Discountitis, Value, & Brand Equity

Al Reis’ recent Ad Age article “Discountitus” points out that in some industries brand differentiation is history, and success lies in deep discounts (airlines, insurance, retail). Another recent article highlighted the continued migration from Brands to Private Label. These articles raise an important question. When should “value” be part of a Brand’s Position, either as a Point-of-Difference (POD) or Point-of-Parity (POP)?

Value POD? Every Brand needs to deliver a strong value, but only Brands for which value is a central differentiator should establish a value POD (e.g. – Walmart). For Luxury Brands (think Tiffany, Ritz), price plays a central role in how consumers view the Brand; however, brand positioning focuses on what makes the Brand special, not price or value. Ritz: Feeling Like Royalty.

Value POP? Some Brands create a Competitive POP on value to negate a Competitive POD. As Professor Keller has shown, to establish a POP, a Brand simply needs to be “in the zone”. Target’s “Expect More. Pay Less.” creates a POP on value to compete with Walmart, while still focusing on their POD. In Categories which are heavily price/value driven (perhaps one with high P/L shares), establishing value credentials may be a Category Requirement even in the absence of needing to negate a competitive POD.

No Value POP or POD? In general, all of a Brand’s communication should be on equity. So, if a Brand doesn’t aspire to establish a value POP or POD, it shouldn’t be a focus of communication. While there might be a tactical exception, it can be a slippery slope.

Value Communications? Where value is part of a Brand’s desired equity, either as a POD or POP, there are many clever and well proven ways to understand consumer psychology around price/value and cleverly reframe perceptions in communications. The right reframing approach and execution can have a surprisingly big and fast business impact.