When Premium Companies Discount – The Brand Pays the Price, Low Cost High Volume Strategies

June 15, 2012 by  Filed under: Branding 

What happens to a premium brand when they are forced to compete on price? Should they create a secondary brand to play that game and keep the first brand as an alternative to differentiate with their high-en clientele? Well, this is a serious issue, and many a company, corporate, or premium brand has made unrecoverable mistakes doing so. Okay so, let’s talk.

The Wall Street Journal had an interesting article not long ago titled; “Asian Airlines Take a Flier – As Premium Carriers Create Low-Cost Lines, History Offers a Cautionary Note,” by Jeffrey Ng and Joanne Chu. Now then, there is a lot of credibility in this article and back in the late 90s HBR – Harvard Business Review had a great article and research study to back up the case against industry price wars. I had followed that article up with one of my own stating that; Price Wars Can Be Won – If You Start It First.

On the same day that the WSJ article appeared above on June 13, 2012, there was also a comment in the Airline News and USA Today that Southwest lowered its fares and the rest of the domestic airline industry immediately matched them, why oil barrel prices are down right now to $83 due to global economic slow-downs. Now I’d like to tie all this together and ask a question;

Is it harder for a premium company to go low-cost high-volume once it has established its brand in the market place? Perhaps not, the transition would be welcome, but the customer will presume a cheapening of the product or service and lose loyalty, along with some consumer animosity that they’d been paying more all along, now they wonder why?

After the crash of 2008 many fashion brands in clothing, cosmetics, and luxury jewelry and automobiles went into steep discounting. Others went out of business, BK’ed, or sold their brands, with little choice as sales dropped off the cliff. It will be hard for those brand names to quickly regain their composure and re-establish those price points in the market place, obviously.

The same goes for airlines, and by discounting they have no differentiation from the discount airline sector, not in the consumer’s mind any longer – thus, the flying customer is left scratching their heads asking; “so, tell me again why I should be paying more now for the same service?” Indeed, I hope you will please consider all this and think on it.

Lance Winslow has launched a new provocative series of eBooks on Brands and Branding. Lance Winslow is a retired Founder of a Nationwide Franchise Chain, and now runs the Online Think Tank; http://www.worldthinktank.net

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