value is the deal

At Forbes.com’s MarketShare, BrandKeys Founder & President Robert Passikoff is highlighting 12 branding trends for 2012. “These 12 will have direct consequences to the success, or failure, of next year’s branding, engagement, and marketing efforts,” says Passikoff. Trends such as “Inward Bound” (using a brand’s resonating emotional qualities to differentiate itself in the minds of consumers), and “Real-Time Branding” (the consumer’s expectation for immediate customer service responses from brands) are just two of things discussed by Passikoff.

However, Passikoff’s trend, “Value is the deal,” has perhaps the best lesson for brands of them all.

“Differentiated and believable brand meaning — emotional, rational, functional, and experiential — becomes a more effective and profitable surrogate for value than low-lower-lowest pricing strategies,” writes Passikoff. “But only the consumer gets to say how ‘valuable’ is actually defined.” To do this, Passikoff suggests that brands listen to consumers, and use their feedback to help shape and grow the brand by "tuning in" to the consumer’s frequency.

At Beneath the Brand, the hidden dangers of the “daily deal” and discounting have been covered extensively. However, the lesson can’t be repeated enough, and the “Value isthe deal” branding trend once again reinforces the idea that discounting won’t save troubled brands.

Just as Passikoff put so succinctly, a brand’s value is the deal for consumers — not the price tag. Even in a down economy, consumers are willing to pay more for a trusted brand if they perceive a greater value in it over a cheaper competitor brand. To consumers, the true “value” of a brand is in how it improves, enhances, or positively changes their lives. It doesn’t necessarily have to be profound, but even saving a few minutes — or even seconds — in their daily routine may be enough to gain a consumer’s loyalty.

But, only listening to consumers, and knowing what they see as value, will allow brands to maximize their full potential.

Daily deals are a distraction from gaining this type of insight into consumers. And, for brands already on shaky ground, the effects can be devastating. Businesses that opt for the allure of daily deals without first understanding what consumers find valuable about their brands — and making the changes to maximize this value — is like holding an open house on a building that’s only half complete. Sure, consumers may see promising signs of brand value, but the promise of potential value isn’t actually value. And, it surely isn’t enough to turn a one-off, daily deal customer into a loyal consumer.

Brands should take a hard look at BrandKey’s trends, especially the first. Brands must take the time to listen to consumers and discover the differentiating factors (this is the "value," in the minds of consumers) that separate them from competitors.

the daily deal emperor has no clothes

“Coupons for the spa drew women from around the metropolitan area eager to see their bulges melt and their wrinkles removed,” reads a New York Times article. “Once.” The article, detailing the rise — and, subsequent waning—- of coupon sites like Groupon, features a New York spa called Wellpath who tried to use the service to drive customers into their business. Unfortunately, the results were a story all too familiar (and predictable).

“Then they would get another coupon and go do it with someone else,” Wellpath’s director, Jennifer Bengel, told the Times. “There was no loyalty.”

No loyalty? No surprise.

Groupon is in trouble, and not because the rise of localized, competitor brands has already begun to take a huge chunk from Groupon’s market share. More and more businesses are learning just how disastrous daily deals can be for their bottom line. “We’re giving [customers] a discount when we could be filling that seat with a full-paying customer,” Arlington, Virginia pizzeria co-owner Joel Mehr tells ARLnow.com. “If we are giving discounts when we don’t need to be giving discounts, that doesn’t benefit us.”

Mehr says that despite selling more than 5,600 Groupon deals for his restaurants in the area, the pizzeria still lacks name recognition. Worst of all, they can’t control when customers come because the deals can be used anytime. “We are seeing people come in one time only, on a Friday night, they’re not coming back,” says Mehr, echoing a common theme among disgruntled Groupon users.

However, the discount emperor, Groupon, isn’t the one at fault. While Groupon has its own internal problems, from a business model that has investors worried to its new-found appetite for line-extensions (Groupon Now!, Groupon Getaways, Groupon Goods), it can’t be blamed for customer loyalty issues. When businesses use discounts and deals, loyalty issues are right around the corner.

Discounts are not a permission slip to excuse oneself from brand-building strategies, nor are they a panacea for driving business through the doors. Businesses that use deal sites as a marketing device can quickly find themselves drowning in customers who are only looking for one-off purchases at a discount price. One owner called using Groupon the “single worst decision I have ever made as a business owner thus far,” after the deal nearly put them out of business.

