Habits are hard to break, but not impossible. Some sort of change occurs after every marketplace disruption. But where changes happen, what changes happen, how many embrace change, and whether change is small, large or far-reaching depends upon the quality of the experience consumers have with whatever is new and different. The asymmetry principle is the way to sort this out.
It is a lot easier to get consumers to try something new than it is to get them to stick with it. It is even harder when consumers are forced to do something different or must do so out of necessity instead of being incentivized or compensated for it. Consumers will slip back into old routines unless the effort involved in changing is rewarded with a higher quality experience. This is the essence of asymmetry.
The basic pattern of asymmetry is true in every category, but the concept comes from research into the performance of private label grocery product brands (FMCG/CPG) during economic downturns. Studies have documented a pattern of asymmetric share gains. That is to say, the share gains enjoyed by private label brands as consumers look to save money are not sustained once a downturn is over. When consumers are no longer forced to shop just on price, they return to name brand products. But private label brands don’t give up all of the share gains realized during downturns. They keep some of these gains, hence the idea of asymmetry.
Private Label And Recessions
One of the most comprehensive studies of private label brands during recessions was conducted by Lien Lamey for her award-winning doctoral research at Catholic University in Leuven, Belgium, under the supervision of renowned marketing scholar Jan-Benedict E.M. Steenkamp. Working with a transactional database for Belgium (1983-2004), the U.K. (1980-2003), the U.S. (1971-2003), and West Germany (1975-2002), Lamey found that over both the short-term and the long-term, the incremental growth that private label brands realize during an economic contraction is more than four times the decline in growth that occurs during the expansion that follows. In other words, when gains and losses are netted out, there is an asymmetry that works to the advantage of private label brands. In absolute terms, these growth gains and losses are small, but the net impact is an incremental and enduring shift in the relative market position of private label brands that compounds over time and builds upon itself across successive recessions.
What is behind these asymmetric share gains is made clear in a follow-up study that Lamey conducted, also with Steenkamp, in which she analyzed 92 grocery product categories in the U.S. over a 20-year period from 1985 to 2005. The purpose of this research was to determine the best way for name brand products to mitigate share gains by private label brands during a downturn. She assessed the impact of six different types of innovation along with advertising, promotions and pricing. She confirmed what other studies have found about the value of advertising during recessions and about the ineffectiveness, and often negative impact, of discounting by name brand products. Most importantly, she found that the single best way for name brand products to win the fight against private label brands is to introduce significant, distinctive innovations that are truly different and noticeably better.
The Price Versus Quality Mistake
There are two sides to the value equation. The side that is most familiar is price/value or saving money. The other side is quality/value or improving the product or experience. Brands can deliver more value in one or both of these ways. The trap most brands fall into during downturns is to focus only on price/value. The assumption is that this is the only side of the value equation that matters during a recession, i.e., it is all about price and not at all about quality. Lamey’s research shows that this is not true.
What Lamey found is that quality-enhancing innovations will keep customers from abandoning name brand products. By improving the quality of the experience, the value equation is shifted in a way that a cheaper price cannot match or offset. Consumers will look to save money elsewhere in order to stay loyal to brands that raise quality. The key takeaway is the overriding importance of quality in the value equation. Price matters, but quality matters just as much and oftentimes more.
Why Name Brands Win On Quality
Private label brands peel away customers who discover that, for them, the quality is just as good as that of name brand products. These customers switch because both sides of the value equation work in favor of private label brands. Only by innovating can name brand products keep perceptions of quality in their favor or swing them back if they are slipping. This is the most important insight from Lamey’s research — the battle during downturns is not a fight over price; it’s a fight over quality. Name brand products pick the wrong fight when they try to compete on price. They need to compete on quality because it’s on the basis of quality, not price, that private label brands achieve permanent share gains.
This is what asymmetry is about. Asymmetry is a matter of quality. When consumers are forced to trade away to something different, most will find it to be a poorer quality experience. But some will find it good enough and maybe even better. When the economy recovers, most consumers will go back to what they were doing before but many will stick with what they switched to because they find it better and cheaper. This is a bigger threat than ever for name brand products because private label brands have been steadily improving quality. When financial circumstances require switching to save money, consumers are increasingly likely to discover a private label product of sufficient quality to earn their long-term loyalty.
Asymmetry is a general principle about change following disruptions. For the most part, what people are forced to do during a time of disruption will not be a quality product or experience worth continuing or retaining when the disruption is over. But for some people, it will be good enough, and even better, so they will switch for good. Such switching presumes that the new activity or product or behavior is a good cultural fit. If not, it won’t matter if it’s higher quality, as the new Coke principle makes clear. But if it is a good cultural fit, then the quality of the experience comes into play as the dominant operative dynamic.
A lot of people will go back to what they were doing before no matter what, so most of what shifts during a downturn is temporary and contingent. The magnitude of the shifts seen during a disruption should not be extrapolated literally. What’s enduring is never what’s seen during a disruption. Asymmetry means that much of what changes, and generally most of it, goes back to what it was before. However, bigger asymmetric gains will take place if the quality of whatever is new and different is better.
When downturns and disruptions take hold, large swaths of consumers are pushed into a mass experiment with something new. Many of the consumers forced to do something new would never have done so otherwise, or at least not as soon. Some consumers will take it up because they find out that they like it better. Others will go back as quickly as they can. This difference in the long-term choices of consumers is the asymmetry seen in the marketplace, and for situations in which all things are equal in terms of cultural resonance, it is quality that predicts whether that asymmetry will be small, large or far-reaching.
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