by: Jonathan Salem Baskin

"Mass-affluent" brands like Burberry, Tiffany, and Coach are hurting in this dicey economy of ours, just like their lesser-branded competitors.

I guess I still don't understand the branding equation: expenditures on branding are an investment because they imbue products and services with attributes, associations, and a substantive equity that should somehow supercede competitive comparisons of function or price.

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Better brands should deliver performances that are somewhat better than their competitiors, and do so at least partially independent of broad economic trends. People will pay for that brand equity.

Er, not so much, it turns out.

Branding orthodoxy defined a psychology of a mass group of consumers in search of affluence. People who felt well-off wanted to buy stuff that affirmed and promoted their success. So luxury brands produced models, clothing lines, and services priced to exploit their aristocratic desires. Presto! Faux, or perhaps partial, wealth appeal.

What the marketers missed were the behavioral qualities of this group, which rendered it not much of a group at all.

Turns out that people spend more money when they have (or think they have) more money to spend. And what they think about potential purchases has far more to do with their own unique contexts -- job, personal life, time available to shop, products friends and neighbors love or hate, etc. -- than with any larger absolutes of brand equity or awareness.

And when those contexts get dicey, those boring comparative qualities of function and price actually matter most.

Maybe the concept of mass affluence was itself a bubble, if not a non sequitur, or an outright mirage? 

What if what was happening instead was this:

  • Lots of individual consumers were riding their own mini-bubbles of inflated home values, stock market gains, and boom-cycle-induced spending euphoria
  • What they had in common was nothing psychological as much as similar bank accounts or credit cards that cried out to be used or abused
  • Once those accounts don’t appear so rosy, these consumers start to penny-pinch, just like the rest of us
  • They're less likely to pay more for brand names when 1) they're retailed right next to cheaper alternatives, which 2) for all practical purposes (i.e. functional reality) are truly the same

So the ihe intrinsic value of mass-affluent brands, like Ralph Lauren?

Nada.

It seems to me that truly valuable brands assert real, lasting connections with consumers. In fact, there are behavioral rules that apply to individuals and groups alike:

  • Do something objectively better
  • Make it relevant to people's needs, not just wants
  • Deliver it at a competitive price
  • Support your customers better than anyone else 

The recent success for the mass-affluent brands wasn't based on any of these principles. It's kinda obvious, now that consumers have two choices: either buy something that costs a little less, or by nothing at all. 

Competitive products and purchase inertia are two sobering variables in the branding equation that cannot be ignored. 

Call them the schmuxury factors.

Original Post: http://dimbulb.typepad.com/my_weblog/2008/02/luxury-schmuxur.html

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