China Herald: Consumers still pay a premium for brands

Some branding experts have been suggesting brand loyalty among consumers is on the decline, as they get access to more information. Shanghai-based branding expert Tom Doctoroff disagrees with the interviewer of Knowledge CKGSB. "People are still willing to pay a premium for brands."

Knowledge CKGSB:

Q. We sometimes find that consumers are less loyal to brands. Where do you think this will leave the idea of branding?

A. That is the $64,000 question and I wholeheartedly reject it. All you have to ask yourself is: are there still products that people are willing to pay a premium for? That premium ipso facto is loyalty. When you think about brand loyalty, and declining brand loyalty, what you’re talking about on the flip side is increased price sensitivity. So perhaps it’s true, that as consumers evolve they become less brand loyal in some sectors, but more brand loyal in other sectors, as you scale the Maslowian hierarchy of needs, a cleaning detergent could be high involvement for you when you’re relatively poor and you need clothes to shine. [But] as you move up, what you wear in terms of a brand, your car or your mobile phone becomes more high-involvement for you and more relevant to your life and you’re willing to pay a higher price premium for that. In emerging markets, you have waves of consumers entering different phases of economic development, so there will always be new consumers. With urbanization in China people are owning homes or moving to cities for the first time. So their brand choices are high involvement and then there’s loyalty. Societies are always evolving. Different segments of societies’ engagement with different types of categories is always shifting as well. Even in the US—in the recession of 1989 everybody thought that generics would take over the store. They haven’t because of the relationship that people have with categories and brands. So I don’t quite buy it, but I will say certain pockets of commoditization do occur.

Q. Some experts are saying that people are often ‘product loyal’ rather than ‘brand loyal’ and it’s easy to confuse the two. Is that a differentiation that we need to be paying attention to?

A. I disagree. I’m not saying that product attributes aren’t critically important. We have to define our terms: what is a brand? A brand is the role of a product in life and it is the relationship that a person has with a product. That relationship is forged through both product engagement, but also from a clear proposition that is in many cases passively received and actively defined by the manufacturer. When you are engaging with Apple, you are engaging with the Apple experience. Ultimately a brand is an experience. So if that experience is not only multidimensional, but also consistent, that experience becomes a holistic brand. Take Lego. It’s not just the fact that you have blocks that makes Lego a strong brand. It’s that you have a clearly defined brand idea, a relationship between the brand and consumer of inspiring builders of tomorrow. So every time you come into contact with that brand—whether it’s Lego Land, the Lego movie, the Lego retail experience, or the Lego toy itself—then you are reinforcing a predefined relationship. Once you start defining a brand as a relationship, you stop talking as if the product and brand can be separated. They can’t. The brand is a relationship that is an alignment of function, emotion and role in life, so that it’s all consistent. Of course if you don’t have a strong and cohesive brand, then the product becomes very important. But that [would be] a very vulnerable product because people can simply out-innovate you very quickly.

More questions in Knowledge CKGSB.

Tom Doctoroff is the author of Twitter is Not a Strategy: Rediscovering the Art of Brand Marketing and a speaker at the China Speakers Bureau.

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