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Unformatted text preview: System Beaters, Brand Loyals, and Deal Shoppers: New Insights into the Role of Brand and Price David Meer Vice President, Analytical Services The NPD Group, Inc Imagine for a moment a world without brand equity. What would it look like? First of all, the brands competing in any category would be perceived as being identical in quality, price/value, and variety lineup. Consumers would purchase whatever brand happened to be cheapest when they needed the product. There would be no loyalty - a consumer's probability of purchasing any brand would be that brand's market share. Obviously, no brand could command any type of premium pricing, because there would be no reason for consumers to spend more for any one alternative. Distribution would be the major battleground. What would happen if one of the competitors, in an attempt to improve profit margins, introduced a reformulated product that was less expensive to produce? As long as consumers did not notice the difference, nothing would happen. But if consumers began to detect a drop -off in taste, efficacy, quantity for the money, or another dimension of importance, suddenly, there would be some discernible brand equity in the category. The brand whose quality had slipped would have negative equity versus its competitors, while the other brands, though remaining at parity with each other, would all enjoy an equity advantage versus the renegade brand. There are several lessons to be taken from this thought experiment. One is that the key to brand equity is perceived differentiation and superiority in the minds of consumers. It is less important that the differences be 'real' in an objective sense; what really counts is being preferred by consumers on purchase drivers. In other words, brands must stand for something, they must stand for something different, and these differences have to be important, not just quirks of brand personality. The second is that the equity that any brand can build and sustain is not just a property of the brand but of the category in which it competes. Some categories resemble the no-equity situation pictured earlier; they are virtual commodities. In other categories, consumers are fiercely loyal to their favorite brands, based on strongly held beliefs about the brands' superiority. Various competitors offer different price/value choices which appeal to particular consumer segments. Some brands cultivate imagery and personalities that fuel the belief that they represent something special. Clearly, brands competing in high equity potential categories have a very different set of opportunities and challenges from those operating in the commodity environment. Third, there is a relationship between perceived differentiation and superiority and the ability to command premium prices. On closer examination this is not a direct relationship. Perceived differentiation is a necessary precondition for premium pricing, because no one would pay more than necessary for a commodity. It is not sufficient, however. There premium pricing, because no one would pay more than necessary for a commodity....
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This note was uploaded on 10/05/2010 for the course ARTM 360 taught by Professor Wentworth during the Fall '09 term at CofC.
- Fall '09