Conquering Consumers in Hard Times: Promotional Pricing V.S. Brand Building

GABRIEL CASTELLANOS
CEO, Hispanic LatAm,
Kantar
Gabriel.Castellanos@kantar.com


The economy in Latin America is facing hard times, and this reflects directly on consumers’ purchasing power. The challenge is knowing whether our brands can rediscover sustained growth.

Time and again, we watch our clients asking themselves whether to continue their marketing efforts or, on the contrary, reduce investment or even cancel the budget. They ponder whether to allocate resources to initiatives that could potentially generate more immediate sales, such as promotional pricing, temporary price decreases, and so on. It is precisely in those moments when clients come to wonder whether marketing activities generate the necessary sales volumes at the right speed for brands. What should the strategy be? Unfortunately, the answer to this question is not easy. Any route taken will have consequences. The truth is that short-term options, focused on volume, are helpful in so far as there is a “brand” to sell. That is not a path to be taken for too long, but rather a tactic within a brand strategy.

ASKING THE RIGHT QUESTIONS

Now, asking ourselves about marketing budgets gives us the opportunity to pose hard questions and enables us to make the necessary corrections in the course to be followed by our brand. The most important thing is to raise the right questions:

  • Are we generating enough brand differentiation? Are we sure that every invested dollar is building differentiation attributes for our brand so that our target audience prefers it?
  • Are we sure about the message to be transmitted by our brand? About how and when to communicate it? Do we understand our consumers? Are we capable of taking timely actions for their needs?
  • Are our activities building sustainable brand equity?

Volume strategies are valuable as long as there is awareness that the brand is the axis of a company and that it should relate to its target adequately, so that this target can decisively understand and experience the differences between our brand and all other brands. If this is not taken into account and activity consists of a volume strategy disconnected from brand structure, we will most surely compromise the future of the brand. It’s vital to avoid the pitfall of ending up with a brand whose only difference will be a one-day offer, no more or less appealing than other offers.

FACTOR IN ALL VARIABLES

We must remember that, when consumers’ purchasing power is impacted, they do not want to buy the cheapest products, but those that give them more for their money, not only in rational but also in emotional terms. It is in these moments when consumers are more aware of their expenses, when they prefer brands with the best balance between quality, differentiation, relevance, and cost. So, as it can be seen, cost is just one variable among others. In fact, cost is something that, depending on the category, can be mitigated by the rest of the variables.

So, why do we wind up giving in and making decisions that often favor volume at the expense of margins? Let us remember that consumers are willing to pay a premium price for a brand that they feel gives them something they could not get otherwise. Premium brands need to be different enough to justify their price and defend themselves from potential competitors. Lack of differentiation could lead to declining gains if consumers have to pay a price so high that it feels out of line with what they perceive as differentiation in a brand.

Share