On January 10, 2016, I wrote an article entitled, “Platforms — Past, Present and Future“. The comments on the article made it clear to me there was massive confusion surrounding the meaning and purpose of branding in general and value, premium and luxury branding in particular.
This is part two of a four part series on and around branding. Part 1, “Android is a Stick Shift and iOS is an Automatic Transmission”, can be found here. Part two focuses on Brands and how they are used by tech companies, in general.
If you don’t know jewelry, know the jeweler. ~ Warren Buffett
Few of us know anything about the products we’re purchasing and even fewer of us know a trusted expert to advise us. Brands are a communication tool for the seller and a shortcut to understanding the product being purchased for the buyer.
Brand equity — or simply ‘Brand’ — is the premium a company can charge for a product with a recognizable name, as compared to its generic equivalent. Companies can create a brand for their products or services by making them memorable or easily recognizable or superior in quality or reliability.
A brand’s value is merely the sum total of how much extra people will pay, or how often they choose…one brand over the alternatives. ~ Seth Godin
The opposite of a brand is a commodity item with little or no perceived differentiation from like products.
Differentiate or die ~ Jack Trout
A commodity is merely one of many options available to the consumer. When every product is nearly the same and price is the only significant differentiator, consumers don’t look for the best brand, they look for the best price.
Remember my mantra: distinct… or extinct. ~ Tom Peters
A Value Brand has one or more significant advantages over its competitors — distribution, automation, location, limited availability, etc. — but the primary way in which Value Brands attract their customers is via lower prices.
There are two kinds of companies, those that work to try to charge more and those that work to charge less. We will be the second. ~ Jeff Bezos
Some well known value brands are K-Mart, Walmart Amazon and IKEA.
Let me make one thing very clear. There is absolutely nothing wrong with or inferior about a Value Brand. A Value Brand may charge less but that doesn’t make them less of a brand. Value Branding is just one of several different — and highly successful — branding strategies. The vast majority of the items we own and use every day are purchased from Value Brands.
A Premium Brand is a Brand that holds a unique value in the market through design, engineering or quality. Premium goods are more expensive, i.e., they charge a “premium” because they have, and maintain, a significant advantage over competing products. Some examples of Premium Brands are Disney, American Express credit cards, and Bose speakers.
More than a 1-to-1 ratio of profit share to market share demonstrates a company’s ability to differentiate its products, provide more value than its competitors, command higher prices, charge a premium and enjoy pricing power. ~ ~ Bill Shamblin
Corollary: Business is hard because differentiation – for which you can charge a premium – is hard. ~ Ben Thompson (@monkbent)
The extra features of a Premium Brand provide the justification for its higher prices vis-à-vis a Value Brand. On the other hand, a Luxury Brand’s price greatly exceeds the functional value of the product. Qualities common to Luxury Brands are over-engineering, scarcity, rarity or some other signal to customers that the quality or delivery of the product is well beyond normal expectations. The Luxury Brand’s extraordinary excesses provide a rationale for the buyer to pay the brand’s extraordinary prices.
We’re overpaying…but [it’s] worth it. ~ Samuel Goldwyn
People can, and do, argue endlessly about where the line between Premium and Luxury Brands should be drawn. However for our purposes, the difference between Premium and Luxury is not so consequential that we need to delve into those nuances. What is important is understanding the concept of Veblen goods.
Give us the luxuries of life, and we will dispense with its necessaries. ~ John value Motley
Veblen goods are luxury goods — such as jewelry, fashion designer handbags, and luxury cars — which are in demand precisely BECAUSE they have higher prices. The high price encourages favorable perceptions among buyers and make the goods desirable as symbols of the buyer’s high social status. Veblen goods are counter-intuitive because they run against our understanding of how the laws of supply and demand are supposed to work.
I have the simplest tastes. I am always satisfied with the best. ~ Oscar Wilde
Some Brand examples of Veblen Goods are Chanel, Louis Vuitton, BMW, and Mont Blanc. Rolex for example, has created a watch to work at up to 200 meters below sea level. Who the heck is going to be fool enough to go scuba diving while wearing a Rolex watch? However, this is exactly the kind of over-the-top quality that helps buyers justify their luxury purchases.
One way to distinguish a Premium Brand from a Veblen Brand is to project what would happen if the brand’s prices were lowered. A significant decrease in the price of a Premium Brand would likely increase sales, while simultaneously decreasing margins. However, a significant decrease in the price of a Veblen Brand would likely DECREASE sales (and decrease margins) because the lowered price would destroy the brand’s cachet.
Although Veblen products are very prominent and therefore receive lots of attention, they are also fairly rare, at least in proportion to the Premium and Value Brands in their respective categories.
Question: Why Don’t More Companies Become Premium Brands?
Most companies don’t strive to become Premium Brands because it’s entirely unnecessary. Being a Value Brand is a very legitimate and very profitable strategy. Walmart is a Value Brand and it’s one of the richest companies on the planet.
Second, most companies don’t strive to become Premium Brands because Premium is hard. And moving from Value to Premium is even harder.
Half of being smart is knowing what you’re dumb at. ~ Solomon Short
Companies that try to become Premium Brands are like kids that try to have sex in high school. They all want to do it. They all claim they’re doing it. Few of them are actually doing it. And those who are doing it are doing it badly.
Once you start in the low-end in this country it is very hard to move up. ~ Ben Bajarin on Twitter
Trying to leapfrog from one brand category into another is like trying to leapfrog a unicorn. Very tricky. Very dangerous.
Question: Why Not Sell To Both Value And Premium Customers?
As I pointed out in last week’s article (Android is a stick shift and iPhone is an automatic transmission), while you can simultaneously appeal to both Value and Expert buyers, you cannot simultaneously appeal to both Value and Premium buyers. Not that many, many companies haven’t tried.
No man can serve two masters: for either he will hate the one, and love the other; or else he will hold to the one, and despise the other. ~ New Testament, Matthew 6:24
No Brand can serve two masters either.
It’s really, really tough to make a great product if you have to serve two masters. ~ Phil Libin, Evernote CEO
The ever present temptation is to chase sales by broadening one’s product portfolio, opening up distribution or even discounting products. This can cause real long term damage to the brand.
