Shift in values turns spotlight on pretenders

A shift in consumer attitudes means many major brands no longer justify a premium status, opening the way for smaller players to take the lead.

Conspicuous consumption was all the rage just a couple of years ago, with people happy to parade their ’it’ bag and luxury labels. But the recession has precipitated a new ethos of concerned consumption, and brands that can tap into these new values have the power to overtake the traditional market leaders and demand premium prices, according to new research from marketing agency Iris.

As part of a global study of 5,500 consumers in ten international markets, Iris questioned 550 people in the UK about their feelings on 150 brands across 15 categories spanning breakfast cereals to mobile phones to sportswear.

Brands were rated by 23 different factors expressing how consumers feel about them, including such values as “expertise”, “openness” and “originality”. Participants were ultimately asked which brand they would be prepared to pay more for in any particular category.

Some values are important in all brand categories, such as “reliability”, “tried-and-tested” and “reassurance”. Being “high profile” matters to consumers when deciding brands’ offer value in all sectors; and being “the brand for me” is of significant value to FMCG companies.

While in some categories, the obvious market leader continues to reign supreme when justifying a price premium to consumers, in many areas, smaller brands appear to be able to charge more because they are perceived to be of better quality. Iris global executive planning director Sam Noble gives the example of Innocent smoothies in the soft drinks category, which is able to charge a premium above the market leaders.
When consumers were asked/ “Would you pay more for this brand?”, Innocent drew a majority yes of 29%, over brand giants Coca-Cola (28%) and Pepsi (12%).

“Consumers are looking to brands they can trust which aren’t necessarily the market leaders,” says Noble. “This has implications for how luxury brands position themselves, and there are opportunities for brands with real depth in their stories to step forward and take some extra share.”
Innocent’s ability to drive such a premium for its products in the face of formidable competition from Pepsi, which owns the Tropicana juice range, is a result of it successfully conveying brand values of “openness” and “responsibility”, according to Noble.

Vast differences appear in the spirits category. For example, 28% of respondents say they are prepared to pay more for Jack Daniel’s whisky compared with 11% for Johnnie Walker.

Noble explains: “Arguably, Johnnie Walker is a more premium product, yet it significantly underperforms here from a consumer perspective. The data in the study supports the hypothesis that in the UK, Jack Daniel’s has done a much better job of making its ’premiumness’ more accessible to people.”

Likewise, Smirnoff appears to have captured consumer recognition more effectively than its arguably more premium rival Absolut: 28% of respondents say they would pay more for Smirnoff compared with 17% for Absolut. Both have attempted to position their marketing around glamorous, exciting experiences when drinking vodka. But, like Jack Daniel’s, the research suggests that Smirnoff has succeeded in being accessible to the public while maintaining its premium.

Other surprises come from the travel and technology sectors. In travel, 38% of people say they would be willing to pay a premium for a Virgin Atlantic flight, while just 28% say the same for a British Airways flight. While Virgin Atlantic is not necessarily only a premium airline, its marketing portrays a fun, forward-thinking company that offers an enjoyable, relaxed experience. Its recent 50th anniversary television campaign, for example, links the red of its branding to glamour through its portrayal of the red lipsticked and red stiletto-clad Virgin Atlantic hostesses. The result is a portrayal of an adventurous company.

In technology, the assumption may be that iPhone and iPod maker Apple would snare consumer imaginations most with its aspirational products, but in fact it is Sony that pulls ahead. Forty-nine per cent say they would pay more for a Sony product compared with 28% for Apple. Microsoft follows at 25% and Nintendo at 22%.

Even though Apple scores a high “buzz” factor, Sony outperforms in the “reliability”, “tried and tested” and “reassurance” values. “If Apple leveraged its ’buzz’ to more effectively demonstrate value in other areas, where the likes of Sony are much stronger, it could drive even more value back into its business,” Noble says.

Well-known lager brands such as Heineken and Becks no longer justify as much of a premium, scores from the beer and cider market revel. Thirty-one per cent of people said they would pay more for Magners and 29% for Guinness, against 11% for both Heineken and Becks. Magners scores greater on brand values such as “originality” and “buzz”, says Noble, while Guinness scores well on “expertise”.

Meanwhile in the confectionery sector, 32% say they would pay more for Ferrero chocolates over Quality Street (14%). Perhaps Ferrero’s gold foil-wrapped Rocher chocolates sways opinion, or its advertising as “the food of the gods”. Its past sponsorship of TV drama Desperate Housewives may also have earned it the extra recognition.

