Inflation worries consumers because their income won’t buy as much. It worries businesses because it squeezes their margins. The first thing to recognise is that brands cannot promote their way out of trouble. Starting a price war erodes margins faster, re-educates consumers about where the price point should be in a category, and immediately destroys value.
Marketers need to understand a brand’s specific situation. Brands exist because they allow a business to command a higher price point than an unbranded product. As inflation bites, you need to protect that margin. You can measure the strength of a brand’s ability to do this by comparing the relative price the consumer sees for your offering against the breadth and depth of their positive perceptions: we call this measure Premium, based on how meaningfully different a brand is in the mind of the consumer.
Kantar BrandZ shows that around one third of brands whose equity does not support their perceived price. In this illustration, it’s the bottom three zones from Commoditised to Over-priced Brands. If your brand sits in the upper zones, it’s well-placed to defend its price, and even has room to manoeuvre. Even in the best situation, of course, brands need to take care when faced with rising prices. It’s the brands in the orange-to-red zones that face the greatest risk under inflationary pressure. There are a wide variety of responses available to businesses, and swift action is essential.
Communication with consumers is key
With production costs rising, too many businesses historically have tightened their belts and cut marketing spend. These brands have suffered deeper and for longer than brands which have bravely maintained support. Communication at this time needs empathy, more than a rational emphasis on price or benefits. Inflation is an unknown for many, catching brands a time of increased vulnerability, and adding to the uncertainty of the future.
Make sure your brand has a voice and uses it to reassure, to empathise and show concern. If prices have to increase, be open and transparent, explain how you’re doing it and why. Above all, continue to build consistent memories of your brand through your actions, your words and your tone.
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