The Middle Brand Squeeze
Posted by: Anthem
Date added: Mon 14 May 2012
So, it’s official – the double-dip has arrived and difficult times are with us to stay for a while. As we know, boom and bust is nothing new, but if you look back at previous times of austerity, our lives and shopping habits seemed simpler then. Saving the pennies was a way of life and ‘make do and mend’ was more than a fashionable hobby. Nowadays, it seems we’re less prepared to scrimp and save, though. Instead, we are polarising our spending patterns – affording to buy the luxury products we love by trading down to value products in other areas of our lives.
As a result, the brands in the middle are being squeezed and need to act quickly if they want to retain customer loyalty. This is a pattern we’ve seen over and again, from fashion to cars, fragrances to nuts!
So what are the reasons behind this buying behaviour? Firstly, now it’s clear that it’s going to be some time until the next boom, people are looking for quality products that they are confident will last. Investing an extra £40 on a pair of shoes makes sense if you know that the more expensive pair will last you several years, rather than one season.
Also, we want to cheer ourselves up with a treat. If we use Impulse during the week we can afford to buy a bottle of Chanel to wear at the weekend or in the evening. Hence why premium brands are still investing budget in launching new products onto the market, such as Prada’s Candy fragrance, with expensive packaging exuding quality and major advertising spend to support it.
At the other end of the buying spectrum, there is a more complex picture. It’s not so much about low cost; it’s about value. Products need to be low cost and functional, or more expensive products bought at a discount price. Discount fashion retailer Peacock’s slide into administration and a slow down in Primark’s ‘fast fashion’ appeal are both a case in point. We want products to do the job they’re supposed to – and last for more than a couple of wears.
In the hard hit travel sector, it’s the discount airlines which are doing well. They are functional, getting you from A to B. Also, importantly, they have strong, no-nonsense branding – you know what you’re going to get when you fly EasyJet. This is a factor which value brands across many markets should note – branding and packaging should act as a signpost for consumers, clearly reflecting the product’s value and functionality.
Otherwise, value brands will also feel a squeeze from another phenomenon – the deal hunter. Consumers love nothing more than finding a high end product at a low price. Deal sites such as Moneymarketingexpert.com point to offers on cosmetics as much as on financial products, while eBay continues to go from strength to strength. However, as TK Maxx flounders it seems that there are only so many discounted premium goods to go around.
All of which is bad news for the mid-range brands. The past year has seen a number bite the bullet, including La Senza, Thornton’s and Jane Norman. For the squeezed middle, times are hard. With little economic improvement on the horizon, they need to think boldly. They can’t compete on price – but given that the consumer desire is for ‘value’ they shouldn’t have to.
Their opportunities lie in making the most of the fragmented media environment to create and communicate clear and differentiated brand values that remind consumers why they are relevant. Demonstrating good quality at a reasonable price should be a winning position today. So, strong branding that shows why they are worth an extra penny or two has never been so important. They need to adopt a new approach and a new way of thinking which builds big brand ideas from the shelf out to drive compelling packaging design which also informs the other critical brand touch points that the consumer and shopper encounter on the journey to purchase - both offline and, significantly, online.
As brands in the middle feel the squeeze tightening, they can also explore opportunities to trade up or down – perhaps creating exclusive or value variants that create relevance and an appropriate price point to maintain customer loyalty within the brand franchise. This is not a time for mid-range brands to stand still and hope for the best. It’s about using consumer insight to create a clear strategy that is brave, innovative, exciting and flexible. This takes investment, but not to take a decisive approach is potentially more risky.
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