Ditch the discounts! Avoid a price war with loyalty and brand values

The eas­i­est tac­tic for any mar­keter in tough eco­nom­ic times is to keep prices as low as pos­si­ble on the assump­tion that cash-strapped cus­tomers will only be buy­ing based on price. As they will right­ly sus­pect, though, the prob­lem with that approach is that it puts them in a race to the bot­tom.

At a time when pro­duc­tion and staffing costs are ris­ing, cut­ting prices will not only erode mar­gins and change a brand’s posi­tion­ing to one built around bud­get-con­scious pur­chas­ing, it pos­es a fun­da­men­tal quandary: if prices are low­ered now, how can they be restored to where they need to be when the econ­o­my starts to recov­er with­out appear­ing to be a mas­sive price hike?

The main argu­ment the Har­vard Busi­ness Review offers against slash­ing prices and cut­ting mar­ket­ing bud­gets is that, apart from dimin­ish­ing mar­gins, it changes a brand’s comms strat­e­gy. Instead of con­cen­trat­ing on the mes­sages a com­pa­ny wants to con­vey to con­sumers, the con­ver­sa­tion ends up being dom­i­nat­ed by price.

It’s a dif­fi­cult posi­tion for con­sumer brands to find them­selves in, and it’s some­thing mar­keters will face again and again over the next year or so. Research from Mind­share, part of adver­tis­ing giant WPP, sug­gests that as many as eight in 10 con­sumers could soon start re-eval­u­at­ing their favoured brands as mon­ey gets tight. How­ev­er, its chief exec­u­tive, Jem Lloyd-Williams, reit­er­ates the point that price cut­ting might not be the best solu­tion when there are alter­na­tives, such as encour­ag­ing loy­al­ty and focus­ing on shared val­ues.

“Mar­keters will be tempt­ed to cut prices to main­tain vol­ume and pen­e­tra­tion,” he says. “How­ev­er, our con­sumer research tells us that while con­sumers are clear­ly look­ing for good val­ue for mon­ey, they are also influ­enced by brands that show empa­thy with their sit­u­a­tion, beyond sim­ply cut­ting prices. They will warm to brands that explic­it­ly hon­our loy­al­ty, as well as demon­strat­ing hon­est and trust­wor­thy val­ues.”

This sen­ti­ment is echoed at audi­ence research busi­ness GWI. Its founder, Tom Smith, says his com­pa­ny fig­ures show that while near­ly half of con­sumers expect to spend less now com­pared with two years ago, 70% are most inter­est­ed in reli­a­bil­i­ty. Price, it seems, is not every­thing.

“The per­cep­tion of cost-effec­tive­ness can be just as impor­tant for brands as price,” he says. “Across a range of prod­uct cat­e­gories, we’re see­ing con­sumers want­i­ng to buy from brands offer­ing greater per­ceived val­ue – even if tech­ni­cal­ly, they aren’t any cheap­er. The buck is with brands to show­case their val­ue and posi­tion them­selves as the best choice for con­sumers’ hard-earned cash.”

One way of offer­ing cus­tomers val­ue, rather than cut­ting prices, is to dou­ble down on mes­sag­ing that under­lines why con­sumers get good over­all val­ue from a prod­uct or ser­vice, even if there are cheap­er alter­na­tives. For Reckitt Benckiser, the brand behind house­hold names such as Van­ish, Fin­ish and Air­Wick, this means draw­ing atten­tion to its sus­tain­abil­i­ty cre­den­tials.

“We are laser-focused on val­ue. If you focus on price cuts instead, you erode your brand val­ue and destroy prof­itabil­i­ty,” says Ain­hoa Rob­les, the company’s brand expe­ri­ence lead.

“There are a lot of ways you can offer val­ue and, for us, we con­cen­trate on telling our sto­ry about how we are always striv­ing to be as kind to the plan­et as pos­si­ble. That helps build up user trust and loy­al­ty, and it also intro­duces us to new cus­tomers who see that val­ue is about more than the price, it’s about the whole brand expe­ri­ence.”

This strat­e­gy has led to two high-pro­file cam­paigns as the coun­try has begun to grap­ple with the cost-of-liv­ing cri­sis. Dish­wash­er brand Fin­ish has part­nered with Nation­al Geo­graph­ic on a “Skip The Rinse” cam­paign, where cus­tomers are invit­ed to pledge not to rinse dish­es before they go in the dish­wash­er. For every cus­tomer tak­ing the pledge, a dol­lar is donat­ed to a con­ser­va­tion char­i­ty. So far, more than 5 mil­lion gal­lons of water are claimed to have been saved.

For fab­ric stain-removal brand Van­ish, a part­ner­ship with the British Fash­ion Coun­cil has led to a doc­u­men­tary series on Ama­zon, advis­ing the indus­try and pub­lic how they can reduce waste by treat­ing old­er clothes well. It has also part­nered with Oxwash, the country’s only laun­dry busi­ness to be B Corp reg­is­tered, to pro­mote a new for­mu­la that uses few­er chem­i­cals.

By con­cen­trat­ing on brand val­ues such as sus­tain­abil­i­ty, Rob­les believes mar­keters can steer the con­ver­sa­tion with cus­tomers to the all-round expe­ri­ence a prod­uct deliv­ers and away from the price at the till or check­out.

Of course, brand ethics are just one way to com­mu­ni­cate the full val­ue of a prod­uct or ser­vice. Anoth­er route is to dou­ble down on loy­al­ty. Fig­ures will vary from one busi­ness to anoth­er but it always costs a lot more to recruit a new cus­tomer than to retain an exist­ing one and turn them into an ambas­sador.

That is the approach being tak­en at can­dle and fra­grance com­pa­ny Essence of Har­ris. Co-founder Jamie McGowan says that his deter­mi­na­tion not to cut cor­ners on ingre­di­ents and pro­duc­tion meth­ods has paid off over the past cou­ple of years. Expand­ing the brand’s loy­al­ty club has also helped, as loy­al cus­tomers appear to have start­ed intro­duc­ing their friends to the brand.

“Dur­ing the pan­dem­ic, we relaunched with a new logo and fonts, and with new pack­ag­ing that is designed to reflect the sandy beach­es of Har­ris that we name our prod­ucts after,” McGowan says. “We didn’t want to use infe­ri­or mate­ri­als or to cut back on the qual­i­ty, so we under­pinned our posi­tion as afford­able lux­u­ry. It has worked real­ly well because peo­ple like the prod­ucts, and now they can also earn points that add up to future dis­counts, free deliv­ery and the oppor­tu­ni­ty to try out new lines before they’re made avail­able to the pub­lic.”

So, while some mar­keters are going to find them­selves pres­sured to go against their bet­ter instincts in the months to come, those who can instead con­cen­trate on brand posi­tion­ing and sus­tain­abil­i­ty, as well as dou­bling down on loy­al­ty, may be able to shift the con­ver­sa­tion from price to val­ue. Then, when the cur­rent eco­nom­ic hard­ship is over, they will have pro­tect­ed their price points while improv­ing their posi­tion­ing and build­ing a legion of loy­al cus­tomers. What could be bet­ter?