Archive for the ‘value’ Category

For the next three days, I will be bringing you interesting bits of insight from the other side of the big pond. Because I want you to be able to read and understand these posts, I will translate everything into English (yes, free of charge.)

How about that!

(If you want to read the meat of this post in its original French, the link go here.)

Jean-Noël Kapferer (HEC).

2007 was characterized by the success of extremes: Low cost and luxury brands in mass market like Apple, H&M or Nespresso. We observed a polarization phenomenon in the market.

On the one hand, certain brands positioned in the value-priced corner further discounted their products, like Ikea and Easyjet for example. The Logan, which was Europe’s cheapest car, will soon be dethroned by a vehicle costing only $2.500 euros born of a partnership between Renault and an Indian manufacturer.

On the other hand, middle-of-the road brands which not so long ago were known for producing mass consumption products are now becoming premium brands.


Apple isn’t technically a luxury brand but it employs luxury brand strategies. This is the case with iPhone: A single distribution partner, a premium price, an exclusive service package, messaging centered on living an ideal lifestyle… all of this to develop a unique experience aesthetic and a strong sense of community. The process is the same when Nespresso launches a boutique on the Champs Elysées.

Likewise, Air France is bringing back First Class in response to its Tempo Class being challenged by low cost operators. (The advantage of business class resides in that businesses, not individual passengers foot the bill.)


Sofitel is also following this model by repositioning half of its operations as luxury properties, under its Pullman brand. This tendency by mid-market brands to restructure “up” their existing stores, properties and product lines is important.


While many companies still remain in the soft, mushy center, the ones with a bit more insight into how the world has changed in the last couple of decades are taking steps to a) differentiate themselves from their competitors and b) stand for something. This is driving brand… or rather value proposition polarization.

As a brand manager, you really need to routinely ask yourself two basic questions:

1) Why should anyone do business with you instead of the guy across the street? Name 3 things. You have thirty seconds.

2) What’s your value prop? Are you primarily value (volume) or are you primarily luxury (margin)? (Yes, even if you want to be both, you have to choose one.)

Examples of volume: Ford, Bic, Motorola, Coors, Sears, Magnavox, Sony, rows 10+, Food Lion, Dasani.

Examples of luxury: Jaguar, Mont Blanc, iPhone, Heineken, Polo, Philips, B&O, rows 1-5, Whole Foods, Perrier.

Some brands do manage to cross the volume/margin barrier, but they are few and far between. They are the Starbucks, Nike, Apple and other mass-market relative lovebrands of the world. (I say relative because being a lovebrand is neither here nor there: Nike may not be the lovebrand it once was, and Starbucks’ star may not be shining as brightly a year or two from now as it did three or four years ago. Here today, gone tomorrow… Consumers, after all, are fickle.)

How to build a Lovebrand, in 5 simple (albeit major) steps:

Step 1) Start with a luxury value prop foundation.
Step 2) Develop volume-friendly products.
Step 3) Create a distribution channel that focuses on both breadth and depth.
Step 4) Love your customers even more than they love you.
Step 5) Keep your eye on the ball (Step 1)

Of course, the devil is in the details, but you have to start somewhere. 😉

Is there a future for middle-of-the road brands? Sure. Why not? For companies more concerned about maintaining a certain level of revenue this year – these are generally companies that take a “if it isn’t broken, don’t fix it” approach and don’t put much stake in innovation or growth strategies. I don’t see these types of companies disappearing anytime soon, but they should already be seeing a downturn in their market share, profit margins and new customer acquisitions. At best, they can expect to sustain perhaps up to 6% growth for another year or two – assuming they are already there now – before that growth suddenly slows and becomes negative.

Mark my words: that downturn will not be gradual. It will happen within a quarter or two at the most. Not good.

The soft middle may seem like a safe place to be if you’re either too dumb or too scared to read the writing on the wall… but hey, some execs are happy to just show up and collect a paycheck until it’s time to float their resume to the next flunkie status-quo company. That is the reality of this world. The tendency for proactive brands to clearly and deliberately realign their value propositition along the line of either value/commodity or its polar opposite (luxury/premium products) is as clear an indicator as I’ve ever seen of the impending doom of the soft middle’s “business as usual” model – at least when it comes to mass-market products.

There is simply a) too much information available to consumers and b) there are too many convenient channels through which consumers can purchase products from a variety of pricepoints for middle-of-the-road companies to have a fighting chance against brands with clear and polarized value props.

Have a great Thursday, everyone. We’ll be back with Part 2 tomorrow.

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