Never purchase beauty products in a hardware store. ~ Addison Mizner
People do not want to buy beauty products in a hardware store and they don’t want to buy Premium products from a Value Brand either. Do you go to K-Mart to buy high end goods? Do you go to Tiffany’s expecting to get a bargain?
Brands are always at risk of being caught in the deadly middle. Mix your brands, mix your message and your Brand will not appeal to both Value and Premium customers — it will appeal to none.
It is not wise to violate the rules unless you know how to observe them. ~T.S. Eliot
Gucci, and Pierre Cardin are recent examples of premium/luxury Brands that overexposed their Brand. Who wants to pay extra for clothes everybody else is wearing?
Samsung is an example of a Value Brand that tried to stretch to cover Premium as well. Who wants to buy a Premium phone from a Value provider?
Sparrows that emulate peacocks are likely to break a thigh. ~ Burmese proverb
Fire, water and markets know nothing of mercy. Stray from your brand and your customers will stray from you.
Some Examples Of Tech Brands
It is a test of true theories not only to account for but to predict phenomena. ~ William Whewell
Microsoft Windows (for PCs)
The Windows near-monopoly that existed for the past two decades was an anomaly, not the norm. When everyone has to buy the same product, the lines between Value, Premium and Veblen Brands become blurred. As soon as mobile computers provided significant competition to the Windows near-monopoly, customer segmentation quickly returned.
Microsoft Windows Phone
Microsoft has had numerous problems associated with its Windows Phone, but one of the problems is the Windows Phone did not neatly fit into any one Brand category. Microsoft wanted the Windows Phone to be a Premium Brand that could compete with the iPhone but, because Windows Phone was so late to market, Microsoft initially sold the phone at discount prices in order to gain market share. The phone’s lack of identity was undoubtedly one of the reasons why it was never able to gain traction against its Value and Premium competitors.
Windows Phone’s biggest challenge: it has neither scale of Android nor premium base of iOS. ~ Jan Dawson
IKEA is not a tech brand, but I list it here because it is a fascinating compare. IKEA is very Apple-like in design and very Value-like in Brand. It’s a unique combination and Brand that’s led IKEA to a unique level of Brand identity and corporate success. IKEA has no secrets. Anyone can copy the products they sell. Yet no one does. IKEA has been doing the same thing for 40 years but they also have no virtually no competitors. They have carved out an identity for themselves that is virtually unassailable.
Amazon Fire Phone
Amazon is an amazingly successful Value Brand. Once again, I refer you to Jeff’s Bezos’ clearly stated company philosophy:
There are two kinds of companies, those that work to try to charge more and those that work to charge less. We will be the second. ~ Jeff Bezos
You cannot have a corporate mindset that you are going to charge less than the competition and then turn around and attempt the sell Premium products. Whenever Amazon does stray into the premium sector, they usually receive a bloody nose. The latest case in point is the Amazon Fire Phone.
I greatly admire Jeff Bezos who is far, far smarter than I am, but I think Amazon would be better served if it stuck to its knitting.
Fitbit is a Value brand. When they recently strayed into the premium sector with the Blaze, the stock market smacked them. Investors and consumers just didn’t believe Fitbit could play as an equal with Apple in the Premium wearable arena.
Samsung is a Value Brand that had aspirations of becoming a Premium Brand. Or perhaps it would be more accurate to say Samsung has aspirations of becoming both a Value Brand AND a Premium Brand.
Almost exactly four years ago, Samsung’s marketing boss sat down for an interview and made a claim that seemed almost comical at the time. … People had been obsessed with Apple’s iPhone line for long enough, and Samsung was going to shift their obsession to Galaxy phones. ~ Zach Epstein, BGR
And for a while, it seemed like Samsung had pulled off their audacious goal of challenging the Apple iPhone in the Premium sector. With a massive smartphone division and tens of billions of dollars to spend on marketing, Samsung’s star seemed to be waxing while Apple’s appeared to be waning. But it was not to be.
Samsung’s smartphone growth has come grinding to a halt. And it’s not because the company’s phones aren’t as good as they once were, or because Samsung’s advertising has slowed down. In both cases, the truth is quite the opposite — the Galaxy S6 and Note 5 are two of the most impressive smartphones that have ever existed, and Samsung’s marketing budget is still 11 digits each year. It’s also certainly not because Samsung is running out of room to grow; an estimated 1.4 billion smartphones shipped in 2015.
The bottom line is this: Samsung’s best smartphones simply aren’t exciting anymore. ~ Zach Epstein, BGR
By trying to sell to both the Value buyers and the Premium buyers, Samsung fell into the deadly middle. Apple stole away Samsung’s Premium customers from above while Xiomi and others undercut Samsung’s Value proposition from below.
Android is a Value Brand because, despite its many significant features, the feature that most distinguishes Android and its associated products and services from those of its competitors is lower price.
People think I’m insulting Google when I call them a Value Brand.
First, being a Value brand is not an insult.
Second, Google Android not only is a Value Brand, Google WANTS Android to be a Value Brand and NEEDS Android to be a Value Brand. Android’s purpose is to extend Google’s reach — to have Android on billions and billions of phones. The more people use Android, the more information Google has access to.
Google Android’s entire business model is based on value. They give away the software for free, which allows manufacturers to sell their phones cheaper, which allows more buyers to buy smartphones, which puts Google services in more pockets everywhere. It’s a brilliant business model that has succeeded brilliantly. To claim Android is, or should aspire to be, anything other than a Value Brand is to not understand Google’s purpose in creating Android.
To be fair, Google has tried and tried and tried to go up market with the Nexus phone and, while the press has often been all agog over them, the buying market has all but ignored them.
While industry writers like to talk about how Google has “80 percent” share with Android, the actual units of Google-branded devices that compete with Apple are quite negligible (0.1 percent, according to IDC), despite the huge share of media attention provided to it. The number of people buying Nexus phones is less than even Windows Phone, and you’d be hard pressed to find any reasonable person who actually believes that Microsoft materially competes with Apple in the smartphone market. ~ Daniel Eran Dilger, AppleInsider
At best, the Nexus is the equivalent of a concept car. At worst, it’s a sign of misguided strategic vision.
