The winds of change seen in the Indian market
place in recent times have brought about a clear shift in consumer
behaviour. For many years, product and service marketers felt
customers were there with them for life, and started taking
brand loyalty for granted. However, there has been a transformation
in the Indian market and consumers are now loyal to ‘perceived
value’ and not necessarily to brands.
Jagdeep Kapoor
Due to intense competition and a wide choice of brands,
every Indian consumer today is equipped with, what I call ‘an
imaginary remote control’. With this imaginary remote control,
the consumer explores various brands, only momentarily, and
evaluates them according to the ‘perceived value’
he is getting. This is not to say that brand loyalty can no
longer exist. However ‘perceived value loyalty’ will
precede brand loyalty. Only after a thorough assessment would
a consumer settle for a particular brand. I have recommended
a unique way to gain, retain and regain consumers through my
Brand Switch Module.TM My Brand Switch ModuleTM recommends strategies
to convert, attract, increase, retain and reconvert customers
leading to increased sales, market share and profits. Thus each
brand gets very little time to project itself, before the consumer
moves on to evaluate another brand. Only brands that are able
to give regular, sustainable and consistently high ‘perceived
value’ can attract and retain customers. How did this trend
suddenly emerge? Well, the first reason is competition, followed
by the rising standards and expectations of Indian consumers.
Further, many brands never had brand loyalty; they had a mere
monopoly in a particular category or consumers bought their
products just out of habit. Thus consumers were not loyal to
the brand out of choice, but because they had few other options.
According to me, in the long run, price wars
do not really work in the branded market. There is a lot of
bloodshed and coverage in the media, but at the end of the day,
neither the topline nor the bottom line gain. Consumers look
for “perceived value” and not at price alone. Value
is a blend of quality and price. A consumer is willing to pay
a certain price for a certain quality. Different segments of
consumers look at different ‘perceived value’ points
and not just price points. This is the tangible part. The intangible
part of perception, which is a combination of image and emotional
value, also contributes to consumers’ purchase and consumption
decisions. The tangible value and the intangible perception
make up the ‘perceived value’ of any brand in the
minds and hearts of the consumers. Thus ultimately it is the
‘perceived value points’ that the consumer looks for
and the wars that are actually won are “perceived value”
wars and not ‘price’ wars. Let us take into account
three case studies to understand this emerging trend. In the
first case study, the recent reduction by major detergent companies
like Hindustan Lever and Procter and Gamble in the prices of
their brand Wheel, Ariel and Tide to snatch back market share
from brands like Ghadi detergent, is clear indication of Brand
Switch. Further, the same companies have also aggressively priced
Sunsilk and Clinic and are resorting to aggressive marketing
for brands like Head & Shoulders and Pantene to take back
market share from brands like Chik and Nyle. They have also
changed the proportion of sachets and bottles to increase consumption.
This is where the consumer pulls out his or her imaginary remote
control and switches from one brand to another. In the case
of televisions, when a consumer walks into a dealer outlet,
he quickly pulls out his ‘imaginary remote control’
and starts evaluating brands in terms of ‘perceived value’.
More often than not, this recent ‘perceived value’
trend has got consumers attracted to some brands. It is not
enough to have innovative exchange schemes, unique tie-ups or
liberal consumer financing. But combined with sound positioning
and servicing, they could get Indian consumers excited and brand
loyalty in the television segment may go for a toss. In fact,
though these balanced brands run the risk of being seen as ultra-aggressive
brands, they have been able to provide the desired ‘perceived
value’ to not only first time TV users, but also to multiple
users who would like an additional television set in their bedroom
or children’s room and to those who are in the replacement
market. The Indian consumer has tasted blood and if a brand
comes in and provides better ‘perceived value’ than
these promotion brands they would consider that brand. The third
case study is in the area of entertainment. In recent times,
Star TV’s Star Plus channel has shaken brand loyal TV consumers
and has aggressively increased its market share. This again
is the result of the Indian viewer taking out his ‘imaginary
remote control’ (and in this case the real one too) and
surfing channels in the search of ‘perceived value’.
Right from programmes like “Kyunki Saas Bhi Kabhi Bahu
Thi” and “Kahani Ghar Ghar Ki” on Star to “Jassi
Jaisi Koi Nahi” on Sony. Consumers are lured to Brand Switch
their programmes to better ones. These programmes have done
well. Similarly, SUN TV in the South or ETV Bangla in the East
have also motivated viewers to switch to them. The viewer’s
involvement with ‘perceived value’ is so high that
he looks at programmes, and not channels, and evaluates each
one before settling down to watch it. If a channel is able to
provide a mix of good programmes that have higher ‘perceived
value’, the consumer gives up his brand loyalty to that
channel and moves towards greater enjoyment and satisfaction.
Here too, brand loyalty has declined and ‘perceived value
loyalty’ towards programmes and hence the channel has increased.
If another channel comes with better programmes and gives higher
‘perceived value’ to viewers, they would not even
hesitate for a second to switch the brand. In all three cases,
the brands that were doing well did not necessarily have the
first-mover advantage. In fact, they were late entrants. But
due to the changes in the consumer behaviour, they were able
to get the brand switch advantage. Surely, brand loyalty is
declining and ‘perceived value loyalty’ emerging rapidly.