Yes, Groupon can help businesses find new customers, but the very nature of discounting undermines customer loyalty — especially when driven by daily deal sites. And, even more so when businesses aren’t prepared to convert new “discount” customers into loyal “full price” customers.

For example, oil changes are one common deal on Groupon, and they come from a variety of businesses. It isn’t out of the question that a Groupon deal for an oil change will come about frequently enough where a subscriber would never have to pay full price for an oil change, if he were to use the deals that came about every so often on the site. Therefore, the subscriber never establishes a bond with any of the businesses that advertise on the site — especially if those businesses have not put effort into retaining new customers.

Daily deal sites should be regarded with a huge caveat emptor for businesses looking to use them. There have been a number of success stories, but on the other hand, they can absolutely ruin a brand — as they have, and they will continue to do.

Discounting in and of itself isn't a brand killer. Just look at major department stores, which have opted for discount strategies instead of brand strategies. Rather than rushing to discounting sites for growing businesses, focus on building the brand through good branding fundamentals. It may take a little longer, but in the end, brand integrity is improved — not diminished.

On a side note, I would be remiss if I didn’t note the unfortunate passing of Apple Co-Founder Steve Jobs. The death of genius is truly like extinguishing a candle. The world is less bright without him around.

when do discount programs begin to undermine brand value?

We live in a new era of brand engagement. The Internet has opened up a floodgate of channels in which to target consumers. A growing trend among these marketing channels is location-based services (LBS) like Google Places, Facebook Places, and Foursquare. These services use GPS location via smartphones, allowing customers to “check-in” at local businesses. Sometimes users can even check-in to receive discounts, which is also another growing trend for marketers.

Sites like Groupon, LivingSocial, and ScoutMob all offer coupons and discounts for local businesses. In theory, the idea is that obscure, local businesses with limited advertising budgets can generate business by offering discounts through these sites. And, after these customers visit retailers, they will return again in the future.

Branding maven Al Ries disagrees with the strategy, saying discounting hurts brand value.

“You see the same phenomenon happening across the retail spectrum,” Ries wrote in his February column at AdAge.com. “Macy's, Kohl's and most department stores seem to have ditched the idea of positioning their brands, instead relying on discounts, sales and coupons to keep consumers coming back into their stores.” Ries says this is especially dangerous when social media makes it easier for coupons to fall into the hands of regulars, rather than first-time customers.

Ries’ point is especially apposite when it comes to discount programs for regular customers offered through LBS when they check-in. The question then becomes: Are consumers coming to a business because of brand loyalty, or because of discounts? And, will they stop coming if the discounts go away?

There is definite value into sites like Groupon generating new business for local retailers. And, the coupon rotation on the site makes it next to impossible for consumers to align their purchasing decisions based on a prediction of upcoming deals. However, discount programs in general—especially those offered through LBS or other marketing channels—do raise a good debate about when discounts begin to undermine the overall brand value.

Instead of drawing any conclusions on this topic, I would like to open it up for discussion in the comment section at BeneathTheBrand.com to get the opinions of people across the industry. Do discount programs ultimately undermine the value of a brand, as Ries suggests? Or, does discounting generate enough new business where the overall net is a positive for retailers?

the real lesson from groupon’s flub

When Cuba Gooding Jr. first walked onto my TV screen during the 2010 Super Bowl, lecturing about the need to save whales, I rolled my eyes. "Really?" I thought. "An advocacy spot during the Super Bowl?" But then, in an M. Night Shyamalanian twist, Gooding donned a life preserver and spoke gleefully about his huge discount for whale-watching via Groupon.com. I chuckled at the spoof, but the American public, not sharing my fondness for irreverent humor, raised holy hell.

Groupon quickly pulled the ad campaign and apologized for their lack of judgment. In their first spot following the Super Bowl disaster, Groupon released a very simple, vanilla ad featuring a "calendar week" filled with deals their members would receive. It ended with the line: "If your week doesn't sound quite that exciting, maybe you should sign up for ours."

Groupon's follow-up was a home run, but it was a home run not because it avoided to offend people, but because, this time, they kept the spot simple, direct and on message. Groupon's brand is simple: people who visit Groupon get big discounts on services and activities in their local community. With a simple brand, why distract the consumer with a complicated (or, offensive) commercial?