In its day, Blackberry was definitely a premium product. It was a best-in-class emailing machine. Geeky, yes. But very powerful.
We think of the BlackBerry device as the greatest communication device on the planet, one which enables you –a push environment, a reliable device. It’s the platform that enables this. ~ Anthony Payne, Director of Platform Marketing, Research In Motion, 13 May 2011
The above was absolutely true in 2006, but it was absolutely untrue when the above was written in 2011. By then, the iPhone had supplanted Blackberry in the Premium smartphone category.
What happened to Blackberry was a technology paradigm shift. The iPhone was as different from the Blackberry as the the steamship was different from the sailing ship. The Blackberry was a premium “sailing ship” but, in the long run, it couldn’t even begin to compete with the Value, more less the Premium, smartphone steamships that followed it.
Once a new technology rolls over you, if you’re not part of the steamroller, you’re part of the road. ~ Stewart Brand
Disney is a Premium Brand. I include Disney because I see a lot of parallels between Disney’s Brand and Apple’s Brand. Disney holds a very tiny percentage of the theme park market, yet they have a commanding grip on the top of that market. Disney could easily afford to create hundreds of additional theme parks, but to do so would diminish, rather than enhance, their product’s appeal.
Apple Watch Edition ranges in price from $10,000 to $17,000 and it is unquestionably a Veblen Good. The price of the Apple Watch Edition is significantly greater than the price of the Apple Watch Sport and the Apple Watch without a corresponding increase in quality or functionality.
The Apple Watch has displaced Rolex on a list of luxury global brands, as measured by analytics firm NetBase…. ~ Luke Dormehl, Cult Of Mac
I don’t know whether the Apple Watch Edition will actually out-luxury Rolex watches, but I do know Rolex is exactly the type of Veblen good that the Apple Watch Edition is competing against.
There are two great rules of life: never tell everything at once. ~ Ken Venturi
Next week I will focus on Apple’s Branding. Is the iPhone truly deserving of its Premium status or is it merely using the smoke and mirrors of marketing to fool us into believing it is a premium product? Or perhaps the iPhone isn’t a Premium product at all, but is a Veblen good instead. Join me next week at which time I will fail to answer these questions and many, many more.
114 thoughts on “Part 2: Branding Tech Companies”
Thanks for the education. At first glance, the positioning of a brand as value, premium, etc. is merely what someone is willing to pay for it.. Traditionally in the computer market, function and capability has ruled above all else. With mobile changing the dynamics, that is the popularization of tech, there is also a necessary shift (I would say manipulation) over what’s expected. Try selling a circa 2000 computer that brags about doing less as a feature.
This simply means that the broader market has shifted it’s vanity. I was at the Louis Vuitton store at the Champs-Elysées a number of years ago, and I saw a safe that cost more than the money it could hold, in commonly circulating currency. Clearly a Veblen Good (didn’t know the term, knew the concept). The vanity shift went from function -i.e. ‘a good, big, strong safe, woo-ha-ha…!’, to appearances -‘you could never be me’ (for which I am grateful). Aspirational brands, I imagine, try to play on this emotion.
Waiting for the other shoe to drop next week, but fair warning, and it’s relevant, I’m pretty sure that ‘Error 53’ applies somewhere.
You’re making a couple of unwarranted leaps (just to push your agenda, as usual).
First, That’s exactly what Apple did ca. 2000 — with the dropping of the floppy drive, for example. Apple’s doing fine on the PC front. Many PC OEMs that would sell you anything you wanted have gone out of business since 2000.
Second, you neatly substitute appearance for function. As though Apple offers little or no functional values, and only appeals to vanity. As it happens, Apple offers both. Apple’s attention to detail and design, and the functional value of its products, have both increased the value of its brand, and thus the desirability of its products.
While you can’t do both value and premium, you can do both functional and aspirational.
Generally, you could say Apple manages to change the game, rather than just “playing on emotion” by delivering a better looking safe. For example, it’s obvious that you feel one “safe” is as good as another (being as how they are all equally insecure at the end of the day). So instead of promoting all payment systems (“more”), Apple offers “less” and sticks with its own system.
So, Apple ostensibly offers less overall (number of features), but in fact often delivers more in terms of the individual features it does offer. In the case of payment systems, Apple has done its homework and provides a better end to end system: including fingerprint scanning and a better token system to keep personal and banking data on the phone, etc. This is because Apple does value its customers’ data; so your analogy to a safe costing more than its contents is only true if you don’t really value your own personal data and are happy for Google or Samsung to value it for you.
‘possibly to push your agenda’
I prefer ‘grind my axe’.
I did not position Apple’s products at all. I’m waiting for next week. Suggest you do the same.
No, apparently it isn’t easy to “say no” to including features, that people like you “expect”.
I didn’t say the act of removing something added functional value. My point is that a PC without a floppy drive is functional enough to still be considered “premium” by some measures. Perhaps it is more functional along other lines and features that it does include.
Keep swinging and grinding. The fact that you find this difficult to grasp shows your axe is extremely blunt.
Here’s his vision of premium functionality:
So it’s YOU that bought the safe! 😉
To show you that I do understand you. Whereas I appreciate ‘what’ a thing does, you appreciate ‘how’ it does it. It’s elegance. Couldn’t agree more. Both are important. In fact, if multiple ways of doing it are made possible, even better. That’s what ‘inspires’ me. When an elegant design becomes imposing, I where we completely differ. Nothing worse than, ‘it won’t’.
“That’s what ‘inspires’ me. When an elegant design becomes imposing, is where we completely differ. Nothing worse than, ‘it won’t’.”
Certainly, “it won’t” applies to an iOS device running Flash. (I’m sure you have tons of other examples, but please don’t list them 😉 ). It’s just that Apple was correct about Flash, and the market, including Adobe, has realised it. Same with the floppy drive.
Patience friend. I haven’t insulted my Apple devices yet. Like I said, I’m waiting for the next installment to come, and then, if I have anything to say, I’ll say it.
Meanwhile, I’ll be shopping for bumper stickers to canvas all over my BMW.
