Chapter 7 : brand QUALITY/VALUE

The Balancing Process of Branding

In 1993, around the branded world, pricing earthquakes struck in such far flung marketing territories as Marlboro (USA), top department store brands (Japan), and brands newly exposed to competition from generic products (especially in grocery products in the UK and parts of Europe). Greedy brands were seen to be suffering setbacks; marketing organisations were shaken up.

The quality/value balance represented by a brand and its pricing policy needs to be carefully Chartered. Considerable subtleties are involved. What may seem to be a tactical pricing decision will often turn out to have cumulative repercussions. Two of the long-term reasons for branding - adding value and strategic advantage - are often talked of as organisational goals without any thought for the occasions when they become directly incompatible.

Branding's determining forms of marketing investment, like advertising, often pay their way by adding value rather than gaining new users. It can be far more effective to campaign on increasing loyalty of existing consumers and their willingness to pay a price premium than to increase sales volume by getting the brand to penetrate new consumers.

The real benefit of branding is often less in creating volume than in supporting the price that the purchaser is ready to pay. It may wrongly be taken for granted that the reason for marketing activities - advertising, for example - is to increase sales volume, which is a relic of the early and expansionist years of this century. In fact marketing is largely a process of adding values, both rational and emotional. The author is indebted to a referee who added a comment at this point: "I have lost count of the number of erroneous marketing decisions I have encountered due to the failure of many modellers of advertising effectiveness/awareness to fully appreciate this issue". Simon Broadbent, "Diversity in categories, brands and strategies", Journal of Brand Management vol 2.1, 1994.

However, year on year, if you keep on banking an extra premium from your loyal consumers, your cumulative exploits make you vulnerable to competitive attack. At some stage, either the increasing value of your market or the pricing amounts by which you can be undercut make you irresistible prey for new competition. Consumer price insensitivity often does not obey the response curves which standard econometrics models assume.

What lessons are there for Brand Charterers from 1993? Are there any lasting consequences? We are not privy to the following companies' detailed financial records, but the year's events do seem to indicate revealing patterns which relate pricing decisions to branding discontent.

Marlboro's price peak - 1993

For over 40 years, Marlboro's branded communications have campaigned on an essence which has been the making of the world's and America's favourite cigarette. It is difficult to imagine how any other communications imagery can directly challenge Marlboro Country.

For several years prior to 1993, Marlboro had led price rises in the USA among premium brands significantly above the industry's extra costs. In the process, an increasing price gap opened up for generic (ie virtually unadvertised) brands to exploit at a price sensitive end of market consumption. By 1993 generics, in volume terms, had risen from being a marginal force a few years previously to the leading dynamic of the marketplace (jumping from 28% to 36% volume share in just nine months). This meant that the generics sector was selling one and a half times more cigarettes than Marlboro itself and in terms of total consumer spend was coming close to that which Marlboro enjoyed (bolstered by its price premium of 50% or more over generics).

Technically, Marlboro's market share was just about holding its own. On a short-term view its most recent price rise may have profited the brand's performance in that year. But Marlboro was by now on the edge of a price premium precipice. The stage was set for what newspapers around the world would soon be reporting in excited tones like this extract from London's Sunday Times:

"On April 2, 1993, Philip Morris, the world's largest consumer-products group, took the biggest gamble of its life. It slashed the price in America of its top-selling cigarette, Marlboro, by 20% - 40 cents a pack."

Unlike other brand pricing earthquakes of 1993, Marlboro's was started on its own strategic terms and judged as correct by many in the pure world of competitive strategy. It was designed to cut generics down to size. The profit squeeze would hurt Philip Morris much less that its main US rival Reynolds. Because Reynolds had inherited a relatively frail financial structure from the days of junk bond management buyouts, it has been conjectured that Philip Morris's frequent price rises may have deliberately lulled Reynolds into a false sense of security of profits that premium pricing could muster. The strategic sting was then dramatically to introduce a deep price cut when it would hurt most.

