Branding pitfalls

Branding pitfalls

Brands have global visibility and as a consequence problems can appear to be on some distant horizon yet suddenly become amplified and virtually omnipresent with unfortunate consequences.

Nowhere has this capacity to suffer global reputation for local or narrow specific problems been more in evidence than the fall from grace in of two of the world’s most successful brands, BP ranked 34th and Toyota ranked 26th in the top 100 brands of 2009/10.

Both brands suffered catastrophic, though perhaps not terminal, blows to their reputations for quality, integrity, and honesty. While BID tussled with leaking oil in the Gulf of Mexico it received four times as many mentions in the world press as it did two years earlier on 29 July 2008 when it announced record profits of {3.5 billion ($5.53 billion) for a single quarter.

Though the brand may survive in the international arena — a survey running on a local Gulf website puts 48 percent in favor of adopting Amoco for US gas stations, a brand it abandoned when that company was acquired by BP.

Toyota and its near-invisible chairperson Akio Toyoda also found themselves the center of a storm of unwelcome public visibility when the company had to recall a few million cars for a variety of reasons — ranging from sticking accelerator pedals to steering lock defects.

Volkswagen, once a top brand, has been banished from the top hundred and supplanted by Aldi courtesy of its emission fraud.

Price

Seemingly the simplest of the marketing choices, it is often the most agonizing decision that MBAs are faced with. The subject transcends almost every area of a business. The economists get the ball rolling with ideas around the elasticity of demand. Set too high a price and no one comes to the dance; too low and your budget for bouncers will go off the Richter scale.

The accounts and production teams are concerned that sales will at least be sufficient to reach break-even in a reasonable time. The strategists are worried about the signals in terms of corporate positioning that prices can send. However profitable a certain price may be for the business, it may just be so low that it devalues other products in your range. Apple, for example, has a position fairly and squarely as the innovator of all of the product adoption cycles.

Their customers expect to pay high prices for the privilege of being the first user new product.

Skim vs penetrate

You need to decide between two generic pricing strategies before you can fine-tune your plans. Skimming involves setting a price at the high end of what you believe the market will bear. This would be a strategy to pursue if you have a very limited amount of product available for sale and would rather ration than disappoint customers.

It is also a way to target the innovators in your market who are happy to pay a premium to be among the first to have a new product. To be successful with this strategy you would need to be sure that competitors can’t just step in and soak up the demand that you have created.

Penetration pricing is the mirror image; prices are set at the low end while being above your costs. Prices are competitive, with the deliberate intention of eliminating your customers’ need to shop around. Slogans such as ‘everyday low prices are used to emphasize this policy.

The aim here is to grab as much of the market as you can before competitors arrive on the scene and hopefully lock them out. The danger here is that you need a lot of volume either of product or hours sold before you can make a decent profit. This in turn means tying up more money for longer before you break even.

Dragon Lock (the executive puzzle makers), who were Cranfield enterprise program participants, adopted a penetrating strategy when they launched their new product. Their product was easy to copy and impossible to patent, so they chose a low price as a strategy to discourage competitors and to swallow up the market quickly.

The danger of low pricing

Aside from the obvious possible problems of the cash-flow implications of stretching out the break-even horizon and quality/image issues, it is an immutable law that raising prices is a whole lot more difficult than lowering them. It is less of a problem if the market as a whole is moving up, but raising a price because you set it too low in the first place is a challenge, to say the least.

Value pricing

Another consideration when setting your prices is the value of the product or service in the customer’s mind. His or her opinion of price may have little or no relation to the cost and be or she may be ignorant of the price charged by the competition, especially if the product or service is a new one. 

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