BMW, hmmm? Just stick one white Apple logo sticker on it, and people will know you have taste. 😉
There is worse than being a hypocrite, and that is striving to be one..
The error is thinking selling anything is not playing on emotion, no matter how “functional” on utilitarian. Even for a technophile, just as an audiophile, the purchase is desire driven.
Even in the least of things the beggar is superfluous.
I agree. When I say where we place our vanity, that’s what I mean. Not that we’re devoid of vanity.
Oh, I agree. Klahanas’ and Obart’s error is that they think (and repeatedly try to suggest) that the main reason for most of Apple’s sales are solely emotion and vanity. That there is no functional value that justifies the premium price of Apple products whatsoever (because Android or Windows products can “do everything an iOS or OS X device can do”).
It is very clear that they as much as declare that Apple products do not deserve the term “premium” but only “luxury”.
I said no such thing. That’s your perception, must be reality.
Well, if I had the time, I would test my perception and go back through all your comments on Disqus. That I am not doing so is simply because I think I would have to list hundreds of comments that would support my perception.
On Doing More. Theoretically, anyone can “do” more, in an unrestrained, unregulated system or with an unrestrained and unregulated device. By definition, less constraints and less rules would make more discrete actions possible. But “accomplishing” stuff is another thing.
When you have a focused, regulated environment, with tools you can rely on without too much user-management required, then the output and accomplishment actually tends to be greater. Hence, people producing works of art, music, film on iOS devices; or people entrusting management of aspects of their health to iOS devices; or entrepreneurs creating startups around iOS devices; or enterprises preferring iOS devices for mobile usage; etc.
Anyway, in reality of course, “Android is better” is, again, only valid in the most broad, ideal sense, and with some effort. The average Android user of the average Android device does not easily, if at all, enjoy all those supposed benefits that could possibly make his experience or accomplishment “better”. All those theoretical benefits of possible features don’t accrue to all users of all devices in the Android universe. Whereas a majorty of iOS device users do enjoy pretty much the same capability and experience, and more than most Android users have at hand to make practical use of on a daily basis.
This is why this article and reactions to it from the Android camp are quite ironic. Android is indeed at the “value” end of the spectrum, while some users like yourself would like to think it’s really premium for the high-end, discerning, pro-user. Android is what people get stuck with, because the OEMs have no choice. Conversely, you would like to think Apple is mostly luxury and emotion-based with less functionality; but Apple devices actually do have solid, unique tech underneath, that, when coupled with its focus on making the complex more simple to use, means it actually does offer devices for “the rest of us” that provide great functionality as attested to by great accomplishments.
Kizzy old boy, I went back and re-read your comment. I stand corrected. I did infer that their vanity (being different than mine) sells iPhones. I stand by my words.
Meanwhile, you know I don’t care about these buzzkill business concepts, I believe I pay premium prices for premium devices. If you consider them “value” devices, that doesn’t offend me in the least.
Not sure what buzzkill business concepts you are talking about, or think I am talking about. You seem to try to attribute the premium things you care about to the general “Android”. When you get called on it, it’s a “buzzkill”, or something.
No-one is saying you can’t buy a “premium” phone that runs Android. Just that that isn’t the norm (according to statistics), because Google and Android aren’t helping raise the game across the board. This article is all about the direction and tendency of Google and Android.
Sure, you can find a premium Android device. After all, you can make a Lada win a rally. But your buying the special rally edition from one OEM that elects to stay in that apparently losing game doesn’t really help most OEMs get mainstream Android models out of “value” proposition territory. The sales of the “premium” models are dropping — because there seems to be little real differentiation going on that most Android users care about.
Now, Obart says this is the fault of the OEMs. But it has to partially be explained by the homogenising nature of Android, and the commoditizing tendencies and intentions of Google, such as some of the efforts to get all software to run on all devices, regardless of OS version or specs, etc.
You guys like to crow about that on the one hand, and then wonder how anyone can possibly say Android doesn’t really lend itself to premium branding and excellence. See how that works — catering to lowest common denominator equals lack of focus at the sharp end. It’s inevitable.
By buzzkill, I mean all the marketing concepts tossed around. With very few exceptions, The Law of Supply and Demand, for instance, it’s all phenomenological. Observe and Report. That’s fine, but then somehow it becomes fundamental and all new jargon gets made up when there is an exception. That’s fine, I’m not dismissing it. As they say in the Queen’s Court, “”I’ll leave it to y’all!!
Meanwhile I will happily bask in non-premium mediocrity! 🙂
“Traditionally in the computer market, function and capability has ruled above all else.”
That’s because back then, corporate IT departments made the purchasing decisions and these were made on purely economic and utilitarian terms, as they should be.
But the computing device industry could not have expanded to its current size if they did not branch out to selling directly to the consumer. And I will say again what I always say, companies that assume the consumer is stupid do so at their own peril.
Consumer’s judge product quality and value by a different metric then enterprises do, but they know quality when they see it. They might be fooled for a while by flashy marketing but they’ll find out soon enough if they’ve been sold a bill of goods.
It actually seems like the reverse of what the pharmaceutical companies are doing. In that case, they are advertising drugs to non-medical people, with the hopes that they will be asking their doctors for it. But the doctors are the ultimate arbiter.
Here, the consumer is the ultimate arbiter, and IT has been replaced by Apple themselves.
When the buyers were enterprises, IT makes the buying decision for the company. Now that the consumer is the buyer, no, Apple does not take the role of IT and makes the buying decision, it is the consumer himself who takes the role of IT and makes the buying decision.
Apple, and its competitors, will of course try to influence that buying decision but no, as much as you seem to wish they did, they don’t make it for the consumer.
Here I must adamantly disagree. Yes, the consumer makes the buying decision. All other IT functions (in mobile) stop there.
I’ll leave it at that because we all know what would follow is an the same old endless exchange of talking past each other.
It’s rely not debatable. The only thing you could do is try to convince me that it’s for the user’s benefit.
Nope, this walleye is not biting on the line dangling out of that hole up there in the ice. 🙂
It’s a snow belt reference. Quite appropriate, I think, given that it’s 14ºF in my neighborhood right now.