Most things have turned out the way Philip Morris planned. The generics boom has been halted. Marlboro's leadership (in 1995) looks like being fully restored. But what Marlboro's owners could not have anticipated was the global news coverage associated with the spectre of - what accountants calculate as - the world's most valuable brand having to take a price cut. Accountancy-driven algorithms of brand valuation, were only popularised as recently as the late 1980s. As amplified in

Chapter 12, their frame of reference, as mathematical algorithms, is influenced by financial regulations and not by marketing foresight.The Financial Times observed:

At a time when corporate performance in many industries depends increasingly on attributes such as reputation and service, there is a genuine need for more precise methods to measure the value of intangibles. But the issues have so far been as much obscured as clarified by efforts to put a price on brands. These methods involve, at best, highly subjective judgements and amount, at worst, to a mechanistic checklist exercise. They offer very few verifiable insights into how and why that performance was achieved, and hence, whether it can be maintained. But in the real world, that is what really counts. Financial Times, 13 April 1993

In the year following the price cut, Philip Morris's stock lost about 20% of its value compared with a 5% gain by the Dow Jones market index. What has now become known as "Marlboro Friday" was taken as a signal for writing down many of the world's major branded companies. 'Life and death stories on brands' seemed to become an ongoing agenda among various influential financial columnists. As a final legacy, even as Marlboro was regaining strength in late 1994, Philip Morris's CEO (in charge of 1993) appears to have taken early retirement.

The lessons from Marlboro are symbolic, but not as generalisable as those from other pricing earthquakes of 1993. They show how widely big brands have become targets for global news coverage. Before accountants talked so publicly of valuing brands, and Marlboro's fame as the world's most valuable property right, Philip Morris' local strategic manoeuvre might have been flawless. Instead, the symbolism of "Marlboro Friday" has opened commentators' minds to the issue : where is brand leadership going right, and wrong?

UK packaged goods price peak - 1993

In the UK, mainstream grocery chains led by Sainsbury's and Tesco's (which each retail over one tenth of the nation's grocery products) have been building up their own brands for almost a decade. In the old days, when neighbouring supermarkets fought battles out on high streets, competing on the price of own labels was the primary concern. Then as a lot of consumer shopping moved to superstores at out of town sites, own label brands started playing a much more prominent role in confirming the quality of the lifestyle you buy into by making your (weekly) shopping trip to your favourite (brand of) supermarket. Many manufacturer brands were lulled into a false sense of pricing security at this time. They had continuously maintained their category leading brands at price differentials which appeared reasonable, typically 20%, when lined against supermarkets' own increasingly upmarket labels.

Partly in response to this sustained shift upmarket by retailer and manufacturer, foreign discount grocery formats began to target the UK (such as Germany's price-fighter Aldi and American-styled "Warehouse" clubs for consumers). Consequently, in 1993 the major supermarket chains suddenly changed course making a show that they were prepared to merchandise products down to generic price-saving levels, in addition to their (by now) premium own labels.

Britain's equivalent to Marlboro Friday arrived on November 3 1993. On "Sainsbury Wednesday", the supermarket group cut the prices of 300 lines, and David Sainsbury, chairman, predicted that branded product prices would "have to come down very significantly to compete". The Sunday Times, 3 April 1994

The pricing shock for some UK branded manufacturers was that they were pricing themselves at over double the price of the generic product. Some still do not seem to be able to reconcile how so much extra overhead has ended up in their branded cost chain. Was anyone in these companies keeping an eye on how much the cost of marketing and supplying their brands had become relative to the lowest cost supplier?

Our first pricing axiom for Charterers is that it is never safe to take your eye off the pricing ball. And the second is that this becomes a doubly vital priority once individual customer channels control a significant proportion of your market, say 10% or more.

At time of writing - two years on from Marlboro Friday - it looks as if Marlboro in the USA escaped with a blip on the Richter scale, compared with what may yet be happening to Coca-Cola in the UK in some supermarket channels for its product. And yet if Coca-Cola had a pricing fault it seems to have been more one of perceived arrogance than failure to add value. Recent advertising, eg "Always Coca-Cola" and globally directed visibility, have been as good as ever. Up to 1993, the added value of the whole soft drinks category in the UK had been consistently raised by Coca-Cola. How did the company fail to explain the logic of its policy to leading UK supermarkets? They profited from high added value in all soft drinks from the strong leadership which the Coca-Cola brand delivered. Now Britain is being swamped by a multitude of lower priced Cotts. These include own label lookalikes (eg Sainsbury's Classic which has taken the lion's share of colas through this channel); and "guest brand formats" (eg the three way production of Cott, signed as Virgin Cola, premiering as the cola of Tesco supermarkets). For more details on strategic interpretations of these manoeuvres, see Chapter 12 on Cott's intent to export retail programs from Canada and the United States to the added value chains of packaged goods globally and locally.

