January 19th, 2009
As my readers know, I’ve been fixated on the concept of value for quite some time. Any random post may not seem to fit this theme, but just about all of them do: turning store returns into a great shopping experience; Visa offering upscale bathrooms to attendees at a festival; a company that lets you leave a voicemail for a person without running the risk of actually having to speak to the person (eww!). All of these are examples of real, observable value.
For all intents and purposes, this is my first post on the general state of marketing since the US economy imploded. I haven’t said a whole lot because I’m still forming my own opinion on what brands need to do to survive and maintain consumer loyalty. What I am ready to say is that the key is value.
I believe the key distinction now, however, is between real and perceived value. Perceived value is what I talked about when I happily acknowledge(d) buying $250 Gucci sunglasses. I am fully aware that I could derive the same amount of real value from $10 shades bought on Canal Street. Shield eyes from sun? Check. but I saw a level of psychic value in the brand for which I was willing to pay an enormous premium. I measured that psychic value by how the world around me recognized that value. Looking at myself in the mirror wearing Gucci sunglasses gets old quickly. But having people reinforce my purchase – every day – as I walk around the city? Priceless. Value has two ingredients: (1) the real value that delivers functionality, and (2) the “psychic premium” I’m willing to pile on top so that the world sees me (and I see myself) in a certain way.
It turns out that it is not just beauty – but also value – that is in the eye of the beholder.
This is why even people “with money” have slowed their spending… why even luxury goods are seeing a decline in sales. It’s no longer fashionable to display the same brand names that only months ago were a mark of prosperity. Those marks are now seen as an indication of greed, of phony superiority, of foolishness. It’s not cool to show you have lots of discretionary income when everyone else is suffering. That’s why Mrs. Dick Fuld is still shopping at Hermes but now demands the store place her purchases in a plain white bag. It’s why Danny Meyer says his restaurants are actually selling the same amount of wine (as before the crash) but fewer bottles, his supposition being that people have decided that a bottle sitting on the table is an unwanted signal of wealth. It’s why DeBeers’ new ad campaign attempts to position diamonds as something to be kept forever in a world filled with “disposable distractions.”
Don’t get me wrong: there will always be rich people who wear big big diamonds in environments where everyone else is doing the same. That’s not going to change, but that’s also not what fueled the success of Coach and Vuitton and even Starbucks in the US: what did was millions more not-so-rich people over-extending themselves to buy that Vuitton bag (or Gucci sunglasses) because they liked the world’s reaction. These behaviors are at the heart of the “trading up” phenomenon in America. Take away both (a) the people who couldn’t afford their purchases in the first place, and (b) those who can afford expensive things but who will no longer get the thrill of everyone else’s desire, and you’ve got major, major problems. Products and services that run on perceived value need to make a new plan, Stan, and fast.
This will not happen overnight. As I said, some people who can still afford to buy status-driven things will continue to do so. Others will wean themselves off instead of going cold turkey. Read the Wall Street Journal editorial, “I Once was Chic, But Now I’m Cheap,” written by an Apple buyer who vows that his family’s next computer purchases will be PCs. The piece reads like a therapy session. The writer’s preparing for the DT’s.
I’m also not particularly convinced that this is some sort of seismic global shift in values; the current economic situation may simply repress luxury consumption for awhile. But until that happens, consumers will either live without or discover products and services that deliver more real value: and once a shopper discovers that a store brand whitens his teeth as well as your brand, he may never come back.
Draw your loyal customers closer, now. Add value, if you can. Remind your customers why they buy from you. Get them to tell others, and you may just be able to stay flat (which is, after all, the new up). The water level is going down, gentle readers, and all that’s underneath are the brands that deliver enough usefulness to hang tough until the next tide comes in. And that could take quite some time.
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