The way I heard one person put it, a Brand is a promise (although, implicit doesn’t always match explicit). And the consumer gets to decide if you’ve kept your word or not.
Another weekend, another excellent, well written, entertaining John Kirk post. And this time, extremely educational, as well, at least for me. A few thoughts and questions:
1. You say that mixing value and premium always ends in tears. Is there a similar problem with the same brand mixing premium priced and velbin priced goods? Does an affordable premium line of handbags by the same label cause their luxury line of handbags to tank? In tech terms, just how dangerous are the waters Apple is treading with the upscale editions of their watch?
2. My first thought on reading your examples of companies foolishly trying to mix premium and value in the same brand was, “gosh, there are an awful lot of companies who appear to have never taken business 101.” My second, more considered thought, was that it has to do with drinking the kool-aid of your own brand, and/or confusing the brand of your company with the brand of your products.
a. Drinking the kool aid – this is easy to do, because the people who work for a company are naturally going to think highly of their company. Microsoft may be the biggest example of this in your list. They give every indication of thinking that people like them and their OS, that their brand is a rock star on wall-street so it should be a rock star in the minds of their customers. Then, when they run their ship aground on the rock solid fact that their customers (especially consumers) have an extremely low opinion of their products, they just shake their heads “nah, can’t be so” and proceed to make the same mistakes all over again.
b. Company brands vs product brands: Each company has a brand image,
based on their history and common perception of what the company is
like, and those brand images are just as irrational as the brand images
associated with actual product brands. Sometimes the brand image of a
company becomes toxic (Haliburtion, Hooker chemical, Blackwater), other
times it becomes a rock star (Apple, Disney). Environmentalists will
have a different brand image of a company than wall street investors,
and both will have a different image than the company’s customers.
Things can get weird when the company name and the brand name are one and the same. The need for some people who dislike Apple products to obsess over negative things about Apple the company being a prime example.
Wall street, the company *is* the brand, so you get a great deal of
foolish behavior on the part of investors who buy and sell based on
their brand image of a company rather than on a logical determination of
the company’s value. So, for instance, Amazon continues to trade so
high despite clear evidence that it will never allow itself to be very
profitable, and Apple is forever trading far below any realistic
estimate of its value based on profits.
c. Confusing the brand of your company with the brand of your products: I’m not quite so sure why this happens. Samsung may be a poster child of this problem. For whatever combination of reasons, they insisted on sticking “samsung” on the front of every phone they made, both the expensive Galaxy line, and their vast array of inexpensive phones. If they’d put “galaxy” on the front of their premium phones, or only used “Samsung” for their most expensive phones and used something else on their value devices, they might have been able to pull off creating a premium Android brand. But they didn’t.
Clearly some companies (eg, automotive companies) get it that their company name should not be their only brand name,. and that when diversifying up or down the value spectrum, it’s a good idea to have a clear division between the value brand and the premium brand. So the word “Ford” doesn’t appear on the grille of a Lincoln towncar, nor does “GM” appear on a Cadillac. But other companies, like Samsung, don’t get this. Is it because they’ve drunk the kool-aid? Or is it that they’ve confused the brand cachet of their company with the brand cachet of their product brand?
Re Samsung. It think part of the reason is Samsung is a much more prestigious brand name in Korea than it is in the US and other advanced industrial countries. Toyota is probably the same thing, though I won’t claim to be an authority on that.
Asian companies seem to fetishize their names far more than US and European corps. The worst example of this is Nissan which suffered a major hit and took years to recover when they abruptly changed the Datsun name tag in the US to Nissan. They didn’t even bother to gradually phase in the new name with ‘Datsun by Nissan’ or something like that. And Datsun had a stellar rep in the US. It was the flashy, sporty alternative to boring, anodyne Toyota.
“It think part of the reason is Samsung is a much more prestigious brand name in Korea than it is in the US and other advanced industrial countries.”
I didn’t know that, but it makes sense — Brand image is never a monolith but marketing idiots continue to delude themselves that it can be treated and “managed” as such. Hah. “Managing” brand image is like the board of directors clinging to the backs of a herd of runaway horses — the company can maybe nudge the overall direction a little this way or that way, but they can’t actually steer, and for every aspect they manage to get a handle on, there’s another aspect that completely escapes their control.
Take Proctor and Gamble — they’ve been trying to get away from the Christian fundamentalist urban legend that they’re in bed with the Devil (due to seriously demented misreadings of their classic, trippy crescent moon and stars logo) for 40+ years now.
Or Apple — for 10 years, from Jobs’ ouster to the release of Windows 95, Mac was the only truly viable platform for doing tasks that require a GUI. And Apple charged extortionate prices for their machines, because they could. Then Microsoft finally ate their lunch, and Jobs came back to save the company from bankruptcy. One of the first things he did was lower their prices to be competitive with similarly specced brand name Windows PCs… but 20 years later, Apple is *still* seen by many as overpriced and greedy. In contrast to most other premium brands, where the typical person’s response to “but they cost more” is “you get what you pay for,” and a shrug.
Long winded way of saying that a company can really screw itself if it allows groupthink or parochialism or confusing their corporate brand with their product brand to blind them to the actual nature of their brand image in any given target market.
Macintosh Performa anyone?
I think its safe to say that Apple became pretty adept at branding. I think it is also pretty safe to say that Samsung has not.
The case studies that always amaze me are the big Japanese firms like Yamaha, Panasonic, and even Sony (though Sony, outside of televisions, never managed to be considered truly premium).
From what I can tell, Yamaha is consistently viewed as premium in every market they participate (and that is quite a few). They’ve dabbled in mass market products, but the brand has not suffered.
The reason the Amazon Fire Phone failed was because it was a grossly misconceived product. They originally priced it at $400, then dropped the price to 99 cents and STILL couldn’t sell it. Nobody wanted the damn thing.
I suggest that before commenting on this post that people take a few minutes to learn about brands from another source. Spend a few minutes doing some internet research, talk to a teenager who has taken a high school level marketing course or just pick up a dictionary and you will get a better, more accurate understanding of Brand and Branding than what John has presented here.
