Cheap Thing No Good. Good Thing No Cheap.
By Jacky Tai
I apologize for the decidedly Singlish title but I think it is a very appropriate one. Singapore’s obsession with wanting things cheap and good is actually undermining Singapore companies’ brand building efforts. The reason is very simple. If you have a good or premium product, you need to charge premium prices in order for your brand to have credibility. Hard as it is for some of you to believe, customers actually expect to pay premium prices for a premium product.
“Ah hah!”, thinks the typical Singapore company, “If we can make our product as good as the leading brand but price it only slightly higher than the entry level brands, we have a winner. Ta dah!” Yeah, right! Name me one brand that has toppled the leading brand with such a strategy. You can’t.
Leading brands need to carry a leader’s price tag. That’s how the mind sees things. If you tell people that your brand is as good (or better) than the leading brand but only slightly more expensive than the entry level brands, do you know what they will think? “No way, buddy! If you are as good as the leading brand, why aren’t you charging the same price? How come you are so cheap?” You have a credibility issue.
Remember that branding is all about perception and perception is reality. You are a customer yourself. That is how you think, whether you realize it or not. Cheap thing no good. Good thing no cheap. So, stop selling your brand short. If you are good, then have the guts to price it accordingly.
By the way, an even worse strategy that I have seen Singapore companies adopting is this. “We are 80% as good as the leading brand but we cost 30% less.” That kind of strategy puts your brand nowhere. Life is complicated enough without having to think in fractions. 80% as good means that you are not as good but that is why you are 30% cheaper but if I want something cheap I go all the way and get the entry-level brands. This kind of strategy will get you hammered from the top by premium brands and kicked from the bottom by entry level brands. That’s no place to be.
Why do people buy Rolex? Because it says something about them That they are successful and they have good taste in watches. Rolex is a top watchmaker and as a result they need to charge premium prices and their customers actually demand to pay premium prices. If Rolex is priced like a Seiko then nobody is going to take them seriously even if the quality remains the same. People will think there must be something not quite right with Rolex if it is priced that cheap. That’s the way branding works. If you are good make sure you are priced appropriately. If you are not so good, then price it cheap.
Why do people buy a Hyundai? It’s cheap. But you might argue that Hyundai is using the cheap and good strategy and it is successful. Hyundai sold 2,283,298 vehicles worldwide in 2004. That is quite good even though it is about 4.5 million units short of Toyota’s figures. But what is the primary reason for buying a Hyundai? It is cheap. I have met a number of Hyundai owners who wax lyrical about how good their Hyundai is. I have driven Hyundai cars before and they have come a long way, especially in the area of refinement and ride comfort but if a Hyundai Sonata is not so much cheaper than a Nissan Cefiro or a Honda Accord or a Toyota Camry, I think a lot of Hyundai owners will upgrade to a Toyota, Honda or Nissan. Hyundai owners can protest all they want but if a Sonata is the same price as its Japanese competitors, I am sure Hyundai will not look like such an attractive proposition.
Sharp shipped almost 2.5 million units of the Aquos LCD TV in 2004. The Aquos is so much more expensive than a Samsung or an LG. So, why is the Aquos still outselling Samsung and LG combined by 2 to 1? People perceive the Aquos as the top brand in LCD TV and they are willing therefore to pay top prices for an Aquos. Is the Aquos better than a Samsung or an LG? Doesn’t really matter. People perceive it to be better because it pioneered the category; got into the mind first and is expensive so it must be good.
Now, if you still think that you can use the cheap and good strategy and build a powerful brand, good luck to you. What if you are already at the top like Sharp? You are the leading brand and you are expensive. What do you do? You continue to innovate like crazy to maintain your technical superiority.
The above article is contributed by our trainer, Jacky Tai, who started his career heading the marketing department of a start-up in the United States. Upon returning to Singapore, he worked in start-up companies as he wanted to build brands, and felt that most big brands are built from start-ups. The hyper-competition of today’s business environment taught him that very often, what differentiates successful companies from the also-rans is applying the right branding strategy. When he joined IE Singapore as branding manager, he set out to develop brand education programs to train Singapore companies, and till date, over 2,000 companies have attended them. With 12 years of experience grappling with the art and the science of branding strategies in the real world, Jacky is able to incorporate his rich experience and knowledge into a practical yet easy-to-understand guide for everyone involved in branding.
Jacky will be conducting the following public learning course at the Marketing Institute:
• Transforming Your Business Into A Brand – 3 Sep and 12 Nov 2008
For more information on the course, please contact Angelina or Su at 6327 7586 or 6327 7588, or email seminars@mis.org.sg
The views expressed in the above article do not necessarily represent those of the Marketing Institute of Singapore. No responsibility is accepted by the Institute or its staff for the accuracy of any statement, opinion or advice contained in the article. All articles on our website are copyright and no part may be reproduced without prior written permission of the Marketing Institute of Singapore.
