Value of balance
In what he terms as value of balance; Keller introduces the concept of a pricing strategy based on the consumers’ perceptions of value. He argues that lowering the price of a product in a bid to block the penetration of new products in the markets does not necessarily guarantee market dominance in the long run. Short term gains may be achieved in the form of a larger customer base as a result of the price reduction. However, the loyalty of these new customers is not guaranteed as they may go back to the old brands after a short while. This therefore means that the focus should be on serving the needs of the traditional market by giving value in exchange for a higher price (Keller, 2000).
Keller may have a valid point to a given extent but such a proposition is not viable in the current highly competitive consumer market. The entrants of new players who have greater control of their production costs, has resulted in the significant drop of consumer goods. These products may not be of the same quality as the old brands but they have been proven to serve almost similar function; the difference is marginal. They are thus substitutes to the existing brands and their cheapness makes them attractive to a majority of the population.
Value of balance may also prove to be effective only in the short term as loyal customers are likely to be wooed to the cheaper products by their peers. Word of mouth is a very effective and expense free form of marketing. If people do not encounter any major problems when using the new products, they are likely to encourage others to start using them.
Therefore, the well established firms with loyal clientele must invest a lot in research and development. This is the only way they will be able to counter the forces of competition. Price reduction is more of a reactionary strategy which can affect the image of the brand as consumers might feel cheated. However, it is at times necessary for the survival of the business in an increasingly competitive environment. This is a common strategy with mobile service providers who adjust their tariffs so as to maintain their market share which is threatened by new entrants into the market.
Brand Equity as a Bridge
The fact that the power of a brand lies in the minds of consumers through what they have learned and experienced over time is indisputable. It is on these grounds that marketers spend vast resources in customer knowledge so that they can know how to add value to their brands. Therefore brand equity acts like a bridge where the marketers are able to learn of their shortcomings in the past and thus address them in the future brand development (Keller, 2000).
On the contrary investing too much on customer knowledge has its own disadvantages. To begin with, the whole process might lack objectivity if not well designed. Consumers have their tastes and preferences which vary from time to time. Negative feedback therefore does not necessarily mean that the brand needs immediate reengineering. This is particularly so for new brands which might not be received well by the market in the early stages.
Consumers may simply reject a new brand due to the fear of change. This therefore means that the firm has to embark on a awareness campaign where the benefits of the brand are outlined. It might be necessary to run promotions where free samples are given to consumers who probably have only heard of the brand but not used it. Apart from consumer knowledge, the markets have to be more aggressive so as to gain penetration into the market. They have to create demand by coming up with innovative products and designing well defined marketing programs. However, brand equity has become more popular with marketers over the years due to its organic approach in addressing the needs of the customer.
Keller, K.L. (2000) The Brand Report Card, Harvard Business Review