Even without much prior knowledge of brands and branding one case easily see that John really does not know what he is talking about. I’ll give a few examples:
“Brand equity — or simply ‘Brand’ — is the premium a company can charge…”. First of all, Brand and Brand Equity are two different concepts. Brand is what distinguishes or differentiates products in the marketplace. Brand equity is measure of the value of a brand or branding. This is not the same as being able to charge a premium as Brand Equity can be negative.
“The opposite of a brand is a commodity…” Not quite. I don’t think there really is an opposite of Brand, though some products simply are not branded or are branded weakly. However, commodities are often branded in order to distingush them from other commodities and competing products — think of a commercial by an industry group or trade association.
“A Value Brand has one or more significant advantages over its competitors…”. That is not really a definition. Value branding is often about convincing consumers a product is good despite a low price. I also don’t think most marketing experts would consider IKEA a Value Brand.
“…you cannot simultaneously appeal to both Value and Premium buyers”. Simply not true. Lots of companies do this, from car makers to grocery chains. I think what John meant to say is that one can not brand products as being both Premium and Value. That is why companies often manage multiple brands. Using Samsung as an example, their mistake was not trying to brand their smartphones as both Value and Premium. Instead, it was that they put both Premium and Value devices under the same Galaxy brand.
John, please do us all a favour and please expand your research to include actual facts and definitions rather than just a bunch of clever quotes.
Umm. IKEA is a value brand. Their pitch is to deliver high design pieces at surprisingly low prices. If flatpack furniture is not a value proposition, I don’t know what is.
And perhaps you should stop confusing your opinions for “actual facts and definitions.”
“…That is why companies often manage multiple brands…” That is what I call contradicting yourself.
You think GM only manages one brand? How about Procter and Gamble?
And that branding decision by GM (to offer multiple brands) is precisely the point of this article. How is that lost on you?
You disagree by agreeing. Then you accuse the author of doing poor research.
Just about all consumers know the differences between Chevy and Cadillac. GM does not attempt to sell/market Chevys against BMWs or Cadillacs against Hondas. Samsung, on the other hand, tries to market Galaxy phones against everyone.
So you are in agreement with the article? Or are you simply trying to show that John Kirk “doesn’t know what he is talking about” by not discussing automobiles in a piece entitled “Branding Tech Companies”?
Quoting from your post above: “The opposite of a brand is a commodity…” Not quite. I don’t think there really is an opposite of Brand, though some products simply are not branded or are branded weakly. However, commodities are often branded in order to distingush them from other commodities and competing products — think of a commercial by an industry group or trade association.
He probably should have said “The opposite of a **branded good** is a commodity” but I think most people who read the article understood what was meant.
I am not sure what you mean by “commodities are branded in order to distinguish them from other commodities” then you cite commercials by industry groups and trade associations. Like those milk commercials wherein milk producers brand their products as “Milk”? Or when beef producers branded their product as “Beef?” Seems you’re getting confused too as to what “brand” means.
“However, commodities are often branded in order to distingush them from other commodities and competing products”
Exactly. Take generic foods — by definition, you’d think they’re the very opposite of branded goods, but here in Toronto every single supermarket chain has its own brand of generic foods. Actually most of them have two lines of generic foods — a cheap “value” line, and a more expensive “premium” line.
When generic foods first came out, they were really generic. In plain brown packaging even. Now they’re really house brands but the term ‘generic’ stuck.
OK, than what do you think “brand” means. And more to my broader point, where is John’s definition of “brand”.
Anyhow, here is a useful definition from Wikipedia: “..feature[s] that distinguishes one seller’s product from those of others.”
“…more to my broader point, where is John’s definition of “brand”…” you ask.
From the article, third paragraph, last sentence:
“Brands are a communication tool for the seller and a shortcut to understanding the product being purchased for the buyer.”
That is a fine shorthand definition, as most people already understand what a brand is. In your zeal to find fault, you forgot to read.
Silly me, when I went back I looked under “Definitions”. I stand corrected. However, there is still a lot wrong with what John wrote.
No, in it’s original conception, a brand is a name. A proper noun to distinguish your product from your competitors. Then you build your brand by associating it with good things, (you destroy it by associating it with bad things). As usual, with the imprecise use of language that business writers are very famous for, “brand” became confused with the “image” and “reputation” that it conveys. The brand is not the image or the reputation. Image and reputation are the things that a brand evokes in the consumer’s mind.
I would add that anyone who wants to think deeply about brands should keep one thing foremost in mind. Do not assume that customers are stupid. Premium, value, commodity, Veblen, etc. whatever brand category a manufacturer or seller chooses, they still have to deliver quality. If they don’t, customers eventually see through this and the brand will be worth less, if not worthless, pretty soon.
For example, Veblen goods doesn’t mean just slapping a high price tag on the damned thing. Haute couture clothes are eye-popping expensive but if you see one up close, the workmanship is out of this world. You can actually wear it inside out and it still looks exquisitely made and finished.
I raise this because a lot of people think that branding is just marketing. In truth branding permeates every aspect of a company’s operations especially product development and R&D.
In a very real sense the customer is more in control of the brand than the company. The company can only control so much. At some point the customer either agrees or not. For instance, VW never branded ( or as they used to say “positioned”) the Beetle for the first time, college buyer. Yet that was who adopted them.
Since you mentioned them, VW is an example of how it is virtually impossible to move your brand upmarket. They built the VW-branded Phaeton, new high tech assembly line and all, a $90K car to compete with MB and BMW sedans that cross the $100K line. It was a total flop. Everyone told them it would flop. The head of Audi, a VW subsidiary, was fired because early on he publicly expressed an opinion that he thought it was a bad idea. And even more amazing, with the example of Lexus right before him, VW’s headstrong (and well known eccentric) CEO went ahead with his crazy notion of selling a economy-branded luxury car. Amazing.
(OT) Current shenanigans not withstanding, this should be no surprise, either. They have been moving their pricing upward for a while to be considered at least premium (and in a lot of ways they are, not just in pricing), but it is, seemingly, even a leap to get from high-end mid-range to low-end high-range, whatever level you would think of Mercedes or BMW. Maybe they thought there was an opening since Saab (my favourite) is no longer a player.
