is re-wound their prices to an ‘08 or ‘07 level.
At my lemonade stand my price has gone up to $3.00. I’ve reduced my price to $2.50 in response to the economy. $2.50 is what I was charging back in ‘08.
When the resession is declared “over” later this year or in 2010, I’m not going to be able to instantly return to my regularly scheduled pricing. (By the way, I would have probably gone up to $3.50 in ‘10). I’ll have to start my gradual increase again in 2010 at 2008 prices.
The Challenge for Starbucks
Regarding Starbucks Coffee offering breakfast bundles at a discount… The challenge with this tactic is that Starbucks is changing their game. They’ve never been a value competitor. A $4.00 latte was worth it because of the quality and “Starbucks Experience.”
Starbucks has started to act like a quick service restaurant (QSR). Perhaps it is what they’ve technically been all along, but they’ve never acted like it.
Starbucks has always been a completely different concept from Dunkin’ Donuts and McDonald’s. They set a higher bar – better quality, better service, in a nicer environment. But Dunkin’ and McD’s have added espresso and bolder flavored coffee, focused on service, and addressed their store environment. (So much so with McDonald’s they’ve opened up McCafes). Now, everyone has caught up, and Starbucks hasn’t touched that bar. The quality of QSR has caught up to Starbucks quality. Flanked by QSRs now Starbucks is acting like one.
Starbucks won’t survive if it tries to swim with those sharks. Part of the QSR game is constant promotion and advertising. McDonald’s spends more to advertise promote the comeback of the McRib than Starbucks has for its entire annual marketing budget.
Starbucks needs to do something radical, raise the bar, and go back to being in the “people business serving coffee.”
What are your thoughts about Karin’s questions?