The global recession does not seem to have lost its grip yet. Traditionally, brands work in a paradigm where price is not a competing factor in the scenario. “People pay for quality, so they would pay for a good brand since quality products have an emotional attachment with customers”– this is what the ultimate branding output would look like.
However, looking at some intervening developments during recession, this ultimate notion of non-price based competition is at stake. Look at the growth of WalMart, Tesco, along with Chinese cheaper brands that are gradually taking over the sales of renowned brands in the market. Particularly amid tough competition from Chinese mobile phone brands, Nokia has announced a cheaper version of multifunctional mobile phone at a price tag of 16 euros only. Samsung and LG followed this “both low price and good brand” strategy for quite sometime. When renowned brands start competing based on price, it means something is seriously wrong in the market. Could those be just fighter brands? I think it is about a shifting trend in the branding paradigm that we did not think of before. Simply put, it is about falling income of target customers for which they are not able to spend for a high priced brand. Yet, falling income does not mean that the need associated with those brands are gone. Rather, customers would be switching to those versions of brands that serve their purposes at an affordable cost.
This practice of companies to comply with customers’ budget and launch cheaper but functional brands has created a long term impact on customers. When consumers find that these cheaper brands are good enough for their purposes, their expectation goes up as compared to actual performance of brands. Some brand strategists argue that this trend is transient. It will go away once economies are out of recession. Well, I beg to differ. Some unknown brands have already got their firm grounds in the market taking recession as an opportunity. They could have used pirated technology, but assembled them with quality to exceed the price-performance expectation of customers.
Thus, when recession is over, these brands may continue to dominate in the market with their positioning of being a “value brand” and getting a permanent mark in customers’ minds. It would probably take a long time for erstwhile upper-class brands to get back their market shares even after the tough times are over.