When GM shut down Saab, there was at least one group who wanted to buy it from them –brand, factories, inventory, everything– to revive the marque. But they chose not to sell it basically because “Why set up people to compete with us?”
One might think that should be deemed criminally anticompetitive behavior but it’s perfectly legal. Nope, what is good for General Motors isn’t always good for the United States.
“They built the VW-branded Phaeton, new high tech assembly line and all, a $90K car to compete with MB and BMW sedans that cross the $100K line.It was a total flop.”
Completely failing to learn the lesson that every Detriot automaker appears to have imprinted in their bones — create separate brands with separate logos for your different market segments. Don’t slap a “ford” logo on your expensive towncars, slap a “Lincoln” logo on them, and vice-versa for your affordable average sedans.
Wife screaming at husband during an argument: “You don’t love me for who I am!”
Husband opens her cosmetics cabinet: “Well who the hell are you!?”
Or something like that…
If it deserves the different name, it better be different and justifying it’s value. If it’s just repackaged, it’s deceitful.
“If it deserves the different name, it better be different and justifying it’s value. If it’s just repackaged, it’s deceitful.”
You obviously have never ridden in a Lincoln towncar. The difference from your standard Ford sedan is very clear.
No but I once had a Taurus and chose to not get the identical Sable.
The very definition of Veblen is that demand rises with price. There’s an app in the Apple appstore which does nothing except cost a lot. That’s pure Veblen. But contrary to what the article says Veblen isn’t the pinnacle of Luxury, just one facet of it.
And a Veblen good whose only selling point is its high price will very soon not be bought by anyone. I am really uncomfortable with the concept of “Veblen goods” or more precisely the simplistic way some people understand them. In truth Veblen goods don’t sell simply because of their high price. They attract buyers because some people judge quality by price. And some people judge quality by price not because they’re stupid but because their past experience has shown them that price is a reliable indicator of quality. Branding (and trust thereof) comes strongly into play here. People probably trust that a very expensive Tiffany piece is well worth the price but not if its a no-name jewelry line. So in fact among luxury, high-end, premium (I’m not going into a nitpicking debate about nuances in terminology) products, Veblen goods are actually the most dependent on brand reputation. People will judge quality by price only if they trust the brandname of the product in question.
As for iPhone apps that do nothing but cost a lot, how well do they sell? There’s always the oddball or two who would buy it, maybe even as a gag, but I doubt if it’s a big seller. There was that $999 I Am Rich app, that did nothing and yeah a few people did buy it and immediately regretted the purchase but the ensuing uproar caused it to get kicked out of the App Store.
I’m feeling stuck in a deconstructing loop, but, again “quality” is only one (optional and loosely defined: does it mean shininess ? durability ? resilience ? precision crafting ? …) dimension of luxury.
A friend of mine working in upscale retail had a recurring issue with people stealing bags and packaging because what that’s what made an item “luxury”…
1- I’m not quite sure why you’re trying to novlang away “luxury”. It’s not a dirty word, it’s not synonymous to Veblen. Veblen is a subgroup of luxury, trying to equate the 2 makes no sense.
2- I think the difference between Value, Premium and Luxury is in the eye of the beholder. The same device (say, an iPhone) can be the Value way to do something (say, a subsidized iPhone to access locked in content and features such as iTunes videos, iMessage…), a legitimate Premium purchase (say, if in-person service is a vital criteria for you and you live above an Apple Store) or a Luxury purchase (if you’re buying the iPhone not for tangible reasons but because of brand image, peer pressure, that Rose Gold option…).
To me the whole argument about Android being Value falls flat because of that, and because the perceptions and underlying realities are not Google’s responsibility, but the OEM’s. And ditto with desktops : to me an iMac that can’t you can’t play on, can’t put an SSD nor any expansion card in isn’t premium… though it obviously is to others.
And a Ferrari isn’t premium because it doesn’t have a trailer hitch.. though obviously it is to others.
But you can indeed install a trailer hitch on a Ferrari.
And you can indeed install an SSD inside or externally bootable to any iMac. Same is true for all other expansion options.
Premium is not defined by all-inclusion. That is your narrow definition.
You didn’t get the point that premium is in the eye of the beholder… You want the stuff you chose to be premium, and to be premium for everyone. That’s doubly a fool’s errand.
Your “point” is unconvincing. The market has many eyes and they see better than you.
What decade are you living in?
The one that uses current video cards. Which one are you in?
Current video cards. Talk about your Veblen goods.
“For an extra $1250 you can get the XB3500 Extreme, which gives an almost perceptible edge over the XB3400 SE. See the zombie’s blood spurt in ultra high definition at 120 frames per second!”
Why buy a passenger car or luxury sports car when you really need a truck? Unless you are modeling complex weather systems, these cards are just bragging rights.
And if you really need to chase these video specs, perhaps you shouldn’t have bought the $1500 iMac.
Veblen? Partially. Like I said before, it’s where you place your vanity. In my case it’s ownership and control over my device.
But only partially, in my desktop I have dual Titan X’s costing $1,100 each, before tax. But I transcode 30 GB mkvs to 5 GB mp4s in 5 minutes. The rest of the machine cost about $3K, but it is at parity with the $10K Mac Pro for performance.
Now my Mac Pro ($4K hexacore) is more of a Veblen good. It actually replaced my i7 Mac Mini, which has become an ATV-like device for my summer home. I knew my expectations going in. It was to be a Mac Mini replacement. I wanted a reasonably good machine for OSX for when I wanted to run it. TB2 cannot run modern video cards, never mind two of them in SLI. TB3 will. Great! I’ll just put TB3 in my Mac Pro…. Oh crap….! That’s Veblen, but I learned from bitter experience going it, where to set my expectations.
PS-But my trash can Mac looks like the cutest little octopus with everything hanging off! 😉
Seems you’ve purchased the tools for your trade.
Oddly, in my world, my old dual G5 tower with a Universal Audio co-processor handled everything I ever threw at it. Occasionally, it still does. Sure, my 2008 8-core Mac Pro has shaved a few seconds off the conversion from 24-bit mixes to 16-bit masters, but in the grand scheme of things, the G5 was up to the task.
