Price: Friend and Foe of Brands

People buy a brand because it stands for something. People buy commodities because they are the cheapest alternative available. It is worth pointing out that brands are not created that way, they all begin life as commodities.

Once upon a time Microsoft was just software, Nike was just running shoes and BMW was just a car manufacturer from Bavaria.

The challenge for any marketer is to expedite a transformation and take a commodity, like water, and turn it into a brand, like Evian. This process is called 'brand building' and involves associating a product with values and meanings that the target audience aspire to.

Advertising, sponsorships, endorsement, packaging and a thousand other techniques can be used to link product to meaning and thereby transform a commodity into a brand. Eventually the brand is built and consumers no longer consider it a commodity and are prepared to pay much more for it as a result.

Many marketers do not appreciate that this process can also be reversed.

Just as a commodity can be built into a brand by focusing on its values, a brand can be commodified back into its original form by focusing on its price. When companies overtly emphasise the price of their product or the amount of the product that the consumer will get for a certain price they are effectively commodifying their brand. All of the hard work and heavy investment that went into brand building is stripped away.

January is therefore a difficult time for brand lovers like me. The crescendo of shoppers and the timbre of ringing cash tills can never drown out the sound of brands being destroyed. The increased revenues that January sales usher in come at a price. That price is brand equity.

The more aggressively a company promotes its January sales, the more damage its does to its brand and thus its long-term future. January sales are essentially a de-branding mechanism. Companies are shouting to consumers: 'Don't buy our brands for what they stand for, buy them because they are cheap'. Sales promotions are thus a very attractive, but dangerous, tool.