How Value Insulates Brands

Walker SmithFebruary 13, 20243 min

The outcry faced by Delta Air Lines over proposed changes in its SkyMiles and SkyClub programs last Fall is a good reminder of the risks faced by brands looking to take value out of their products and services.

Now, I feel sure that Delta would take issue with my characterization of the changes it announced in September as value-diminishing. But that’s not how Delta flyers felt, and that’s what matters. Under pressure, Delta scaled back many of those changes about a month later.

Peter Drucker once observed that what customers buy is rarely what a brand thinks it is selling them. Drucker was calling attention to the vulnerabilities a business inflicts on itself when it fails to see itself through the eyes of its customers.

The foundational idea of marketing is solving people’s problems, which means the customer always comes first, and thus value delivered to customers is what creates value for the bottom line. The converse is also true — when you take value away from customers, the business will suffer.

It is easier than we realize to get turned around by our own success — in particular, by the internal demands of the organizational infrastructure built up to manage our brands.

We end up putting our own interests first. We take customers for granted. We let fads and panics warp our priorities.

This is normal stuff, so I’m not casting stones. We just need to keep reminding ourselves about the value for the customer — which we tend to do about once every ten years, when we take stock as an industry and drill home the idea of customer-centricity yet again.

But sometimes it takes a wake-up call from the marketplace. Like the one Delta got.

It’s not just Delta. It’s every brand right now. Brands need to be investing in value, not squeezing it out.

To begin with, economic pressures are not letting up. Some economists have become more optimistic lately because several macro metrics have trended in a positive direction. Perhaps their optimism is warranted, but I’m more cautious.

I worry that what we’re seeing in these metrics mainly reflects the rapidly diminishing carryover of the atypical circumstances that consumers enjoyed post-pandemic. I am concerned that household budgets will soon be under more — not less — pressure.

Whether pressures are worse or better, however, it is never a good idea to take value out. Doing so may be expedient — even temporarily imperative for internal financial needs — but it always weakens brands.

You are taking away the reasons people have for choosing your brand, thereby opening up your customers to competition. For example, competitive airlines quickly announced frequent flyer status-matching programs to woo away disgruntled elite Delta flyers. Because value was suddenly up for grabs.

We tend to make value mistakes when we confuse price with value.

Price is always a big factor, of course, and more so during economic hard times, which is when the temptation is strongest to take value out in order to match the cheapest price. But even in good times, this temptation is tugging at our sleeves.

Brands that continue to invest in more reasons to buy are always better insulated from the vicissitudes of price wars. Such brands are also better able to maintain higher margins and thus to earn stronger bottom lines.

Value doesn’t always immediately trump price, but there’s no way out of a downward price cycle without investing in more value.

So let Delta be a lesson for all of us. Don’t take value out.

Build more value, not less. Deliver greater difference — not a diminishment of reasons to buy.

Contributed to Branding Strategy Insider By: Walker Smith, Chief Knowledge Officer, Brand & Marketing at Kantar

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