Our third pricing axiom is that Brand Charterers should never forget that added value strategy is not only about competition but whom to partner, and how partners may share your expectations from the added value chain.

The second part of this chapter will take a closer look at three basic drives which need to be balanced harmoniously for brand processes to keep on winning. These are:

·Top Value

·Top Quality

·World Class focus

Additionally, we will review why transactions labelled as "brand milking" need to be organised with care, unless it is intended that the brand process should keep on losing value.

Top Value

Through the 1980s, one of your authors was involved in managing and reporting over two hundred experiments involving brand launches, relaunches and extensions. Each experiment involved collecting a customised dataset for forecasting the brand's business potential. Our part of the bargain to clients was the competence to forecast their brand's business potential with a modal accuracy of +/-12%, provided they specified market access parameters, defined in terms of:

· awareness (% of consumers who would know their brand)

· distribution (% of consumers who would find the brand where they wanted to shop)

· market crowdedness, eg how many brands made up 80% of the market and how many brands were actively rotated in a typical consumer repertoire.

These two hundred experiments were personally managed in over fifteen countries and around 50 product or service categories. This was part of a larger corporate experience databank which through the 1980s comprised about 2000 in-market experiments, spanning 40 countries and several hundred market categories.

Our modelling approach involved simulating communications, purchasing and usage experiences of consumers. Simulation modules were structured to be comparable across experiments but were not based on normative measurements. This enabled us to take full account of the fact that brand leaders aim to break norms especially in extending or relaunching their franchises. However, as our experience bank of in-market experiments grew, it was naturally interesting to search them for benchmarks of consumer response. We detected a 25%-50% rule on pricing which is shown in Table 1.

Table 1 - Pricing : consumer response benchmarks ·Brand leaders can "perceptually justify" price premiums of up to 25% against other directly competing brands ·Brand leaders with a discernible product plus can "perceptually justify" price premiums of up to 50% against what are otherwise directly competing brands ·Higher premiums are "perceptually justifiable" only where the consumer's need served is actually a "different competitive marketplace"

There are some subtly interesting qualifications to note before applying these guidelines in practice. Before coming to these, two clarifications of terms are worth making:

·We view these as ballpark figures (ie within a few per cent). If your own personal operating heuristic is 30% or 20%, instead of 25%, that's fine. We are talking the same language.

·These guidelines seemed to be general consumer response patterns:

- over time (or at least the 1980s)

- across countries/markets, from developing ones to over-developed ones (reporting areas included India, Thailand, Indonesia, Japan, USA, Europe)

- over different periods of economic health and social mood, ie feel-good boom-times to depressing recessionary times

Subtle Qualifications on Pricing Perspectives

1) There may be many different "value" markets for the same branded product. Typically, these are defined by consumer need and its specific situation

For example, there are at least three different markets for soft drinks :

·Multi-packs to take home from the shopping trolley market (a competitive one in which our rule would apply)

·On-street consumption out of pack ( where we would expect a higher pricing base to apply than multi-packs - and also to suspend the rule at locations where there is little competition or the immediacy of thirst is great)

·Restaurant/bar consumption, where we would not advance any rule because the added value of the service environment dwarfs any value judgement of product value.

France, as home to one of the world's thriving markets for mineral waters, provides an interesting example of how price bases between the three soft drinks markets vary immensely. For decades, the price multiplier between the take home market and the "restaurant" market has been observable as almost any number from five in a cafe to ten or more in a restaurant. But it was only in the 1980s that French mineral water companies realised they could also open up the on-street market with a multiplier of about three to five through merchandising new small (0.3 to 0.5 litre) bottles competing directly against canned sodas. Indeed, to this day, in France's local parades of small food stores, which double-up for residents' take-home shopping and tourists' impulse purchasing, you can see two strangely different consumer behaviours going on in the same outlet. Some consumers are paying more for a smaller bottle of mineral water - though admittedly often out of a chilled cabinet - than others are paying for a bottle three times the size.

