Value for money brands – some thoughts

I shared an image of the Average Selling price of major smartphone brands (as reported in a Mashable article) on Twitter. I disagree with the comparison of a single phone model, iPhone (even if you include the 4S, 5C and 5S it is still a single brand) with an entire category of phones with literally thousands of brands under it, i.e. Android. Be that as it may, the data presented is not a startling new revelation: the iPhone has always been a premium brand and so it is not surprising to see its ASP to be the highest among phones. Even the iPhone has seen a reduction in its ASP in 2013 compared to 2012 – it dropped 6%. Android, on the other hand dropped 14.3% in 2013, compared to previous year. ‘Others’ too fell sharply.

Chart Source: Statista

I shared this image on Twitter and said that perhaps the only conclusion could be that the rate of fall of the iPhone ASP is lower than the leading category, Android. One of the responses to this tweet was that, ‘tells me it’s of you’re not a hardcore Apple user, you get more value for money on Android’. I presume that has been derived based on the lower ASP of the Android phones and the residual perception of iPhones being poor value because of their relatively higher price. I disagree with that sweeping statement, implying that lower price automatically means greater value for money (and by extension, higher priced brands in the same category are poor value).

I do understand that everyone, including me, would love to save money while buying anything. However, ‘getting what we pay for’ is also a concept well understood. No one would believe that a 5-star hotel holiday can be had by paying 2-star prices. And the one who opts for a 5-star holiday expects a threshold level on product delivery; in fact, he would demand it. The product delivery would include everything from the process of reservation, hotel amenities, food quality & presentation, customer service etc. On the other hand, if the same customer stays in a 2-star hotel or lodge, he automatically lowers his expectation on all the above parameters – he knows he will get what he has paid for. Are these the only types of customers i.e 2-star and 5-star? Are these the only kind of offerings across product categories? Certainly not. Even among hotels, there are budget hotels, luxury hotels and many kinds in between. Some of them may promise to deliver a 5-star experience at affordable rate. Ah, the value for money proposition. Naturally, this is the type of promise that attracts many. It is like buying into a Rolex imagery, or at best a Rolex-like imagery at an affordable price. But is that truly possible? I don’t think so. I realise that it is possible to offer a great product at an affordable price point, delight the consumer and still make money. That’s a win-win situation for all. In my view, even in this situation, the maxim, ’kuch paane ke liye kuch khona padta hai’ (loosely put: ‘to gain something, you have to lose something’) holds true. A buyer of a mid-price MPV/SUV (recently, there have been a few success stories in India) knows full well that while his brand choice may have been right, the high end premium SUVs have that certain something which his brand lacks. That certain something could be just imagery (not a strong differentiator for the premium brand) or tangible features, big and small. The point is, there is a market for everything and all of them can be great value for money.

A person who buys Koryo brand of TV is likely to perceive a higher priced brand, say Sony, as poor value for money. And the buyer of Sony TV may think that a Bang & Olufsen TV is poor value for money. The point is, all of them are likely to think that their choice is great value for money. Fact is all of them are getting what they pay for. The Bang & Olufsen buyer may seek (and demand) great aesthetics and sound design in his brand. The Sony buyer may seek great picture quality, the re-assurance of a popular brand and the Koryo buyer may simply seek an affordable TV. It does not mean that the lower priced brand is of greater value for money.  In my view, however hard a brand may try, it simply cannot have all the features that a consumer wants, all that a premium brand in the same category offers, all the imagery that the consumer yearns for and yet give it to him at a throwaway price. Take biscuits for example. There are premium brand which cost Rs.30 for a 100g pack and then there are those which are at Rs.10 for the same quantity. The latter may claim to offer premium ingredients (maybe even same as the higher priced one) and its advertising may be as slick as the premium brand but both cater to different mindsets and audience. Marketers may anchor the lower priced brand’s positioning and communication purely on price – in fact, that is the common practice and common perception of ‘value for money’. When I asked for the definition of a value for money brand on Twitter, one of the responses was on similar lines:

Same or similar value as an expensive substitute but at a lower price.

My problem with this definition, anchored on ‘similar value as an expensive substitute’ and ‘lower price’ implies that the higher priced one is poor value and the buyers of that brand are fools. I believe that buyers of super-premium and luxury brands perceive great value for money in their brand choice too. So the value for money definition should de-link lower price. On Twitter, one of the responses to the same question was:

Lasts long, gives status, justifies price. Most importantly…works.

I thought the ‘justifies’ price bit was the most pertinent one. The justification can arise out of a set of rational or emotional reasons. That’s the reason why there is room for all – the basic to the super luxury in virtually all categories. And brands in every one of those categories have a value for money of their own. Your comments?