Brand Self-Busting
It is clear that many brands have considerable value, and that value is reflected in higher prices. It is also clear that much brand value is tenuous. Witness Penn State, Kodak and Lehman Brothers.
What I don’t understand are the major efforts to destroy brands by the companies themselves with watered down versions of their products sold in “outlet” stores. At the beginning, outlets were a method of selling last season’s leftovers or over stocked products. Now, it is an excuse to produce a lesser quality product to be sold at lower prices in a large volume.
What the manufacturers do not get is that customers expect the quality to be comparable to the regular priced merchandise. We don’t expect inferior quality goods. The lower prices present a momentary benefit to the customer, but the poorer quality wears on for a couple or few years. At some point – long after the cheaper payment is forgotten, we start to resent the cheap products and start thinking about the brand not living up to its reputation, and a customer will be lost. It doesn’t happen quickly, but it does happen.
Customers are not stupid. We resent lower quality. And at some point the higher revenues and profits reverse themselves – and at a much faster rate than they grew. Mr. Quality Brand, stop busting your brand. Please.
P.S. Check out the hot new WithumSmith+Brown State of the Firm video at https://www.youtube.com/watch?v=1EymCFOP14Q
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