Hello all, it’s been a while. I wanted to know if anyone knew of case studies where brand strategies went south. Right now our brand team wants to lower cost (ie cheapen product) at all costs just to get higher margins and number growth, and I need a way to show them that in the long term this could hurt the brand. Their argument is that the customer won’t notice, My argument is that it sets a new standard of quality and that in the end, it will cheapen the brand as a whole.
The customer always recognizes the cheapening down, that engineers think they could hide.
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VW Golf IV vs Golf V interior. The cheap new Jettas dash. (2012).
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Cars in general get a lot of attention, so it is no wonder those things get critizism
there. But the same holds true for tools and household items to a certain degree.
What kind of products are you involved with?
Playing devils advocate here (yes I know this is anti-design in many ways) - will the cheapening of the Jetta actually HURT sales? Or will it boost sales given that the car is now more price competitive in an increasingly tight market?
It’s very easy for critics and journalists to criticize certain areas, but whether or not that actually applies to the masses and the revenue generated isn’t always true.
I find it interesting that the article iab posted specifically calls out “Apple” - which is BS. Apple products are made in China, using the same Chinese, Japanese, and Korean components as every other mobile device. While Apple has not subscribed to the OEM model of design that some other companies have (which is not the point of the article and not called out) it’s not all that different from what other companies are doing. If anything, Apples saving grace is it’s ability to recognize and capitalize on areas that are run entirely by other people. Case in point, Itunes (Apple does not make music), the App Store (Apple does not make apps), and IMO in a month you’ll see payment (Apple does not make money, though given their market cap maybe they should).
As designers, we always strive to make the ultimate product, but that need always needs to be balanced with the market. Every designer wants their brand to be the Bentley of their respective spaces, but theirs no shame in being the Hyundai if you can still deliver great products that people love to buy.
Cyber, I agree with you as a business-minded designer. Like you said, a lot of designers want to design Bentley when Hyundais can still deliver great product. But what if you work for Bentley? Is using a Hyundai engine ok? Of course not. I’m not talking about a single instance or a single design, it is a mentality going through some established brands trying to squeeze growth, margin and the requisite numbers to look good in these trying times.
But one question you posed is exactly what I want to find out: Did cheapening the VWs end up hurting the brand? They may have sold more but people regard it as a cheaper brand now, or maybe customers didnt notice at all and VW is as successful as ever.
I work in the fickle fashion market, so this question that I pose comes from a branding standpoint more than a design standpoint.
As far as the article iab posted, very interesting! But from a manufacturing standpoint we are already there: manufacturing in China with design in the US. So to use the article as an example, an answer I’m looking for is “what happened to Dell as a brand when they dropped the QUALITY (not only cost) of their components”, and the article does not focus on that.
Thanks for the responses so far, this is getting interesting.
What I took from the article is that lowering costs to raise margin is only a short-term gain. In the case of Dell, it can be a very dangerous strategy. That is not the case for Apple. Yes they have manufacturing in SE Asia to lower costs, but their overall strategy is to raise value to raise margins. That is the long-term strategy for success. I think any brand strategy fits better to a long-term goal than a short-term goal. Brand building and maintenance for the positive does not happen quickly. Damage to a brand on the other hand can happen very quickly. Toyota is a good example. The article points out most managers don’t have the long view, they want the quick hits for the quarterly report.
Also, argueably, Apple has no choice but to manufacture in SE Asia. There is no capacity anywhere else in the world barring huge start-up costs.
iab, couldnt agree more. I keep preaching the long term strategy vs short term gains but it falls on deaf ears. Is there a case study or article on what happened to Toyota? What Im trying to do is basically SHOW management that what they are trying to do isnt foolproof and they could do more damage. If they see other brands have gone down in flames for taking the short term route, it’ll be more effective than my preaching.
It also mentions Sony’s fall to Apple. Again, Toyota, Sony and Dell stopped their long-term value-add strategy. They forgot it is the only way to sustain growth. Cost-cutting will eventually lead you down to becoming just a commodity and you will become a dinosaur in a short time.
I completely agree. Strange but the first brand that came mind for me when I first read this post was Sony. I don’t know if this was from cheapening their product as it was from not keeping up with the times. I totally agree that when you start to skimp on your brand you will start to see a consumer backlash. With the example of the Jetta (can’t say I know much about this as I have not seen the new dash) I would say that the short term may not change, but if it changed the consumer experience then it will start to hurt the brand in the long run.
I think another way to look at this is every brand has nonnagotibles, equities and experiences that they are portraying. If a cost savings change or resource change effects any of these than your brand is going to be directly effect the brand either in the short term or the long term. We have to remember that brands are an emotional attachment. Changing nonnagotibles inherenly effects these emotions.
As far as examples, some short term ones I would throw out Tropicana, and the “New” Coke as some obvious ones. Long term could be almost any of the a,Erica car companies other than Ford, Kmart, and Schwin. Those are just a few that come to mind. Let us know how it goes. This is an issue I battle every day. Good luck!!
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I just thought of a great personal example. A couple of year ago Hershey tried to change the Standard Identity of milk chocolate in the US (which is mandated by the government) by replacing cocoa butter with vegetable oil. This would have greatly reduce the cost of production. In order for this to happen, we (Mars) had to agree and move forward with this and change our recipes and process. We refused, as quality is one of our main principles as a company. Because of this the products that Hershey had changed to these recipes were not allowed to be call out as “Milk Chocolate” and they were forced to call them “Chocolaty Flavored”. We then capitalized on that and created a campaign that let consumers know that our products were made with “Real” Milk chocolate. This then caught media attention and drove down Hershey’s sales. On the flip side we did not put the right efforts to the long term campaign and Hershey has started to fight back.
lol- The KitKats I grew up with in the Dubai had real chocolate in them. I came to the US expecting the same and was rudely awakened to the waxy substitute that is called chocolate here.
Strong brands consistently employ a distinctive shape on packaging, or house their products in uniquely shaped packs. Heinz is instantly recognisable, regardless of category, by its keystone shape, in the same way that Coke’s contour bottle is unmistakable.
Brendan… I’m curious, how many other times have you posted this comment verbatim?
Cost Plus carries the European Kit Kats with real chocolate. They used to carry Smarties too, but they’ve been banned because greedy bastards at Ce De Candy own the U.S. brand copyrights.
I do agree. If it is my brand strategy, maybe I would also go for a long-term goal. And Toyota is indeed a great example for this. They would need their superiors to attend the right way to manage and goal for a yearly increase than just a quarterly increase.
In case anyone wondered, I’m guessing the responder above meant ‘non-negotiables’.
For d-flux; Great topic! Some declining [and/or in disarray] brands to study could include Scion, Black & Decker and Casio. Each of those brands continues to hold onto some category equity (Scion - small cars with interesting styling, B&D - claimed innovation in various DIY categories, Casio - watches, projectors & cash registers) but the brands are dropping in breadth of market penetration, value and cache due to current / recent past cost cutting and poor product planning.
I was at GM when they were at their worst and their brands have suffered for it ever since…only now are they climbing out of the hole they created. I was at B&D when it was its best but over time those at the helm embraced the cost cutting mantra to the point that they had to create (DeWalt) and acquire (Porter Cable) new brands to cover up the mess.
