8 Requirements Of A Brand Value Strategy

Larry LightOctober 24, 20237 min

Here is a marketing truth: it does not matter if there is a recession or inflation: the best value wins. Value is a virtue.  But, brand-businesses do not just wake up one day and have value. Brand-businesses must develop and implement a brand-business value strategy. Value is everything.

What is value? Value is customer-perceived. Value is a brand-business’ expected total brand experience (functional, emotional and social benefits) relative to the brand-business’ total costs (money, time and effort) multiplied by trust. Marketing sets price. Customers declare value.

In 2008, during the last serious economic crisis, The Wall Street Journal ran an article describing how consumers were cutting food expenditures. The article noted that consumers were trading down to lower-priced items. And, those cans and boxes in the back of the pantry, those staples, were now on the table.

Fast forward. Pepsico, home of beverages such as Pepsi and Gatorade and snack foods such as Doritos and Fritos released its July 2023, second quarter earnings. In its analyst call, Pepsico stated, “Consumers are making some adjustments. We’re seeing consumers shopping in more stores than before. They’re looking for better deals. They’re starting to look for optimization. They’re going to channels that have better perceived value. They’re buying more in Dollar stores or they buy more in mass or in clubs. So, every segment of the consumer is making adjustment.”  Just to be clear, to optimize means “to make the best or most effective use of a condition or situation. In this particular Investor-Relations-speak, optimize means changing behaviors.

C-suite executives tell Wall Street that consumers are recovering. Recovering does not mean wanton spending. Nor does recovering mean buying those C-suite executives’ brands. Recovering means customer adjustment to a new reality. In this Age of Adjustment, consumers are moving from conspicuous consumption to careful consumption; from status conscious shoppers to conscientious shoppers. Increasingly, the purchase decision-making model is: What is it? Why is it? Can I afford it? Is it an affordable value?

The Department of Commerce reported that prices were slightly lower in August, 2023. But, many consumers are not “jumping for joy.” Prices are still substantially higher than before COVID-19 appeared. For example, Netflix has not only raised prices but eliminated its lowest tier. The average price of a gallon of orange juice in grocery stores is $9.18, as of October 7, 2023, according to The Wall Street Journal.

Consumers are adjusting to affordability. Adjusting to affordability is the new reality. If a brand is affordable, the brand is desirable. True affordability represents an opportunity for the savvy marketer.

Once again, frugal is becoming fashionable. Frugal is not the same as cheap. Frugal is careful, prudent and economical. People are “eating their leftovers and cooking from scratch.”

This is problematic for brand-businesses. Over the past several years, brand-businesses have raised prices, and then, raised prices again. Brand-businesses have supported these price hikes with the phrases, “Our brands are strong. Consumers are still buying. We must protect margins.”

Due to price increase, Pepsico and other brand-businesses have lower volumes. Revenue growth comes from price increases. The Wall Street Journal commented on Pepsico’s latest (October 2023) earnings call.  Pepsico’s organic volumes were down 2.5% from a year earlier demonstrating that Pepsico’s revenue growth derived from price increases. In the US, Frito-Lay volumes were flat and beverage volumes fell 6%.

The Wall Street Journal stated, “One main concern among investors has been that consumers are exhausted with price increases and are starting to cut back, which makes weak underlying volumes especially worrying.”  Pepsi Chief Financial Officer said there are “… signs of caution among consumers, such as trading down to cheaper items.” Furthermore, Pepsi CFO said, “Sales at convenience stores and food service locations, places where consumers typically cut back first when they hit economic trouble have remained robust, with the latter still growing by double digits.”

It is not just Pepsico. Its rival Coca-Cola stated in its recent earnings call that Coca-Cola sales were flat. Coca-Cola explained: “We have seen some willingness to switch to private label brands in certain categories. Across the sector, consumers are increasingly cost-conscious. They’re looking for value and stocking up on items on sale.”

Kellogg’s, at the time of its spin-off of cereals into a stand-alone company, indicated that consumers were buying more private label cereal brands as some boxes of brand-name cereals were priced at $8. The CEO of Kellanova, the Kellogg’s cereal spin-off, told investors not to worry. Customers will become used to higher prices. Sales volumes will increase. This “sticker shock” will dissipate.

Procter & Gamble just beat Wall Street’s expectations. However, as CNBC points out, P&G’s volume fell for the sixth consecutive quarter. P&G has “consistently raised prices (over the past 2 years), causing some consumers to choose private label alternatives.” Now, CNBC states that the volume declines are less than the previous year. However, P&G’s baby-feminine-family care segment experienced a 3% fall in volume. P7G’s grooming segment experienced a 2% volume decline. P&G’s fabric and home care segment experienced a 1% volume drop.

Same with Nestlé: organic growth driven by price increases.

Investors want brand-businesses to focus on volume growth. Investors believe the customer has become weary of price hikes. Investors are shining a spotlight on a major, endemic, brand-business concern. Brand-businesses confuse value tactics and value strategy.

For example,

But,

  • Short-term price promotion is a tactic
  • Special occasion pricing is a tactic
  • Continuous price increases are a tactic
  • Smaller packages at the same price is a tactic

Brand-businesses must create a brand-value strategy. This is not a calendar. A calendar prioritizes tactics. A brand-value strategy is a plan. It is a plan to create trustworthy brand value.

A value strategy affects R&D, not just the marketing. Brand-businesses must engineer value into the product. Example: Whole Foods 365. A brand-value strategy is global or national. Tactics are local. Tactics are how brand-businesses execute a strategy locally.

A goal of a brand-value strategy is “amazing value.” Amazing value is not offering a lot for the money. This is brand-value tonnage.  Amazing quality is a great brand at a great price. A great brand with a price that will entice. Staggering value is unique, high quality at a price that amazes the customer.

Here are eight must-do’s for creating a brand-value strategy:

  1. Have a unified view of “amazing value.” Everyone in the organization must share the same understanding of what amazing value is at the enterprise. Alignment is critical.
  2. Have a discipline for pricing, including a focus on price elasticity.
  3. Avoid the obsession on margins. Of course, margins are important. But, obsessively focusing on margins marginalizes the brand-business.
  4. Create branded value. Creating extraordinary value is being responsible. Engineer value into the brand. Engineer in the brand its unique, high quality and offer that brand at a great price. The customer should say, “Wow. I did not think I could buy this brand at this price.”
  5. Create brand-value that excites. Remember, the price must entice. What is the powerful price point relative to alternatives? Move from fair value to amazing value.
  6. Value, not price, must be a consistent part of the brand’s Brand Promise.
  7. Focus on permission marketing. Give consumers permission to buy the brand-businesses products. Convenience? Quality? Wholesomeness? Uniqueness? Service? Price?
  8. Avoid constant promotions. Constant promotions create deal loyal rather than brand loyal customers. As Pepsico learned. After serious and continuous promotions on bottled water, Pepsico saw the promotions drive volume. But, these gains disappeared once the promotions stopped. According to The Wall Street Journal, grocery store promotions are proliferating. “Food makers are responding with deals. But, even with these deals, consumers are paying “more than one third more” than before COVID-19.

In the Age of Adjustment, value is the eye of the storm. This is where it is calm. Achieving the right price and becoming the best value keeps a brand-business ready to weather anything.  And, not just for today. but for the times ahead.

It is not a cliché: the best value wins.

Price hikes to save margins and to diminish effects of inflation weaken customer demand. Having a strategy to create branded value that excites at prices that entice is the way to get through the typhoon of tight times.

Contributed to Branding Strategy Insider by: Larry Light, Author of The Paradox Planet: Creating Brand Experiences For The Age Of I

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