Drive down any local shopping districts in the last year or two and you’ll notice how half the stores scream sales, discounts and promotions. Strangely, the frequency of sales seems to outnumber the introduction of new stocks, designs, collections, services and ideas. In the short-run marketers may cite recessionary constraints to justify this trend. But considering some brands are reporting as much as 60 per cent of their marketing budgets on promotional activities, it’s the trade-off on the brand in the long-run that ought to be considered.
Let’s apply street logic to brand building. There is the pull-appeal that brands create which draws consumers towards a purchase. And then there is the push-dynamic where consumers are bombarded with discounts, freebies so as to coerce them into a purchase.
In the consumer’s perspective, if he can own a brand he otherwise considers overpriced, for half the amount or with an offer, his preference is a foregone conclusion. Digging a layer deeper, price-sensitive consumers realize that if brands can continue to remain profitable despite the constant flurry of sales, then perhaps they are being duped in the name of premiumness. In effect, brand trust and loyalty is corroded in the era of promotion quick-fixes as consumers begin to see lesser value behind the expensive price tags. Profitability cannot be at the cost of the brand’s honesty. While marketers may see the advantage of volume growth in the immediate future, it might be worth considering if patience and brand-building efforts might contribute to sustainable value growth instead.
Investing in brand-building, therefore works not only to build loyality but also justify the premium marketers wish to charge for their products and services. Brands can be built on aesthetics as in the case of Swatch, Apple, Porsche and brands can be built on emotional badge value, as in the case of Hummer, Titan, Zippo and Beetles. But rarely are brands built on the promotions, discounts and freebies. It’s not without reason that during the recession, marketers who bucked the cost-cutting trend and continued to spend on branding efforts reaped the richest harvest.
(The author is National Creative Director, Leo Burnett)
