5 Mar 2010

The problem with getting more for less

Let us continue on our quest to understand the holy grail of Marketing: The consumer's perception of 'value'

In the previous post, I opined that what we see when we look at brand-names and pricetags is a wholly intangible notion of value.

So what is the common denominator of value?

Just think of the two most common 'concepts' in all of the Marketing and Advertising universe: FREE (including EXTRA, MORE, WIN, SAVE, SUPERSIZE, etc. as subsets), and NEW (including IMPROVED, ALL-NEW, etc. as subsets.)

The way we respond to those two concepts is inexplicable. And they are so powerful, that they have changed little even in an otherwise fast-evolving scenario. In fact, the culture of 'More for Less' has more or less exploded all around us... Think Hypermarkets. Think Social Media engagements that are usually created around freebies or discounts!

Strangely, our decision seldom feel like an intuitive reaction, it feels like we've made a very rational call. It feels like we've scored a point against the 'seller'. Whereas in actual fact, we're falling for the oldest continuously perpetated trick in the book. (Actually, I think it pre-dates the book!)

But most of us would dismiss any doubt of being baited (and we could not validate it without considerable inconvenience). So as reach out to a supermarket shelf and the words 'FREE' or 'NEW', we slip into denial - and mark up the score in our minds: Buyer 1, Seller 0. And the game continues...

But is it really possible to provide incremental - or even consistent quality with shrinking margins?

Let's look at the other side of the coin... While the 'More for Less' mantra has helped convert entire populations into vast open-cast quarries of consumption, the expanding markets also fuelled intense, frenzied competition by the producers.

Competition is supposed to be good for the consumer? But only if it is health competition. It is definitely not healthy, when businesses resort to the downward spiral of offering 'More for Less' to build or shore up a statistic notion called 'marketshare'.

Let's take the most tangible of industries today - Manufacturing. To be competitive, a producer first needs to cut out the 'flab'. Sounds great so far, and lean organisation are also more likely to hire better people... But to maintain marketshare with new players continuously entering the fray, the producer is forced to start cutting 'cost' as well. Now if you cut input, the quality of output is bound to be impacted.

Soon, the only viable source is the cheapest source. First, for periheral inputs. Then it's for essentials. And finally, for the entire product!

When that happens across a category, the only differentiation that remains between products is the marketing behind their Brand / Label. But the Catch-22 here is that once the very essence of a Brand has been eroded or compromised, any advertising that claims a differentiation is bound to ring hollow and carry increasingly less meaning!

In short, the Brand becomes unsustainable.

Let's take a peek behind the scenes of the Advertising industry itself... Marketers slash budgets just when investments in new techniques are most desperately needed to save their Brands from the bleak sameness of outsourced products. With less earnings, Ad agencies scrimped on talent, when obviously a higher order of thinking is the obvious need of the hour. Meanwhile, cut-throat competition at play force Ad agencies to take the easy way to retain clients. THEY OFFER MORE FOR LESS!

Plying clients with value-adds, leading to roughly 60% of the work that leaves an Ad agency's front door going out as non-billable... Quality 0, Quantity 1.

Perhaps, it's time to invent a new game!

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