Broken brand promises

I once read that the marketing director for a major UK public company had defined the company’s brand as being like “a promise kept”. This was met by the British financial media with much bemusement. However, the phrase resonated with me then, as I was also the marketing director for a major British public company operating overseas.

At the time I was marketing global brands into what was then called the FSU, the Former Soviet Union. A place where over a few short years, shoppers had been exposed to international brands with considerable heritage, alongside “newly created” pseudo heritage brands, along with a smattering of fakes out of Asia – copies of Levi’s, Marlboro and Johnny Walker Whiskey, among others.

It was truly amazing how quickly, in the absence of a lifetime’s exposure to the concept of brands, Russian, Ukrainian and Kazhak shoppers sifted the wheat from the chaff, stacked brands in order of price and quality and knew when they were being asked to pay too much. They developed intuitive quality to price ratios in tiny little stores that popped up all over their cities, and settled on exactly the same ratio as western shoppers who had grown up with these brands.

Over the past two years, online shopping has done exactly the same, but on a global scale. It started with our cheaper items – books, DVDs and clothes. Now it’s moving up cost per items scale.

Many brands, most notably Zara, Prada and McDonald’s, have stayed true to the brand promise. While brands like Levis, Mercedes and Harley Davidson have been slow to respond to the new online transparency, or have chosen to accept the dissonance between prices for their brands in different countries, in order to maximise profits at the expense of growth – arguably at a long-term cost to their brand and relationship with their shopper base.

Brands used to be able to get away with higher prices in one state, country or retail channel, as it was hard to compare. Now it isn’t.

I admire the Harley Davidson brand and the authenticity with which it’s been managed since the family and a group of dedicated and talented leaders and workers took it from the brink of extinction, to a globally respected and growing company and brand. It does a huge amount of good through charities and road safety initiatives via the extremely loyal dealer and owner base and has made very few mistakes in the past 30 years. However, now that the dollar is low, and online shopping allows us to compare pricing for identical items, it’s starting to look like the brand promise is being broken.

I stood in a Harley dealership in Southern Texas a couple of weeks ago, with two members of my Australian leadership team. We walk stores, dealerships, banks and malls whenever we travel, looking for trends and ideas. One of my guys stood in front of a big black shiny Harley Fat Boy Lo and said: “That’s the one I’d have.” This one has significant heritage. It’s much older brother was ridden by Arnold Schwarzenegger in the first Terminator movie and has been a benchmark bike ever since, as far as pricing is concerned.

I know Harleys have always been cheaper in the US than Australia, partly due to taxes, freight and the exchange rate. However, when one of my team members read out the price I thought she’d misread the sticker price. I responded: “You mean $26,000?” Sure enough the Fat Boy Lo was on sale on the floor for $16,000. I took out my iPhone, went to the Harley website in Australia and searched for a Fat Boy Lo. Its RRP was $31,000 – almost double the US price. And motorcycles don’t come in left- and right-hand drive. The AU compliance, import taxes and freight costs may add $2,000 to the price, at best. So why was the bike for sale to Australian shoppers for so much more?

I phoned a dealer in Australia to discuss the price differences and an uncomfortable and embarrassing conversation ensued. This guy loves Harleys, owns Harleys and has sold them for over decade. He lives the brand values. However, he was being asked to compromise those values, due to the significant price differentials The Motor Company is charging between its home markets and Australia and New Zealand.

To be clear this isn’t a Harley-only issue. It’s an issue that’s creeping up the price chain as shoppers are now used to shopping online for $100 to $1,000 items. Next in the frame are the $2,000 to $20,000 purchases that we only make every three years, which include bicycles, motor cycles, boat engines, jet skis and forklifts. Let’s see how this pricing transparency is dealt with by each brand.

In his role as CEO of CROSSMARK, Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. In this insightful blog, Kevin covers retail news, ideas, companies and emerging opportunities in Australia, NZ, the US and Europe. His international career in sales and marketing has seen him responsible for business in over 40 countries, which has earned him grey hair and a wealth of expertise in international retailers and brands. CROSSMARK Asia Pacific is Australasia’s largest provider of retail marketing services, consulting to and servicing some of Australasia’s biggest retailers and manufacturers.