In today’s world positioning a brand is as important as the brand equity itself. Brand equity building always takes time. It is an asset which could be used as a serious competitive advantage in a Red Ocean market. But what matters most is the way it is positioned and written in the minds of customer.
The Parallax error
One should be very clear with what their brand signifies. Imagine a successful brand, which had acquired a significant amount of brand equity over a time period, but due to the macro economical or environmental factors the brand, needs to improvise the strategy to retain its market position. Lot of successful brands tries to cover a wide market, with a single brand or by brand extension, which confuses the customer about what the parent brand actually stands for. This is has a slow and invisible effect on the parent brand. It is invisible because you would see an increase in sales or a positive change in any such factor as result of the improvised strategy. But on the other hand, what the brand is losing or digressing from is its core brand perception in the minds of customer, ultimately creating a parallax error about the brand.
Let me explain this analogy with an example of a well-known brand called ‘Lenovo’. What does Lenovo stands for? You will have a tough time to come up with the message what the brand Lenovo wants to convey to you. Is it a high end computer, or low priced computer or a mid-priced one? This is the parallax error in case of Lenovo.
Lenovo has a wide product portfolio. It has ‘Think Pad’ the most premium and high priced computer from Lenovo. On the other hand, there is ‘Essentials’ line which has only basic features with less or no accessories. Then there is ‘Idea Pad’ which is priced somewhere in between the previous two products. These kinds of strategy where you just keep Trying to cover a wide swath of the market with a single brand name just do not work. Lenovo is suffering heavy losses now. Here the external factors which made the Lenovo to come up with the product proliferation could be the cut throat competition and the technological advancements in the PC industry.
An example of successfully managed brand would be Apple. It is consistently known for disruptive innovation and aesthetics. Apple does not change its pricing strategy for every product. They are very clear about what the brand stands for and are not ready to compromise on the brand perception for short term gains.
Why do brands make these errors?
Brands should be very careful before venturing into a new market. The Myopia for making immediate gain and easy money makes the decision makers to turn a deaf ear to the problem that could arise if the newly identified market does not fit the existing brand’s image.
Years ago, Coca Cola once wanted to squeeze more profits from its beverages business and so went on to take the full advantage of Mother Nature. They introduced vending machines which could automatically raise prices for its drinks in hot weather. Consumers got scared of this Coke’s action. It was not about paying few cents more on a sunny day to enjoy coke. It was about the perception of the Coke brand in the minds of customer which got disturbed and unclear. A brand which signifies sharing happiness around the world suddenly creates an image of itself as if it was only for money making and was looting its consumers all this time. However, Coke immediately wrapped up the project.
Now let me illustrate the brands which have deliberately refrained from entering lucrative markets just to preserve the brand equity and stand as a brand to be emulated. Let’s take a Rolex watch. Without the price tag, it is just another watch brand. It needs high prices to define its brand. A Porsche car would be a simply another sports car brand if it is not priced so high.
Are high prices a problem?
High prices are not always the problem. Well it depends upon the product category. A conjoint analysis has to be done to come up with the set of attributes of the product which are the most to appealing to the critical mass of the market. There could be a untapped market for premium brand of watches or pens but not for premium toilet papers. However consumers try to bring a homeostasis in the system by associating higher price with better quality. It is at this time that the brands have to perform their job of convincing the customer about its price and the quality level. Consumers are always smart. A consumer might not want to buy a high quality product all the time. He knows to manage his resources according to his needs. He might save some money by not buying the best quality product in the market.
There is nothing wrong in being an expensive product in the market or the most cost effective product in the market. It is wrong if you try to be both and it is disastrous if you try to be everything to everyone.
[The article has been written by Hemanand Yadhindran. He is presently pursuing his MBA from IIM Trichy, prior to which he has worked with Cognizant Technology Solutions.][/sociallocker]