This trend will become accentuated in the next few years. Brand
managers and marketing heads will have to clean up and polish
their act because the Indian consumer can now pull out his imaginary
remote control everyday. Nothing stops him from deciding not
to continue with any brand that does not provide him with the
desired ‘perceived value’.
BRAND
LOYALTY VERSUS PERCEIVED VALUE LOYALTY
Consumers are more loyal to ‘perceived value’ than
to ‘brands’. If a brand consistently delivers ‘perceived
value’ over a period of years, it may attain brand loyalty.
But this cannot happen before Perceived Value Loyalty. Perceived
Value Loyalty is, therefore, more important index in today’s
context. There are six reasons why consumers make decisions
in the branded sector based on ‘perceived value’ and
not just price. In fact ‘perceived value’ wars work
in brands because they are fought for the mind and heart of
consumers. Price wars do not work in the branded sector because
they are fought mainly in the short-term trade and pocket level.‘Perceived
value points’ are more important than price points.
The
six elements which I am putting forth strongly bring out the
fact, that in the long run, price wars don’t work in the
branded sector.
1. Many companies do what their competitors do in a blind, herd-instinct
manner. My strong recommendation is that marketers must focus
on the consumer and not on the competition. Comparing and contrasting
with competition, and even following the price cut road to a
bottomless pit, is suicidal. Every company must focus on its
consumer segments and customise its offerings.
2. Unwarranted and adhoc promotions, that are actually disguised
price cuts reduce the equity and the image of the brand, making
the consumer focus on the ‘deal’ rather than the branded
product.
3. There is difference between brands and commodities. Faceless
and nameless commodities, have only one recourse – Price.
Branded products, on the other hand, satisfy various needs of
the consumer and non-price factors can be very important.
4. The pressure of quarterly results has stopped companies from
quarter to quarter. It is important to understand that first
you must have market share in your chosen segment; only then
can you have a good share market. It is important first to look
at the consumers and their needs and thereafter all other stakeholders.
5. A price reduction sometimes gives a wrong signal to the consumer
making one feel that it is a liquidation exercise, a desperate
move, tampering with quality or earlier excess profiteering.
6. The sixth element is the element of parity. If you can reduce
price so can the others. In fact, after a period of time, there
is again no difference. It is important to create disparity
through positioning, core values and enhancing the ‘perceived
value’ in minds and hearts of consumers. There is nothing
wrong in launching a new brand or a variant at a low, medium
or high ‘perceived value point’. This is consciously
done to focus on a given segment. However, rash, thoughtless
and desperate price-cutting measures, directly or through promotions,
actually reduce and discount the perceived value of the brand
in the minds and hearts of the consumers. Sooner or later consumers
will move up in life and aspire for better things. At that time
it would be prudent to have various brands or variants in the
portfolio, allowing the consumer to choose which segment they
would like to participate in. An excellent example of various
‘perceived value points’ across various segments is
that of ITC. With its 59 mm HERO plain, 69 mm SCISSORS plain,
69 mm BRISTOL filter, 74 mm WILLS filter, 83 mm GOLDFLAKE filter,
83 mm CLASSIC, 83 mm INDIA KINGS brands, the company covers
many ‘perceived value points’ giving it good results.
Price wars usually do not work in the branded sector. ‘Perceived
value’ does. Price alone is necessary, but not sufficient.
Therefore, it is important to have ‘perceived value points’
and not just ‘price points’.
TRENDS
There has been an acceleration of the concept of
perceived value loyalty through the phenomenon of multi-brand
purchasing. Most non-durable consumer product classes comprise
several brands that are so similar in terms of their basic attributes
that consumers find it difficult to distinguish one from the
other. Thus it is hardly surprising that consumers do not, on
the whole, show total loyalty to any one brand, but select from
a small set of tried and tested brands that are close substitutes.
I call this, the Consideration Set. Since all products tend
towards parity, for Brand Switch one must create disparity.
There is a great deal of evidence that consumers behave in the
manner stated above. The markets for established non-durable
products are characterised typically by more or less stable
sales, at least in the short to medium term. The buying behaviour
of individuals usually involves several brand choices, but the
aggregate level of market sales and brand shares is stable and
predictable. Customers may change brands often – the vast
majority frequently do make substitutions – but not in
the sense of irrevocably switching brands; that is, never again
buying that which is rejected. Buyers of a given product class
typically choose several brands over a sequence of purchases.
Similarly, duplication of purchasing is also apparent for the
other brands. In some cases, there is no indication that the
majority of the consumers are brand loyal in the sense of always
purchasing a particular brand. Some consumers, of course, are
totally loyal in the sense that they buy only one brand and
never try its competitors. But they make up only a small proportion
of most markets. The original concept of brand loyalty (which
was measured by the degree to which a consumer purchases a brand
without considering alternatives) is fading away, making way
for Perceived Value Loyalty.
This article is based on Jagdeep Kapoor’s new book, Brand
Switch,
publsihed by Jaico Publishing. Feedback may be e-mailed to smeditor@indiatimes.com
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