Maintaining Brand Value Is Vital In Tough Times

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Once upon a time, long ago, the CE industry featured numerous brands that were widely recognized by consumers. And the companies behind those brands were rewarded with the ability to sell their products for more than average prices.

However, little of that remains today.

Today anyone can bring a $59, allegedly fully featured DVD player to market and expect to become a sales leader, at least in the short term. Today we tell consumers that we have a $19.99 cordless phone for them rather than worry about what they will think of us when they get the barely functioning product home.

Today we "sell" satellite systems for $300 with a $300 rebate in return for a one-year service agreement.

But guess what? Not all companies work that way, and more than a few don't make money as a result. They understand the value of their brand's equity and do all they can to not only maintain it but also increase its value in the eyes of the consumer.

Proponents of that approach, from both the CE and non-CE worlds, include Nordstrom's, Crutchfield, Bose, McIntosh, Bjorn's and Porsche, just to name a few. Not an exhaustive list by any means, but these are some of the companies that realize that their brand image is as much a component of the products they sell as is any physical feature.

They also know that being recognized for providing more than just a product at a low price results in not only increasing sales but improving margins as well. Moreover — and best of all — they earn a customer who values what they do and rewards them by buying more from them in the future.

By the time you read this, Coyote Insight will be in the field conducting 1,000 consumer and 100 retailer interviews for 27 CE products to determine the value of each of their brands. (See "Coyote Insight Brand Value Study" at for more information.)

This, we believe, will be the most comprehensive analysis of the components of brand value ever conducted within the CE industry, and while biased, I do not think it will come a moment too soon. Our work in related research, both syndicated and custom, shows that brand equity for many of what had been leader brands is rapidly diminishing to the point of causing consumers to see those brands as no different than names they had not heard of previously. And that's a shame.

This will result in significant loss in margin potential because, unless given a reason to do otherwise, consumers will not pay more for one brand over another. But worse, it could also mean that legacy brands will actually lose market position to brands with lower pricing.

There is much discussion these days about retailers who want to move to direct importing (see story, p. 29).

If they do this out of a sense of efficiency and actually succeed, maintaining, if not improving, their beleaguered margins, more power to them. However, I suspect that for many the motive is to reduce costs.

If so, it will not work. It simply serves to feed the downward spiral of both price and margin, while doing little if anything to cause consumers to buy more.

Few consumers will buy a product they otherwise would not have bought simply because it is now available for 20 percent less.

Like all of us, they are concerned about the total package, not the least of which includes having trust in the brands they buy, or the stores in which they buy them. And any retailer or manufacturer who forgets this point will ultimately pay a price in lost market position.


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