2) Brands may position products in very different quality/value submarkets by social occasion of use

For example, there are different segments of the take home ice cream markets whose prices bear no relationship to each other. A super-premium ice cream brand like Haagen-Dazs is not competing for the same end usage as an everyday block of ice cream for all the family. If in doubt ask consumers. Substitutable selections for Haagen-Dazs may be patisserie cakes, or other desserts fit for an adult dinner party.The ice cream block may be competing against jelly or tinned fruit for little Johnny.

3) If the top-priced market is a haute-couture fashion one, then all generalised pricing guidelines are cancelled

In the highest of fashion markets, snobby behaviour takes over with a vengeance. People are prepared to pay any price, indeed may want to pay any price, if this means they feel visibly superior to all but a self-elected elite. You may debate whether this is ordinary branding territory or whether it is more appropriate to have a different word for this. Kapferer explains the French do, in their notion of marketing the "griffe":

Table 2 : Beyond mass marketing - the world of the "griffe" In luxury markets, the French distinguish a special term of relationship, the so-called "griffes" or literally "claws". In reality, brands and griffes should be distinguished for the different grounds they cover. The very word says much more. Its meaning as a 'claw' suggests instinct and violence; something unpredictable, that leaps out and leaves its mark. In this sense, the griffe is the mark of an inspired and instinctive creator. The griffe also has the same root as 'graphic', and it refers back to the hand. Its reference model is handmade work and craftsmanship. Strategic Brand Management, Jean-Noel Kapferer

4) Balance of what may be "perceptually justifiable" makes pricing a fine art.

On one hand, it can be very risky for a brand to stretch its price premium to the upper limit of what is perceptually justifiable. Our evidence is that brand price elasticity seldom takes on the linear form which economic modelling assumes. Many brands have a critical pricing point up to which consumer response remains robust, but after which it falls over a precipice.

On the other hand, the brand leader which claims no price premium at all will often be underachieving in sales volume - let alone sales value, and profit. This happens because new or intermittent purchasers use price as a selection cue to the quality image of the brand. It also happens because loyal users like the reassurance that their brand is superior which a pricing premium, used in moderation, can give.

Towards a robust strategy for competing on value

A price that is "perceptually justifiable" in current competitive markets is only one aspect of branding a robust value strategy. Critical points to add to the picture of price decision-making include:

·Taking too high a price premium may encourage a new branded entrant to enter the market

·Taking too low a price premium may not enable you to invest in the future.

One newly urgent meaning of World Class competition is that being locally the lowest cost competitor may not now be enough. Are you low cost vis a vis scenarios of global competition, including new ones involving companies outside your traditional competitive set that may become intent on introducing discontinuities to the added value chain across a sphere of business? This is what Cott Corp is intent on doing in colas. Generic priced products can also suddenly emerge because of the branded supermarket's own need for competitive response to foreign retail entrants offering discount formats.

The Brand Charterer must be well informed on all scenarios involving attempts to revolutionise the added value chain. Some of the most important clues will emerge first from the other side of the world. Organisations will need to hone their networking antennae to collect this intelligence. Among serious attempts to destabilise branded added value chains, you should note two different types of outcome which condition what branding action must be taken. Distinguishing between revolutionaries who will make a long-term mark on the sphere of business, and those who will not.

Foreseeing fundamental discontinuities to added value chains

If you assess that the revolutionary will win, you must review your own core competences. Business survival may require you to reengineer value across the whole of the branded business. A partial response - eg cost cutting measures however painful - is unlikely to be enough. Like repeatedly fleeing an enemy in war, this can be the start of a vicious circle of self-destruction of your value contributing capabilities. For a live example, view the new competence configurations of brands like President's Choice and companies like Cott Corp in chapter 12, and then debate what the revolutionary consequences will be, for which traditionally branded manufacturers.

Managing the fallout from revolutionary failures

Some generic priced products will have a fairly short-life. Britain's leading branded supermarket chains would not be able to survive themselves - in the formats which their brands represent - if the public unanimously chose to shop generic. But this does not mean that brand leading manufacturers can afford complacency because:

·Some brand processes have managed to get 250% out of line with sustainable low cost, and many more are above our 50% benchmark for a sustainable value-based offer

·Even where brand manufacturers are operating processes of unbeatable quality and value, the visibility of generic price differentials of 250% can tar all brands with the same brush. In different ways, this makes end-consumers, retail customers, and opinion leaders like journalists take another look at who may be over-exploiting what in the added value chain.

