April - June 2008
As the market matures, the Indian horological trade is facing a major challenge even as its constituents prepare to post exponential growth! In a bid to capture a greater share of the market, several watch marketers and trade constituents have been indulging in mindless discounting. This has filtered across various levels of the value chain affecting the international brands as well as the domestic ones. And the discounts are sometimes as high as 25%!
Quality and price do not exist as isolated concepts in consumers’ minds. They are interrelated. Research has shown that deep discounts do cause the consumer to believe that something is wrong. Frequent discounting serves to lower the value of the brand because of an almost subconscious reaction by the consumer who believes that quality also has been lowered. Or, in a “value rebound,” consumers begin to perceive the everyday price as too high. The brand is then bought only on deal. This madness kills brand equity!
Perhaps the greatest danger in frequent discounting is with loyal users. Loyal users, however, who would have bought the product at its normal price because they believe in the quality/price relationship, are now rewarded for purchase at the expense of lower margins and their removal from the marketplace for a period of time when the brand is selling at full price.
In the future, marketers must look at discount coupons as only a weapon in a broader tactical effort, never as a strategy. Strategy implies long-term vision and planning, a concrete goal to be achieved over time. Discount coupons should be used as a weapon only if delivered to the right consumer segment within a context that enhances the brand's quality perception.
The goal should be to establish a high quality/price relationship with the consumer. And then, when discounting becomes necessary as a trade lever, boost the quality portion of the equation so that the Value = Quality/Price equation remains relatively unchanged. Manufacturers can enhance quality in a number of ways. As the price changes, make a change in one or more of the attributes that make up the quality impression. Such quality enhancers could be a new package, image-enhancing publicity events, or higher
advertising levels.
Avoid getting into the cycle of frequent deep discounts. Second, if you are in it, get out. A deal can always be beaten by a competitor. An image is quite a different thing altogether. Strong brands can withstand and benefit from a well thought out discount program, within the context of a brand equity building plan. Brands developing equity realize no benefit over the long term from frequent fire sales ... and may even suffer significant damage.
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