I recently discovered that my favourite chicken quiche at L’Opera café now costs Rs 100 less than before while my wife assuredly confirmed that Baby Gap, in some parts, is comparable in price to H&M. It is fairly common for brands, and often categories, to resort to significant downward price correction to retain and grow their customer franchise. To manage this process efficiently we must adopt the Seesaw Strategy, the perceived value of the brand going up while the real price of the product goes down.
For starters, it is important to define the value proposition of the brand for it to be engineered to increase. The quality must convincingly remain the same, the reduction connected credibly to a dip in direct or indirect input costs or perhaps the realisation of the value of intellectual property. The increase in the volume and value of the consumer base must be connected to a greater commitment to quality and range, as the brand becomes a larger entity than before. It may suffer temporarily in terms of exclusivity that will well be compensated by an overall expansion of stature, leading to an enhanced value proposition. This process is not necessarily organic or spontaneous but must be orchestrated by a series of cohesive inputs, involving a proactive engagement programme and not just reactive discovery.
The airline industry in India is a great example of a successful Seesaw Strategy crafted not just by the individual actors but dynamics of the industry at large. I remember distinctly in 1992 a one-way Indian Airlines ticket from Calcutta to Delhi costing Rs 2,500. And after 25 years with prior booking, a similar rate can still be gained. In spite of a regular rise in input costs, civil aviation has flourished through economies of scale, more passengers flying more often, leading to greater capacity utilisation and volume, thus leading to more equitable price points. Even more importantly, the value proposition of the industry and brands have honestly increased, even the most elitist flyer benefitting from the abundance of choice and infrastructure emanating from this relentless growth. At no point does the quality perception suffer, as fleet quality is monitored by the regulator and service standards have been successfully connected to the price of a ticket.
An example of price points being rationalised as a result of a progressive dip in input costs, unlike aviation, must be consumer electronics, including mobile phones, experiencing a constant state of value rationalisation. While prices may or may not come down, the set of features is growing constantly with customers being bombarded welcomingly with enhanced value, clearly tangible and not perceptual. Another successful peer is the world of mobile voice and data, volumes leading to cheaper and better access for consumers, serving both business and societal purposes. In both such cases, however, the rise in the value proposition is amply clear so not much needs to be done by the corporations to manage perceptions.
Unlike say in the case of fashion, FMCG or food, where there can quite easily be a serious question-mark about the fundamental quality if prices are corrected. Even though it tastes the same, I partially believe that the chicken quiche mentioned earlier must be now having lesser or inferior cuts of chicken just as Domino’s Pizza resorted to Indian pork to retain prices on pepperoni. If Mainland China were to cut down its buffet prices by half, many would certainly assume that the inputs have reduced and this is the case with clothing brands as well. M&S became successful when they calibrated their products to Indian pockets but the performance dip was certainly a lingering concern. If today a serious fashion brand was to dramatically cut prices, the ardent fan would certainly connect it to a demonstrated insincerity in inputting, even if that were not to be the case.
That is exactly why brands attempting to price-correct must consciously adopt the Seesaw Strategy to be successful in their ventures. Quality assurance to the existing consumer base must be the primary step through direct, retail-level or mass communication that demonstrate adequately that nothing has changed. A number of foreign liquor brands suddenly become cheaper when manufactured in India but customers do get suspicious about the rigour of origin, which must be proactively assuaged. Then comes the challenge of attracting newer customer sets who had previously been resistant to consumption and this is easily possible by the simple announcement of the new point of pricing, in an identical premium tonality of words and pictures. The fundamental is assumption that aspirational brands enjoy high awareness but the core challenge is the shift from desire to action, thus their premium-ness in appeal must be retained at every cost.
Hotel chains manage this balancing act most perfectly by offering the same room at Rs 5,000 a night in the sweltering heat while charging five times as much in the winter peak season. While the brand becomes accessible for a newer customer, there is a clear difference in the product definition for the top-paying discerning traveller. From buffet meals offering mass gratification to gourmet fine dining is just one illustration of how the experience is graded, the knowledgeable regular knowing fully well that the budget tourist does pay for sustaining the business, thus ensuring his luxury holiday. Just as the first-class traveller knows quite definitely that the boom of LCC travel actually subsidises his privileges, from infrastructure to operating P&L heath. In many such cases, the success of both brands and industries have sharply jumped due to the successful adoption of the Seesaw Strategy, although partly by chance and not entirely by design.
In sum, the value proposition of the brands in terms of a distinctive experience must be seen to rise even when the price point of the product needs to fall. Any plausible association with a reduction in quality will alienate the existing customer and insufficiently attract the new user, so drops in price point must never be connected to the integrity of inputs. Instead it must be answerable by the changing economies of scale and the diminishing of ingredient costs which allow brands a brand-new opportunity for growth aided by both existing and emerging customers. Do implement the Seesaw Strategy next time you are planning a price correction else you may need to take evasive action.
(Shivaji Dasgupta is the Founder of INEXGRO Brand Advisory and can be reached at: firstname.lastname@example.org)
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