·One likely scenario is that many retailers will continue over the long-term to make a show of generics in some categories, just as they make a show of premium own labelling value in other categories. To some extent, all brand manufacturers are now in battle with each other to convince retailers that their categories are genuinely ones where brands add the most value for all (ie retailers, consumers, and themselves). Branding grounds for this justification include continuous scope for innovation in a product category, or valuable closeness to the end-consumer in ways that only an unique brand essence can offer.

Top Quality

Quality and value are correlated perceptions. Unless your aim is to turn a market permanently into a commodity one, there will be a pricing point below which your brand starts to reduce its perceived value. Too a low a price cue conflicts perceptually with the credibility of the brand's claim to be a better or differentiated standard from other offers in the marketplace. A brand leader which cuts its reference price is liable to be perceived by consumers as reducing the quality of its ingredients or service even if it isn't. We have assisted several number 2 ranked brands - who have had advance notice that a leader is going to war on price - to counterposition with a stand on quality and take over market leadership.

Consumers, as humans, aspire to continuously better things. Some of the implications of this:

·If a core brand (ie one which you are not milking or otherwise disposing of) does need to cut its costs, it is usually advisable to do this in ways that are least visible to its most loyal fans. Working out how to do this is much easier if the Brand Charter is already in place, before you address the cost-cutting challenge.

·Global marketing may bring pressures to smarten up the added value of your brands (and cull those which do not afford the opportunity for this focus). Yet, in those local economies around the world, which are not keeping up as fast as your company globally wants to raise value, you are unlikely to win friends by introducing high added value lines too quickly alongside the brand's traditional offers. A strong global brand lets local consumers feel that they are making local improvements to a global institution. Conversely, a brand which presents itself as having better global things to offer, but ones which are going beyond local consumers' means, is exhibiting its own local weakness.

·A coherent global brand cannot afford to vary price across countries whilst presenting itself as precisely the same in all other respects . It can help a lot if the identity system of the brand architecture has established an international coding system which is credible in communicating a variety of quality and value offers. Alternatively, it can help to present a brand in an array of different product categories - including some where all products are relatively low ticket items. By this means, a premium branded fashion can still make itself available to every locality but sometimes in different product manifestations.

Quality perceptions and the global whisky brand When IDV was first taken over by Grand Metropolitan, I got permission to try to promote J & B within the group. I spent half an afternoon telling hundreds of executives from Watney's, Trumans, Mecca and Peter Dominic what a magnificent whisky it was. My persuasion worked and J & B promptly appeared in optics all over Britain. But then foreigners, used to the idea of J & B as a luxury premium brand, discovered it was just a commodity Scotch in its native Britain and the discovery was beginning to hurt sales in the rest of the world. So, a few years later I had the embarrassing job of telling my in-house customers that they would have to discourage buyers by upping the price and transforming it into the same premium brand as it was everywhere else in the world. People outside the drinks business may not appreciate what a serious mistake it was because I'd jeopardised J & B's image, and that's the only asset any drinks brand has - apart from its intrinsic quality - and even a whisky as good as J & B can be hurt if it becomes associated with cheapness. ... The story has a happy ending. J & B is still not a big seller here (in Britain), though an awful lot of people are prepared to pay a premium price for it, but it's the second biggest selling Scotch in the world, and its sales outside the United States have gone up eight times in the last 15 years to more than four million cases. And that's not bad for a Scotch which was virtually unknown until the 1950s, and which depended on the US for 90 per cent of its sales until the 1960s." George Bull - extract from "My Biggest Mistake", Independent on Sunday, 25 February 1990

Moving on from perceived quality to realisation of quality, there are some trends in World Class competition which need active tracking by managers and iterative foresight by directors:

·Increasingly, companies claim to be focusing their competences, and orienting new product development towards products and services which are strong enough to capture world markets. Some of this is hype, but it suggests world standard in some product categories will be lifted above what would make do when companies were organised to deliver local standard produce. The opportunities for leaders and the risks for laggards from this trend need to be foreseen. Brands as processes do need to be increasingly tied in to a focused and realistic assessment of a company's combination of core competences.