If there is one ubiquitous theme throughout all the disciplines of advertising and branding, it's simplicity. Simple headlines. Simple logos. Simple ads. It may sound dull and plain, but simplicity is the foundation of lasting brands. Groupon's faux-advocacy ads took a simple brand, with a simple sell, and managed to completely fail at communicating with the audience. And, not only did they fail to connect, they actually turned consumers against them.

When you have a simple brand, complex ads needlessly confuse. Apple has time and time again proven that simple works. Their commercials, like those advertising the iPad, feature the product exclusively, often on plain backgrounds. There is no excessive effects or storyline. The now iconic print campaign for iPod features silhouettes wearing an iPod on a solid background. And, despite their simplicity, these ads have high recall among consumers.

The purpose of advertising is to sell products and reinforce brands. The most effective way to do this is keeping things simple -- as boring as that may be. Ad agencies aren't in the entertainment business. Ads created to win awards, or get laughs, will never move product as effectively as an ad designed to sell.

This is not to say that entertaining ads don't work. When done right, they can be particularly successful. But, what creativity giveth, creativity can taketh away. And, like Groupon learned, it's important that you don't let your creativity get in the way of your brand.

is groupon a “road-to-ruin” for local retailers?

In a February editorial published at AdAge.com, marketing guru Al Ries called Groupon – and the whoring of coupons – a “road-to-ruin deal for local retailers.”

“Presumably, all those consumers who bought products and services for 50% off are going to be happy to return to their local retailers and return to buy those same products and services at full prices,” Ries asserts. "That's not going to happen."

Speaking about the "coupon culture" as a whole, Ries has a point.

Coupons are like crack to companies looking for a quick fix in sales numbers. As such, it’s easy for companies to get addicted. And, unfortunately, it can come with some harsh realities after the rush wears off.

Companies that routinely use coupons lock themselves into a dangerous pattern where consumers shop only when product is on sale, or discounted by coupons.

It’s hard to lay off that sweet, sweet discount, man.

Ries points to department store retailers like Macy’s and Kohl’s who have begun to rely on steep discounts to move product rather than the strength of their brand. It’s basically a discount war.

Personally, I find this to be true. I love Macy’s because, from time-to-time, they have a huge discount on dress shirts and ties. Sure, the quality of the store will push me to Macy’s above JC Penny, Belk, or Sears, but I don’t find myself frequently shopping at Macy’s unless I run across a sale.

As a cost-conscience consumer, I know that all I have to do is delay my purchase by a little bit of time, and that the same shirt that costs $39.99 will be $15.99 two or three weeks later.

The distorting effects of coupons also fueled skepticism of the potency of Proctor & Gamble’s Old Spice commercial featuring “The Man Your Man Could Smell Like.” During the explosion of publicity and social media conversation regarding this pop-sensation of a commercial, a simultaneous marketing campaign using coupons was launched.

“It's hard to determine how much of (the sales increase) was due to an aggressive couponing campaign which was in market simultaneously,” says Adweek’s Joseph Jaffe, though he did admit that there was some impact that could be attributed to the viral success of the commercial.

But, is Groupon the same as a packaged good, or department store?

I have to disagree with Ries on this one. While discounts and coupons can ultimately undermine the strength of a brand when they become assimilated into the shopping behavior of a consumer, the platform of Groupon is much different.

The variety of Groupon’s clients makes discounts unpredictable. There is no reason to expect that a discount for an eatery will appear at a specific time in the future – or ever again. Consumers can’t anticipate the appearance of an additional discount in a way that will cause a delayed sale.

If Groupon’s discounts from clients rotated on a predictable schedule – say, a discount to a local retailer that appeared every two weeks – then Ries’ comments would hold some water.

But, it doesn’t; at least, not yet.

Retailers advertising on Groupon have a chance to offer a discount to their products much in the same way a loss leader is used to entice future sales. It’s more of a premium than a discount.

Retailers with relatively small advertising budgets can get a high profile spotlight in the community through the use of Groupon, which is the appeal that has sent Groupon’s value through the roof. As more retailers partner with Groupon, the more varied the discounts will be, and the less likely company’s are to fall into the “coupon trap” Ries fears.