Creating meaningful differentiation to sustain customers’ preference for a product is becoming one of the biggest marketing challenges, with competitors taking little time to copy.
Heavy competition, the ability to replicate a successful product and its features, availability of replica brands and the ability of many manufacturers to provide products of equally good quality are some factors that lead to commoditisation of brands. To maintain a brand’s position in an extraordinary phase of the competitive cycle, companies are getting into functional value addition to add new features in their products for brand differentiation. Creating meaningful tangible differentiation to sustain customers’ preference for a product is becoming one of the biggest marketing challenges, with competitors taking little time to copy. With the incorporation of differentiated function by rival brands, the differentiated function of the innovator brand moves from an extraordinary phase to the desirable phase and gradually becomes an expected function of a product once copied and present in large number of brands. Thus, an incremental innovation to add functional values makes a brand swing from being the most preferred brand to an ordinary one. This has been diverting companies’ attention from merely looking for ways to add replicable functional value to ways of adding intangible value to a brand. Many companies, therefore, have not just been trying to increase customers’ satisfaction in tangible terms such as quality, reliability and differentiated product features; but are now also increasing their focus on enhancing ‘esteem value’ of their product that gives customers a feeling of being proud owners of the brand.
Roti, Kapra aur Makaan (Bread, clothes and house) — once the basic need of the common man — have been replaced by Pizza, Pantaloon & Penthouse. Because of the economic boom, high disposable income, small family size, fast-changing lifestyle, large proportion of youngsters and awareness of and access to global brands, Indian consumers have become savvier and more demanding. Dual income, fat pay cheques, exposure to material world, etc, have transformed the objective of purchase from merely fulfilling basic needs to deriving esteem from a purchase. It is generally believed that prestige goods play an important role in lifting social standing because of the value placed on them and make people hold and display such goods (Plourde, 2009). Thus the focus of companies is gradually diverting from merely adding functional value to a product or service to adding a flavour that can inculcate the feeling of pride among customers.
Towards the marketers’ side, contracting product life cycle and increasing commoditisation across products and industry have been huge challenge for marketers, to differentiate their offerings. With the growing potential to pay, and reduction to price sensitivity among highly-paid urbanised customers, companies are focusing on adding value to differentiate a product that can attract premium price. Thus continuous incremental innovation to frequently add value has become a key to maintaining customers’ interest in products and to keep brands in the extraordinary phase of competitive cycle.
Background
Due to a rise in competition and customer demand, it is becoming difficult for marketers to maintain competitiveness and satisfy customers for long without regularly adding value. Value addition is a tool to increase the worth of a product for its customers. Functional value, esteem value and exchange value are the scopes of value addition. Functional value is the ability of a product to perform requisite functions to fulfil customer needs. Esteem value, also termed prestige value, is a brand’s ability to give a sense of pride to its user/owner. Exchange value reflects the amount a customer is ready to pay for the product or service. It is a function of the esteem value and functional value of a product. With an increase in technological knowhow and access to it, functional properties of a product, like quality and reliability, have now become an expected benefit for any reasonably good brand. Also, since any new functional value addition (tangible features) in a product is fast copied by rivals, functional value addition often gives temporal gains. Though this approach to value addition helps to differentiate, it doesn’t ensure it over a long period. Response to such market challenges to continually differentiate from rivals and keep customers stick to a brand could be ‘esteem value addition’.
Esteem value of a product is its ability to confer prestige on its customers and it plays a vital role in placing a product under the premium category and creating aspirant group customers. This is mainly associated with the exclusivity or high brand equity. Goods capable of delivering esteem value to customers are also termed prestige goods. According to the report ‘The Prestige Consumer’, published by Datamonitor (2002), getting social prestige, conspicuous prestige and unique prestige are the most important of customers’ motives behind purchasing prestige products. Social prestige demands the imitation of other prestigious people; conspicuous prestige is derived from visibly spending huge money on an unnecessary luxury; and, unique prestige is the desire for rare or hard-to-find items. Prestige is usually an additional feature of functional goods and services. According to ‘Prestige and Pleasure Mobility as a Prestige Good and as a Pleasurable Activity — Implications for Transport Planning’, TDM Encyclopedia, Victoria Transport Policy Institute (2007), prestige goods increase the status of consumers who own or use these. This is because possession of prestige goods are said to reflect the success and social standing of a person. Therefore, where superior functional values put a brand in the purchase consideration list, an addition of esteem value takes it to the customers’ basket.