·World class quality is not derived by a director's wave of a magic wand. It will need more teamworking, more carefully integrated R&D, and dedicated stamina of all involved over longer incubation periods. Branded markets are going to be horribly visible places for exposing companies who turn out to be incapable of organising the pre-marketing brand processes now implied by development of world class products and services.

World Class

Six years ago we wrote the following.

The world's best products often depend on highly personalised commitment. Local products of excellence will always be prized, but in an era where the meanings of local and national boundaries will soon need to be questioned more honestly, World Class brands should have the confidence and the integrity to symbolise the best produce, services and experiences that transnational cooperatives have to offer. Good marketing involves facilitating offers that are as customised as technology and human endeavour can manage, while maintaining an economic balance which satisfies the customer and the company. Branding provides the power to identify a cause which unites people over time - with an appeal that acts as a centre of gravity - so that customers can benefit from economies of scale while enjoying a feeling of individual attention. Chris Macrae, World Class Brands

It is this world class philosophy which advances the brand's social role as ambassador of free world trade and competition. And motivates staff in a service company to "reach out for the stars". But we now have a new interpretation for those involved in scoping the essence of individual brands.

We believe that anchor points of top level brands will increasingly move away from products to a consumer bond of trust that - whatever the brand offers as products - it will deliver particular balances of quality and value which the brand's reputation has come to signify. This means that top level branding will be more corporate. The reassurance of quality/value capabilities will come from consumers sharing a feeling of particular combinations of competence served by specific companies. If the architecture of retailer brands already manifests this, why cannot manufacturers' brands? If the architecture of service brands already manifests this, why not manufacturers' brands? If the architecture of fashion brands does this, why not manufacturers' brands? Ultimately, as we argue through Chapters 11 to 14, the economic models for branding World Class Quality and Value must involve more communications resource weighted towards organisation-wide banner brand processes and less towards product sub-brands than was practised by the classic fast moving consumer goods manufacturers of the twentieth century. It is a shame if the quality of the structure of a company's communications channels does not live up to the quality of its products.

Understanding of the nuances of quality and value must pervade all perspectives of brand and business process if a company is:

·to compete to the maximum effectiveness of which it is capable

·to be consistently successful in cooperating with maximum long-term effectiveness with partners in the added value chain of the sphere of business.

Milking Brands

We should now be well positioned to conclude this chapter with a brainstorming exercise on "milking" a brand. By this we mean consciously or inadvertently taking profit out of a brand in a way which either damages brand equity (medium-term competitive standing in its markets) irreparably, or will cost more to restore the brand than has been gained from the milking episode. Here are some of the ways that brands get milked:

1) Allowing short-term sales tactics to run the marketing mix. Many companies have

- for a generation of marketers - fostered brand management cultures where people have been rewarded for actions like price cuts whose only purpose was to hurry up sales for a particular time period - "meeting the targets planned". This can easily become a vicious circle, with more and more pricing manoeuvres required to push sales along. For example, in the early eighties most American manufacturer brands spent the majority of their marketing mix on quality enhancing activities. By the late eighties, most of these mixes were spent on price promotions. From the consumer viewpoint, branded products of this sort increasingly become commodities - they end up with no differentiating qualities other than the price they sell at.

Wherever organisations are directed in this way, it comes as no surprise that brands get sick. One of the most damning indictments of short-termism in late twentieth century branding is embodied by the humble coupon which promises the targeted consumer money off for trying a brand. It is known that in many US product categories, the physical cost of sending out coupons exceeds the amount of money consumers redeem. In other words, consumers are ultimately paying for the brand's couponing as well as its increasing lack of quality differentiation.

You are bound to get interesting answers if you ask a brand manager : why are you couponing? One typical answer is : to penetrate new users for the brand. In the circumstances cited above, this suggests a brand with a strange mechanism for rewarding consumer loyalty. Probably, the most honest answer is because retailers like it. Catch 22 is that retail chains like this because they can see that coupons - over the long run - weaken manufacturer brands and strengthen own labels.

We are not claiming that coupons should never be used. But the dangers and temptations to deploy tactical weapons like these have become so great that it may be time to take a symbolic initiative. For example, requiring that the CEO signed off every couponing campaign would cut down this form of customer disloyalty marketing. In fact, in the summer of 1993, Procter & Gamble may have pioneered the way with a process which takes the seriousness of this kind of issue to heart.