The financial services sector draws very low percentages of people willing to pay a premium. UK market leaders and globally recognised brands HSBC and Barclays both attract 9%; NatWest follows with just 4%. Noble says this shows there is a real gap in this market for brand innovation and heightened customer engagement.

But there are brand icons that have managed to maintain their stronghold over the public’s minds and wallets. Sportswear leader Nike has 44% agreeing that it is justified in charging a premium. This compares with 26% for Adidas, 18% for Reebok and 11% for Puma.

Nike outpeforms in “leadership” as a value driver; however, rivals Adidas, Puma and Reebok score highly in “tried and tested”, “reliability” and “reassurance”. “This suggests there is an opportunity for one of those brands to assert a new, more substantial definition of leadership in the category, centred around quality, delivery and dependability,” says Noble.

Longtime market dominator Nokia continues to top the mobile telecoms sector, with 34% saying they would pay more for a Nokia mobile phone than other brands. However, the innovations of Apple and BlackBerry place them as close followers, respectively pulling 26% and 23% of the survey’s respondents. Sony Ericsson’s placing, at 22%, is encouraging despite its lower market share and brand power. Noble explains: “This suggests that consumers are ready and waiting for the return of the original challenger brand in this category.”

Brands until now have largely assumed that people want to “borrow” values from them and shape their lives accordingly. But, Noble says, the study’s results show that in fact it is the opposite that is more important and that brands should aim to reflect the values of their audience. He says: “Brands need to shift the focus of what they think they are to be more about a representation of audience values. And they must spend time building real, tangible value in individual relationships with consumers.”

The Frontline

WE ASK MARKETERS ON THE FRONTLINE WHETHER OUR ’TRENDS’ RESEARCH MATCHES THEIR EXPERIENCE ON THE GROUND

Helen Facey
Senior brand manager, Smirnoff

We’ve seen research which indicates that two-thirds of consumers are willing to pay more for a branded spirit and they cite “quality” as a key reason for this. In TNS’ Independent Consumer Survey from January 2009, 86% of drinkers surveyed were prepared to pay more for their favourite vodka brand. And in Millward Brown’s December 2009 consumer survey, two-thirds claim Smirnoff is better quality than other vodka brands.

Smirnoff is triple distilled and ten times filtered through hardwood charcoal for purity. We invest in through-the-line activity to ensure both consumers and trade customers are aware of this. This year, we ran our campaign, designed to challenge consumers to think about whether or not they are compromising on quality by choosing other brands, in the run-up to Christmas. We plan to repeat it again later in the year.

Paul Dickinson
Sales and marketing director, Virgin Atlantic

As Iris’ research suggests, there are three things that people want from brands today – a brand they can trust, that offers the best value for money, and that shares in their values, saying something about them and their view on the world.

For some people, the choice of their favoured brand is largely functional: who gives me the most for my money? But for others, there is a highly aspirational element to their choice of brands. The functional benefits need to be there, but their choice of brand is saying something more about them, their beliefs, their aspirations, their attitude and what makes them feel good.

By getting this combination right, we can potentially charge more than a competitor which may meet the functional elements adequately but falls short when it comes to attitude, style and personality.

Customers have become much more focused on value for money as they are more aware of controlling their personal expenditure. But the value equation is more than just finding the cheapest ticket – account is also taken of what precisely is being offered in return.

One of the clear signals that this is going on can be seen in terms of the decline of first-class longhaul travel. Why pay thousands of pounds more for a first-class ticket when our upper class provides a limo transfer, use of the private security channel at Heathrow, access to our clubhouses, flat beds in the sky and great onboard service?

Mauro De Felip
Marketing director, Ferrero

Essentially, consumer loyalty is the Holy Grail for all brands, but it is something that must be earned and nurtured across an entire product range.

We have continued to develop our portfolio to meet UK consumers’ needs and to try and futureproof our brands. Our consumers have always been – and will continue to be – our number one priority.

Our customers are looking for affordable indulgence. WPP’s Brand Asset Valuator research claims that Ferrero is perceived as high quality and glamorous but also fun and sociable, thus bridging indulgence and accessibility. Our strategy has consistently centred on offering a unique premium product experience, supported by a commitment to connect with consumers.

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