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Building Real Value vs. Creating Sales Incentives

As you all well know, I am a big fan of Tom Fishburne’s work both as a cartoonist and as a marketing honcho. @GabriellRossi pointed me to this post via Twitter yesterday, and it struck a cord (as Tom’s posts tend to do).

Here’s what Tom had to say about the seeming pandemic of brand erosion:

“Value is of course the theme of the moment, and marketers are all scrambling to add more “value” into their marketing plans for 2009. I met with a retail buyer last week, and tried to convince her that there was still a role for premium brands in a recession. I shared my opinion that a recession simply heightens the urgency for premium brands to prove that they are meaningful enough to command a premium.”

The retail buyer disagreed. She said that premium brands had two and only two choices in this economic climate. Either increase price promotions to compensate for the premium or permanently lower the price so that there is no longer a premium at all. Merry Christmas.

I think it will be important for brands to be responsive, but not reactive, to this economic climate. Make sure that your brand has renewed meaning for consumers who are genuinely struggling, but that doesn’t mean that you have to start behaving like private label.

Thank you Tom.

See, back in the day, premium brands (dare I say luxury brands) hadn’t fallen into the mass market trap. Exclusivity bred value, and value guaranteed minimum price-points which in turn validated the brand’s position in the market. In plain English: Premium brands weren’t trying to scale. They didn’t want to compete against the middle and low-end brands for wallet share. When a company starts pimping out its products to every distribution outlet it can find, it’s just a matter of time before it’s available at Wal-Mart. (Which is precisely what happened to Levi’s a few years ago.)

You can’t be ‘premium’ and be on everyone’s wrist, Grasshopper. Every time I see a sixteen-year-old wearing Gucci, someone is hammering another nail in the once premium brand’s coffin. (For more on that topic, check out this little ditty.)

This topic came up recently during a conversation I had with Brains on Fire’s Spike Jones the other day. We were talking about brands, and Spike asked me point blank if I still thought that (blankety-blank brand) was still relevant and true, or if it had ‘sold out’? My reply was that it was still true to its roots. He didn’t agree, so I asked him why. His answer was simple: One day, while shopping at a massive bargain warehouse, he saw a bin of products from that brand just sitting there on clearance.

At one time, that premium and highly technical lifestyle brand had embodied the very spirit of adventure and extreme outerwear. Now, by virtue of sitting there in a bargain bin next to $3 family packs of some no-name Tupperware knockoff, the brand’s value evaporated. Poof. Just like that.

I can’t argue with that. It’s as clear an illustration of brand erosion as I could have ever conjured up myself: From the summit of Everest one decade to the bargain bin of a massive discount chain the next.

Brand death 101. Somewhere along the line, some hack of a brand manager decided “hey, if we got out of this specialty niche thing, we could scale like crazy!!!”

Yeah. And if Bang & Olufsen really had any marketing savvy, they’d be selling $75 stereos in Radio Shack too, right? *sigh*

When those of us in the business of building (or rebuilding) brands hear traditional marketing folks talk about building value through marketing plans, we just shake our heads at the familiar idiocy of the notion. A brand’s value may be communicated through Marketing, sure, but it isn’t created there. The value, folks, does not live in the marketing. It lives in the product. It lives in the customer’s interaction with it. It lives in the company’s customer service. In its quality control. In its billing department. In the spirit from which the product was first sparked and then painstakingly perfected.

The only people in the world who will ever try to convince you that a brand’s value is created through marketing plans are marketing people. Advertising execs mostly, but all branches of the marketing profession are guilty of perpetuating this decades-old farce. Stop falling for it. It may work great for breakfast cereals and air fresheners, but premium brands are a completely different animal. (And by Premium brands, I don’t mean J-Lo, the fragrance.)

Listen. The difference between Cartier and Armitron isn’t in the Marketing. The difference between Oakley and Ironman sunglasses isn’t in the branding. The difference between Ford and BMW isn’t in the advertising or the incentive programs.