Procter & Gamble has revamped its US marketing strategy, introducing a policy of "everyday value pricing". This involves cutting down on short-term deep-discount promotional deals, which periodically slash the cost of products to the retailer, and replacing them with a system of more consistent lower prices. However, the change has stirred up opposition among less efficient retailers, who have relied on deep-discount promotions for a substantial part of their profits. Typically, P&G is cutting the price of Tide and Cheer liquid detergents by as much as 15% with lesser reductions on some other brands. The Financial Times, 15 July 1993

2) Ironically, 1993 has shown that a form of milking may also be manifest by the reverse phenomenon of a strongly marketed brand mix ( eg Marlboro) but one which over time gets too greedy with the price premiums it accumulates. We have seen that a brand can get too greedy for its own good from the perspective of any or all of the people in its customer chain. In particular it may:

· go a price rise too far for its end-consumers

· be judged by retail customers as not sharing out enough of the added value it is winning

· invite in a new form of competitive brand process

3) Whether, a brand leader's price is in balance (or out of kilter), it is being milked whenever its organisation does not invest sufficiently in the brand's essence and inter-related competence building. This may include various kinds of evolutionary qualities such as innovation, customer service, renewing the vitality of the brand image.

4) Milking also occurs, by default, if the brand team fails to manage the brand's essence caringly. This can happen when previously loyal consumers are left behind by a sudden relaunch of essence which is insensitive to helping them interpret the relevance of the brand's new values (or, indeed, has become a totally different brand in all but name). When new people come to a brand team, especially at top levels of management, there can be a temptation to do something different like attacking a competitor's position. Whether this is done through superficial understanding of the brand (eg because the whole business team has changed and no Brand Charter handed over) or because of some sort of personal arrogance, consumer research has consistently demonstrated that this is a tragic waste of time and money.

Similarly, brand essence can be milked if it is stretched to represent new products in an uncaring way (see Chapter 1)

5) A brand is also being milked if nobody is responsible for foreseeing how to take advantage of future change. There are many ways in which the implications of World Class competitive quality and value now need to be tracked. These include:

·the relatively simple, eg tangible assessments such as : are we keeping in touch with World Class cost and quality of production?

·the fairly complex, eg will the scope of the brand's essence be broad enough to have critical mass in a world where competitors may be directing higher level banner/corporate brands, and media economies/effectiveness of the brand mix are changing fast

·the strategic scenario, eg what fundamental discontinuities to the added value chain are foreseeable? How do we take advantage of this, with which partners, and against which competitors?

When should a brand be milked?

Provided no harm will be done to a company's reputation, there are times when brand milking is appropriate. These include:

·Prior to killing off a brand or selling it (if the purchaser does not understand milking)

·Brands with tactical (as opposed to leadership) objectives. (Eg see leagues of branding in chapter 11)

Summary

A lot of pricing and quality decisions on brands have been made merely from tactical perspectives of junior brand managers, where they really needed corporate recognition as fundamental strategic components of the brand process. Training on the dangers of brand milking should be a pre-requisite for all who make or influence marketing decisions.

Strong brand leaders act as consumer reference points. They define quality and value standards. To be faithful to these, subtle decisions on balancing price and quality need to be taken from a consistently informed viewpoint. Price of the branded offer can be too low or too high. Competitive value and quality are :

1) correlated

2) perceptual as well as real in product terms

3) always include service elements as well as product elements

4) subject, within the same product category, to different consumer frames of reference such as the urgency of the need and the local competitiveness of channels reaching a specific need.

World Class Quality and Value are introducing new dynamics into marketing and business processes. These may effect entire strategic configurations - between competitors and partners - of the added value chain, across a sphere of business. Somebody with high level responsibility in the company will increasingly need to foresee and take a view on communications scenarios which must be turned to corporate advantage. These include:

·evolution of the quality and value capabilities invested in the company's brand architecture (Chapter 11)

·competitive, partner and organisational strategies (Chapter 12, 13)

Feedback from those managers closest to local customers and consumers will be an important part of the process of developing an informed top-level view of core brand processes. A new World Class realism may be needed in market-leading organisations. If branding is to be a core competence in competing for the future, the company's marketing savoir faire - regarding competitive quality and value - will need to be sovereign in the way its leaders think, act, and direct the company's service culture (Chapter 14)