What price a price cut?

A KPMG report out today says that UK firms are paying the true cost of inflation and slashing prices to an unsustainable level in an attempt to maintain customers and turnover.

As we wade our way through the worst recession in living memory, it is dichotomous that the high-end brands such as Hermès and Rolls-Royce are continuing to flourish.

At the other end of the scale, bargain brands are also increasing their share of the market. This can be seen, for example, in the hotel sector, where value hotel chains such as Premier Inn and EasyHotel are doing very well indeed. The EasyHotel chain has recently opened a 216-bedroom hotel in Dubai.

The brands which have suffered most and seen their sales stagnate or fall are the mid-market ones – those caught in a pricing ‘no-man’s land’.

This begs the question, how does one position a product or service during a recession? If we aim for a middle of the road price point, which, from the outside, might look like a sensible option, are we setting ourselves up to fail?

The question vexes business people up and down the land and the answer lies, not in the price, but in the clarity and consistency of the proposition.

RyanAir, Lidl and others do well because they are unambiguous about what their offer is and have put as much thought into their positioning as the top brands.

Equally, the top-end brands are unashamedly proud of the prices they charge, confident in their quality and clear about who their target audience is.

But what about the mid-market? Not every business wants to offer bargain basement pricing, nor indeed can command premium pricing.

If a business decides it wants to target the mid-market, then it must look to position its brand where there is a gap in the market – but not lead on price. Instead, it must find another point of difference, another reason for clients to choose it. This could be quality of service, level of expertise or the something unique that it offers.

Certain types of customer will take reassurance from a higher price and see it as a sign of quality and expertise. If this is where you are, don’t waiver and dilute your brand by slashing prices when demand falls. Hold your nerve, because once you have lowered your price it is very hard to increase it again.

Indeed, the worst thing any of us can do is confuse our customers by suddenly setting our prices lower because of the current economic climate, or simply to get a foot in the door – they may see it as a sign of desperation.

As our accountants will swiftly remind us, selling more products more cheaply isn’t necessarily a successful exercise. For a start, our margins will be less, so we will need to sell more and this may mean a larger investment in production and advertising. Successful ‘bargain basement’ brands spend a lot of money on getting their message out there.

Pricing and positioning a brand is a key aspect of the marketing process and something we spend a lot of time talking to our clients about. The key for any business is to know its target audience and, importantly, know on what basis it is going to compete. Once that is known, entrepreneurs should build a pricing policy and stick to it.

Is there a role for branded websites in the social media age?

Matt White examines the growing trend for businesses to market their Facebook presence in preference to their website.

A recent article in Brand Republic concerning the shift by businesses from traditional websites to social media pages, such as Facebook, left me with more questions than answers.

The facts put forward by the article suggest that social media pages would replace branded websites within 5 years. The case in point is rum brand Bacardi, whose unique website visitors fell 77% between 2009 and 2010. Bacardi is now reportedly shifting up to 90% of its digital spend to its presence on Facebook.

Certainly it is true to say that we are seeing Facebook used as the lead online destination for a number of consumer brands – one only has to look at their adverts to see that this is the case.

The arguments put forward by these brands are that Facebook is the primary destination for their target audience and it is easier for their consumers to engage via a Facebook page than it is through a corporate website. This reasoning seems sound enough.

In order for leading brands to move fully away from traditional websites, however, some barriers need to be negotiated. Below are some key issues that are not outlined in the article:

• SEO is generally regarded as a very important part of online presence. Brands would need to be able to fully optimise their social media pages. A Google search for Bacardi reveals the Facebook page is not on page 1, but the website still occupies top spot.

• Ownership of content is another key issue. For example, if you capture data, who owns the data? The branded Facebook or Twitter pages are still owned by Facebook and Twitter, not the brands themselves. The implications of this are an entirely separate debate in itself!

• If social media is to be the main online presence, brands need to have the confidence to allow certain aspects of control to pass to the consumer – branded websites have the peace of mind of 100% content management.

With this in mind, I predict the majority of brands, particularly those who market B2B, will increasingly use Facebook in support of their branded website – but I can’t see Facebook replacing it.

The reason you cannot make generalisations is a matter of budget and what is being marketed to whom.

'Super-brands’ such as Coca-Cola and Nike have a ready fan base of millions of people who will ‘like’ their Facebook pages and who, in turn, will receive their updates. Furthermore, they have the budget to market the page and create engaging material on a regular basis to reach their social audience.

There are, however, many industries where, no matter how innovative businesses are in their use of Facebook and social media in general, the available fan base will always be small. This is before we come to the cultural (or age related) issues of business leaders not seeing social media as an appropriate outlet to promote their business to existing and prospective customers.

Answering the question posed in the Brand republic article – is there a role for branded websites in the social media age? - my response is a resounding yes. I predict that 99% of businesses will still use a branded website in 5 years time. What we may see is more and more campaign specific social media pages in both the B2B and B2C sectors, and this is the trend that needs to be watched.

The Marketing Eye is gearing itself up to be able to advise clients appropriately.

You can visit The Marketing Eye’s Facebook pages and see how we are using it in our business at www.facebook.com/themarketingeye.

Let us know what you think.