Building value through marketing plans is called “selling”. It isn’t building value at all. It isn’t even really marketing. You can call it that if you want to, if it makes you feel better, but in the real world it is called promotions. (And yes, there is a BIG difference between marketing and promotions, just like there is a HUGE difference between marketing and sales.)

What this silly retail buyer Tom mentioned is concerned with is selling – as in selling as much of whatever she puts in her store as she can, as fast as humanly possible. That’s her business model. She couldn’t care less what brands she carries as long as they sell well and fast and get people in the door. Premium to her means highly profitable and fast-moving. Is there anything wrong with that kind of model? Of course not. But it just doesn’t jive with premium brands because premium brands – in order to remain so – cannot scale like Colgate or Capn’ Crunch cereal: Once premium is everywhere, it ceases to be premium.

Which is why premium brands fall into a different business model from the one embraced by Tom’s brand-agnostic retail buyer who can’t tell the difference between building value in the B2B space from building value in the B2C space.

Why Premium Brands are allergic to our discount culture

Where do I want to buy my premium coffee? Not at the local 7-11. Where do I want to buy my premium quality mountain climbing shell? Not at K-Mart. You get the drift.

Specialty stores are where premium brands thrive. If you’re Cervelo or Specialized, you want to be in real bike shops and triathlon stores and not Dick’s Sporting Goods. If you’re K2 or Rossignol, you want to be in real ski shops, not Wal-Mart. If you’re Cartier or Yves St. Laurent or Brooks Brothers, you want your own store. Your own retail space. Your own premium environment where your customers can get the full experience of your brand.

Speaking of your customers, are they looking for good deals? Sure! Of course they are. But they don’t want 20% OFF sales. They don’t want 2008 closeouts. Not if you’re a Premium brand. Never.

If you’re a premium brand and you want to discount a product to help the sale along, you do it discretely. Without eroding the value of the product or your brand. Without insulting your customer’s tastes. If they are about to walk out without buying what they came to look at, (assuming you care) you discretely tell them about your members-only sale. The one that nobody is supposed to know about. You’re doing them a favor now because they’re a valued customer. Because they’re special. Because you have that kind of personal relationship with them. You ask them to keep it on the down-low. Shhhh. Nobody knows about this. You wink at them and smile as you hand them their receipt and premium branded bag. You say their name as you thank them and wish them farewell.

And of course, when they get home and unwrap the thing they bought, the French bottle of perfume, the Swiss watch, the Italian pair of jeans, the English hand-made shoes, when they feel it in their hand, when they touch it, smell it, wind it, button it up, the value is right there in the experience. The experience which started in the store and continues every time they look at it, use it, share stories of it and inspire their peers to go buy one as well. When they open a magazine and see a premium glossy full page ad for the thing they bought, for the brand it embodies, they feel the value once again. They smile, confident in the knowledge that their premium brand, that the premium price they paid for it, that the value they assign to it are all safe and sound. And thus, all is well in the world.

What they don’t want is to get an email a week later telling them that the watch they just spent $5,000 on is now on sale for $1,300.

I don’t want to see my Canon EOS 1D in the glass case at Best Buy. I don’t want to see Hermes scarves hanging from a rack at Target. Mont Blanc pens shouldn’t be sold in 3 for 2 bargain packs at Staples.

When you start catering to everyone, you end up catering to no one.

As exemplified by Spike’s reaction to the brand we shall not name, once a premium brand sells out its authenticity, its exclusivity, its specialty in exchange for sales volume, it dies. Period.

There is zero value in being a sellout. None. Zip.

There is, however, always value in being exclusive. In being special. In being rare and hard to get. So if you are responsible for a premium brand or product, next time a Marketing professional (inside or outside your organization) mentions building value, make sure you’re all on the same page.

Have a great Monday, everyone! πŸ™‚

PS: You can read more about the nature of premium brands here.