By Neal Sandin, President, 643 Research
Economic uncertainty reigns, with concerns about tariffs, rising unemployment and inflation, and the possible “AI Bubble” spilling out from social media feeds and news outlets. With higher costs for groceries, utilities, as well as at the gas pump and seemingly everywhere else, people are becoming more discerning about where to spend their hard-earned money. The challenge for brands and market researchers that work for them is not to focus too much on one single factor: price.
Many companies when faced with economic hurdles immediately reduce prices. This is understandable. After all, a typical question that the market researcher asks is if there is anything preventing someone from buying something. Not surprisingly, the first answer is always cost. If things were only a little less expensive, they would buy. Yet ironically, reduction of prices can actually cause people to not buy from a brand.
For example, if Rolls-Royce suddenly started selling their vehicles at a Honda Civic price point, many people would wonder about the brand and if the quality was truly there. The true appeal of Rolls-Royce is that it is exclusive. These vehicles belong to a rarefied group, one that is full of brand-loyal customers. The more exclusive, the more exciting the brand, the more it captures the imagination on both an emotional and social level. All of this creates and reinforces customer loyalty.
Some may conclude from this that a higher price is required to create exclusivity. While it is true that a Rolls-Royce at $30,000 is not nearly as remarkable as a Rolls-Royce at $300,000, it is the stories we tell about the brand that truly makes them something special. Rolls-Royce played a key role in royal weddings, including between Princess Diana and Prince Charles. Yet, that Honda Civic that can last 200,000 miles also tells a story, one that Rolls-Royce never could, that of road trips and memories with loved ones. These stories give people a reason to buy from that brand. They make the customer want to spend their money with a specific company and not anyone else. Stories create loyalty.
In other words, being unique is not enough. To be exclusive, a brand needs to be distinctive while also being evocative. The mechanic who stayed late to fix the car so that the college graduate could reach that job interview, the jacket that inspires dreams of travel because of the claim that it can keep you warm even on Mt. Everest, the honest and competent tax professional who finds a way to save the client from severe penalties, all of these inspire emotion. They are also social, all moments or hopes that people can share with others. In essence, they are exclusive. They are moments and experiences that other brands cannot (or do not) recreate. A compelling story creates a reason to buy and a reason to be loyal, more so than any change in price. The challenge for the market researcher is to find those stories in a world of anxious clients and brands.
Exclusivity can work the other way too. A story of being overcharged, of dishonest workmanship, of rude after-sales service, all undercut customer loyalty and create a type of exclusivity that works against the brand. At that point, the company will be forced to lower prices because there is no other reason for customers to purchase their products and services. In other words, lowering prices can signal to customers that the brand has nothing special to offer and might be a liability.
There are times that offering discounts can help brands, as we see during Black Friday and the holiday season. Individualized discounts for loyal customers can also evoke loyalty if done with sincerity and personalization. However, cutting costs across the board can make a customer go from “I want to shop there” to “I guess it is good enough.” “Good enough” does not evoke loyalty, especially when economic tides eventually change for the better.
Doors open for brands when they are specific. Being all things to all people means there is, by definition, no exclusivity, no reason for consumers to be excited or loyal. Market researchers need to push beyond a fixation on cost to find the story that evokes a strong and compelling emotion, that is different from all others, and work with brands to bring that to the market.