Do price wars and fights for more favorable conditions endanger the brands and products for which they stand?

The severity with which these wars are being fought in all markets and branches for the favor of the customer is unparalleled. Rebates, net cost and conditions seem to be more important than the products themselves. Consumers are feeling the uncertainty. Couldn’t it be that a 30% rebate today could be followed by a 50 and 60% discount tomorrow. And is the quality really the same as it was yesterday? The intensity with which bargains are being advertised, the volume, the primitive speech, the often noticeable dishonesty, all of this barely leaves the customer enough air to breathe, it pressures him/her and constricts his/her room to think and act. And it’s not just the retailers who act like this; aside from a few exceptions, banks, insurance companies, airlines and other formerly rather reputable and solidly working businesses and institutions fight unrestrained for orders. Brands, it seems, only play a minor role in this. They seem to be only a worthless attachment. And if you listen to and look at the countless discussions and publications regarding the role of a brand in today’s competition, one could think the end of time has come for it: The last fight between price and brand ends with a knock-out for the brand.

Does the brand have a future? Of course, provided that you are dealing with a true brand!

Brands who aren’t really true brands, and that is the majority, will not survive today’s price wars and fights for more favorable conditions. And those who have declared them will be eliminated from market development or will decline into meaninglessness. Our point of view may seem contradictory due to its directness. Therefore, let us cover this point by point.

When are you dealing with a brand that is not truly a brand? We state a brand is only a true brand if we can find seven elements in it: origin, history, profile, positioning, image, awareness and protection. With young brands, one or the other element might not have fully developed yet, but it has to exist and the growth process as a whole has to span all seven elements.

A brand which does not carry all seven elements is not a brand, but only a word without content and therefore without value; worthless and powerless and therefore in no condition to put up resistance during price wars and fights for more favorable conditions. Well, on closer consideration one might say that the quality of the product decides whether it is being bought or not. And this is exactly where the second mistake lies. Price wars and fights for more favorable conditions in the long run break any commitment to quality; they lead inevitably into manipulation of quality. The market teaches us daily that before the death of the manufacturer lies the death of the notion of quality. No manufacturer or retailer can exist in the long run if he makes less money than expenses and earnings call for. And no customer will abandon quality in the long run. It may well be that the end can be deferred in one case or another. Maybe even that it looks like on the way to the end, that there might be a solution, a means of escape. Exceptions always confirm the rule. Whoever engages in price wars and fights for more favorable conditions is surrendering substance in the end.

Do price wars and fights for more favorable conditions endanger the existence of brands and products for which they stand? We say no, because brands, the way we define them, carry the elements of origin, history, profile, positioning, image, awareness and protection inside of them and with this bundle of energy they fend for the products. The seven elements mean life, life that is being carried by every single employee of the manufacturer and its tool, retail, from research and development through all manufacturing processes all the way to the presentation on the shelf or salesroom and beyond, up to the details of the after-the-sale services. Brands produce responsibility; brands are personalities; they show profile; they are living intermediaries between product and customer.

Brands are positioned on the market according to the character of their personality and the resulting profile. Awareness results from the image it emanates and it is the strength of the personality, aside from the protection of trademarks regulated by law that protects it from imitators and forgers.

Brands add up with all they represent, the seven elements, to a mere value of the product, everything that makes them incomparable. And it is this incomparableness that poses as a shield in front of any ruinous price war and fight for more favorable conditions. And a guarantee for the customer that the price/cost ratio is based on a solid foundation. This also goes for products which satisfy needs as well as products which fulfill wants.

Only brands are in a position to end those ruinous and market disruptive price wars and fights for more favorable conditions and to give back its function to the competition in the free market economy.

Of course, the accomplishments brands are able to achieve are not for nothing. They cost money and they ask for investments, not just once, not just occasionally. But that is only the least, because it’s just about money. Brands ask for truthfulness, iron consequence and discipline, quick awareness for responsibility, endurance, courage, sovereignty, a negative attitude towards overestimation of one’s capabilities and exorbitance, in short: classic entrepreneurial conduct. Brands are the soul of a business and the core of each business strategy. In terms of what is important to us we would like to add that this is the explanation why we as strategic consultants pay a lot of attention to the brand.