Approaches to add esteem value
Some of the popular tools that can be used to add esteem value to products are premium pricing, celebrity-stamped products, loud pre-launch advertisement, limited edition/restricted supply, associating a social or environment cause, etc. Customers’ feeling proud of owing a premium product or a product in introductory phase is quite common. Attaching a higher price tag with a product has been an age-old formula of adding esteem value to add conspicuous prestige for a brand’s customers. There was an order for 20 units of luxury sports car, Aston Martin, in India soon after it featured in a James Bond movie. With price ranging between Rs 1.3 crore and Rs 2.9 crore, the car is set to give conspicuous prestige to its customers. However, with the ever-growing number of millionaires and many market options in the premium product category, it takes more than just sky-high price to make customers feel pride in being associated with a brand. Here comes the supply side of the story. While terms like ‘out of supply’, ‘waiting list’ and ‘limited supply’ have vanished from the business dictionary, these could be used as strategy to add esteem value to a product and give unique prestige to owners, creating more aspiring customers. Indian customers have witnessed ‘Limited Edition’ in many product categories. Launch of a limited range of 150 watches of TAG Heuer, a Swiss luxury watch brand, signed by Shah Rukh Khan, on the digital side, is one such case. Only a very rich diehard Khan fan could write a cheque of Rs 3.05 lakh to be among the 150 possessors of these watches. It helped Tag Heuer, with a growth rate of 40 per cent, become the most vibrant luxury watch brand in India. According to a 2009 report published on a website that tracks the country’s retail industry, Indian luxury watch market is estimated at $250 million and has been growing at 25 per cent. Though it was not part of TAG Heuer’s promotion strategy, a small get-together of the buyers of these limited-edition watches over a dinner party with Khan could have given a further boost to the sales of and awareness about the brand.
Another example could be Apple’s iPhone, a product that had, even before its launch, ensured success for itself in most markets globally. Its technology and performance ability in the digital world apart, the sense of being a proud owner would not have been as high as it is now if customers had been able to acquire it without any hassle of waiting period and the cap on the number of units a customer could buy on two. It was first announced by Apple CEO Steve Jobs on January 9, 2007, while it went on sale in the US on June 29 that year. A loud announcement about the product before its launch was also a factor that did the trick by adding esteem value to the brand. This made hundreds of customers stand in queue outside the stores for the breakthrough-technology product. The fact the product’s just 4 per cent market share helps generate more than 50 per cent of the total profit that global cellphone sales generate indicates the premium the company is enjoying on the back of the brand equity created through an excellent mix of functional and esteem value. The practice is not just limited to the premium brands. India’s biggest car maker, Maruti Suzuki, known for its value-for-money products, also came up with its limited edition of 1,000 units for the Swift Glam, a variant of the popular brand Swift. This was called the ‘Swift One Million Edition’ to celebrate the milestone sales figures of one million units in a year. However, it was not attached with a premium price tag. German automobiles manufacturer Audi, launched its limited edition of A6 on December 24, 2009, in India, as part of the company’s centenary celebrations.
The Nano was in news since its ideation in 2003. The Tatas sold 500,000 forms, in the first phase of booking, from April 9 to April 25 and randomly selected 100,000 customers for the first round of supply. Due to production constraints, this virtually acted as limited edition. Even as the product was priced amazingly low and the target buyer was the middle-income group, it could create a unique prestige value for the early birds. The Tatas also created a buzz by keeping it on display at Smithsonian’s Cooper-Hewitt, National Design Museum in New York. The product also got a huge media support in India.
It is evident that marketers are gung-ho about their product giving esteem value to their customers, but the strategy needs caution. Too low or non-availability of the product may result in loss of customers to rivals in the absence of unique functional value to the product. Similarly, very high price without complementary functional value may also hamper the brand image. Brands need to ensure the presence of difficult-to-copy unique features in their products. These should also match the taste of the target customers, or it will boomerang. Public sentiments also need to be paid attention to while designing limited-edition products. Mont Blanc, a German manufacturer of writing instruments that launched limited-edition ‘Mahatma Gandhi Limited Edition 241’, faced criticism and lawsuit over the company’s move to sell the limited edition of 241 units at an exorbitant price of $25,000, and 6,000 units of cheap fountain and roller-ball pens priced between $3000 and $4000. It was criticised for its commercial association of the name of Gandhi, known for his simple living and high thinking with a super-premium product.
Announcement of product launch well in advance and launching with funfair is the other observed tactic that helps add esteem value to the product, though it may not last long. We have seen this working with movies. Movie lovers were seen vying for first-day-first-show tickets of Saawariya, Om Shanti Om, Taare Zameen Par, Dhobi Ghat, etc, following huge pre-launch promotions. Though all were not successful, the strategy at least ensured grand openings.
Wealthy customers are no longer content with just a technological sophistication in products. A product is not just a source to fulfil their apparent needs but also a medium to project their socio-economic standing. Ownership of rare items is considered an opportunity to earn status and as a medium to gain popularity among peers. However, this strategy will work only for brands that have already proved their functional superiority over rivals. It is expected to give the best results when used with premium and foreign brands. Customers of generation ‘X’ are not interested in just owning a rare product; it must also speak of their social standing. India is a country that has a large number of religious and national festivals, besides highly-followed cricket matches, etc. This gives marketers the opportunity to come up with limited editions specific to these events. In a commoditised market that gives many options with similar functional value to customers, differentiating through esteem value can prove a sure bet to become customers’ first choice.
The author is assistant professor (marketing), Indian Institute of Forest Management, Bhopal. The opinions expressed in this article are the author’s and the analyses made are not on the basis of primary research). She can be reached at joyss@rediffmail.com
