Construct Manufacturers On Worth Not Value

Build brands on value, not price

Levi Strauss, the 167-year-old blue jeans company, is rapidly pursuing its branding strategy to accommodate our changing retail habits. The venerable brand has great incentive to do so as many retail businesses are struggling or facing Chapter 11 bankruptcy. Levi Strauss has several plans that focus on how we will shop in the future from now on. As with other retailers, the coronavirus pandemic has accelerated the implementation of these strategies.

Our expectations have changed. Retailers need to focus on our changing values. Retailers need to recognize that value seekers are not a segment of the market. Everyone is looking for value. Different people just appreciate different things. We are all "value" buyers.

In an interview with the Wall Street Journal, Levi Strauss' CFO spoke about the brand's clothing lines and the price differences between retailers (e.g. Target) and their direct sales to consumers. The CFO said, "If you think about the product hierarchy, there is a better product and a best product. The good product is the jeans (sic) for about $ 40. The better product is between $ 60 and $ 80. And that Best product is beyond that. Wholesale in the US is mostly a good product market. Our direct-to-consumer business is more like a better and best product. "

The danger of good-better-best strategies

A good-better-best strategy at the price level can be death wish marketing. It can kill the most wonderful branded business strategies. A good-better-best-price strategy is all about price, not value. Price segmentation is a manufacturer's approach. Manufacturers decide the price. However, customers decide on the value. Price and value are not the same. For example, the lowest price level should appeal to “price-conscious” customers. The implication of the highest price level appeals to customers who care about price.

Price segmentation is a risky strategy. It's easy to do and easy to explain. Just carve the marketplace by price. Sometimes the price points are given names like Mid-Market, Up-Market, and Premium. The automotive industry is great in this regard: entry-level, middle-class, luxury, near-luxury, luxury, and premium. Hotel marketers take a similar approach … compromised, entry-level, mid-range, upper-mid-range, upscale, and luxury.

Labels like these don't make sense from the customer's point of view. The best approach is to develop pricing strategies that focus on customer perceived value.

Organizing by price points increases the misconception that marketing is all about price. It confuses price and value. Which is the better value? The lowest price? The highest price? Or is the middle price the best compromise?

It is an unfortunate event that the word "value" becomes synonymous with "price". Some brands state that they target their inexpensive “value brands” to the so-called “value conscious” consumer. Do these brand leaders think that if we pay a premium price, we are not value conscious? Mercedes buyers believe they have purchased good value for their needs. Kia buyers also feel they have bought a good value. For some of us, in one situation, the feeling is that a glass of Prosecco is the best value, while for others, in another situation, a glass of Moet is the best value.

We are all value conscious, and that includes those of us who pay super premium prices. People value different things for different needs in different situations. What price point strategies fail to take into account is the fact that we all want to believe that in the particular circumstances, we have acquired the best value for our particular needs within the brands we can afford.

As Professor Robert H. Frank said in one of his Upshot columns for the New York Times, “Obviously a lot of rich people like to show off their wealth. However, in general, when they see it, they believe they know the value. "He continued," The rich are naturally willing to spend more, often much more, on products that deliver the quality improvements they value. But few of them want to throw money away. "

The price focus threat

A price focus diminishes the brand. It's price management rather than brand management. Price segmentation forms the basis of third-party online shopping channels that sort brands from lowest to highest within a range of specifications and without considering brand differentiation based on price. Sites like Expedia, for example, have an unintended consequence of brand commodification caused by price-based segmentation.

The price segmentation is not customer-oriented. Customer-centric segmentation should focus on situational needs, not just price. Which brand promises and delivers the best value to meet my needs in this situation? Value is in the eye of the customer.

Levi Strauss CFO says he understands the diverse needs of his customers. Buyers want positive brand experiences that they value. For this reason Levi Strauss keeps many inpatient facilities. Levi Strauss' strategy is to implement a needs-based segmentation approach to channel management.

Levi Strauss has a hybrid strategy that deals with online clothing ordered directly from brick and mortar stores, brick and mortar sales and wholesale to other retailers such as Target, Macy & # 39; s and Kohl & # 39; s. However, each price must be a good value. In our uncertain times, we want the best price-performance ratio regardless of price.

Contribution to Branding Strategy Insider by: Larry Light, CEO of Arcature

At The Blake Project we support clients from all over the world at all stages of development. Redefine and articulate what makes them competitive in critical moments of change through online strategy workshops. Please email us for more.

Brand Strategy Insider is a service from The Blake Project: A strategic brand consultancy specializing in brand research, brand strategy, brand growth and branding

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