For me, a newer Mac Pro would be utter overkill. Until there is a need, I will stick with my working gear. The money saved can buy other expensive toys (audio processors, musical instruments & microphones are like crack).
I have never presumed that my specific computer requirements are the benchmark for anyone else (other than my disdain for all things Microsoft – or an Android device of any kind, or those goofy-shaped trackballs, or… never mind). In the rare instances that I ever transcode video, I’m content to walk away from the computer and let it do its thing. Step outside, sip some scotch, actually talk to people. Live in the moment.
And savor real weather while its happening. Transcode me some of your more interesting weather models and I’ll buy you a scotch.
I totally see where you’re coming from. I strive for, and thirst for maximum flexibility and performance. As if you didn’t already know, I’m a curious character, and I like learning new things.
That doesn’t mean that others need to share my lunacy, but I’m sure you’ll understand when I say style getting in the way of functionality. The thinner iMac really got my goat. Same footprint, same screen size, thinner (as if it mattered) at the expense of upgradability.
And I can mostly see where you’re coming from.
I still think its unreasonable to resent the sports coupe for not being a truck. That slim iMac works perfectly and looks great in the fancy reception area, on the CEO’s desk, or in one’s private study.
Upgradability is not a real concern for most people.
If the iMac was a real dog at basics tasks, you might have a point. But the current iMacs are faster than my old G5 tower, and that machine was perfectly acceptable in Photoshop, QuarkXpress, InDesign, and any spreadsheet software one might require. I just can’t share in your outrage.
Great! A holdout, I love a rebel! Here’s the thing…to be a rebel you need to have choices. It’s not that you ‘can’ and you choose ‘not to’. And having to buy an entirely new machine, over a restricting design decision, because your needs/wants changed is ridiculous.
That’s why I adjusted my expectations over the mighty Mac Pro to those of a souped up Mini.
This has all happened before. Perfectly functional hardware needed to be replaced due to industry adoption of new PCI slots, hard drive interface standards, constant RAM obsolescence, etc. Different manufacturers have lead the charge and we all have been forced to follow.
My current system of gear works. Until it doesn’t I’ll stay put.
Nothing an industry standard slot couldn’t handle. When slots change, it’s more rare and usually after a large industry shift.
But how about memory (in MBPs) or industry standard SSDs in the Mac Pro. It’s a proprietary hellstew.
I got burned by the shot lived PCI-X.
I have never managed to reuse RAM, and I have spent big cash on it over the years.
Oh scotch. No shortage of Veblen brands in the world of fine alcohols.
A Ferrari is mostly luxury indeed.
“I’m not quite sure why you’re trying to novlang away “luxury”. It’s not a dirty word, it’s not synonymous to Veblen.”
I would assume he did it in order to avoid tendentious arguments with you about where to draw the line between premium and luxury. Premium and luxury have a lot of overlap. Velbin is upper tier luxury, floating far above mere premium.
Veblen is not upper tier luxury, it’s just one of several flavors of luxury
Pray tell, what are the other flavors of luxury?
Chunky Monkey and Cherry Garcia.
Do I really need to deconstruct luxury? A lot is about intangibles (image, advertising, distribution, service, aspirations, co-optation by celebrities, heritage value, exclusivity…) a bit is about non-functional niceties (process, “noble” materials…)
Those concepts are only tangentially related to luxury. They apply just as easily to any to value brand.
So, yeah. You do have to deconstruct luxury if you’re going to claim there are “several flavors.”
“…the whole argument about Android being Value falls flat because… the perceptions and underlying realities are not Google’s responsibility, but the OEM’s.”
Huh? As stated in the article, the Android “brand” exists only to serve Google’s need to serve ads and capture user data. How that is “perceived” is irrelevant, as the physical products running Android are still hamstrung by Google’s objectives.
And don’t bother to reply that you can customize your Android phone and not use Google apps/services. The same is true on iOS regarding Apple apps/services.
An Android phone with a nice camera and high build quality is still an Android phone, and the market has spoken as to the “perceptions” of whether that OEM’s product is deserving of premium status. Commodity-priced, 2-for-1 deals, and ‘good-enough’ have driven OEMs offering only “premium” Android into rivers of red ink.
But keep beating that ‘lock-in’ dead horse. You wouldn’t want to give any credit to the company offering unique secure services that don’t involve auctioning off your personal information to every damn advertiser on the net. Better to keep justifying your prejudices.
If Android only serves Google, how come OEM make Android phones and users buy them?
How are Android devices hamstrung by anything when they are utterly customizable? And the same isn’t true about its devices…if only because only Apple sells Apple devices… your ignorance and inability to understand simple concepts (OEM and FOSS) beggars belief.
And you don’t even get basic facts straight: most premium Android OEMs aren’t in the red
I could go on, but… this is boring.
No need to go on. Your predictable response was boring enough.
I guess you believe you are entitled to your own facts when it comes to what is actually “open,” what the word “most” means, and the difference between profit and loss. You do know what a minus sign means on a balance sheet, don’t you?
Beggars belief alright.
Most premium Android OEMs aren’t in the red because of their other sectors, not because of their premium handsets. Unfortunately the same can’t be said for HTC which has no other units to help them along. Which premium OEMs are you thinking of that I, obviously, am overlooking?
A recent tweet from Ben Bajarin sums it up pretty well: “High end Android shipments ($500 and above) have decreased from ~ 280m units in 2012 to ~ 190m units in 2015. Curse of modular.”
Of course the anti-Apple crowd will simply move the price point and count cheaper phones as premium because they ‘do all the same stuff as an iPhone’ (false equivalence), but the reality is that sales of premium Android devices are shrinking and Android is losing share in the premium segment where all the best customers are. Apple dominates that segment, there’s no debate on this. Still, for years all we’ve heard from the anti-Apple crowd is cries of ‘just wait, as soon as OEM X does Y Apple is doomed’ or ‘no, really, wait until OEM A starts doing B Apple is doomed’.
There’s a profound lack of understanding on the subject of why Apple is successful and why consumers choose Apple. Ben also has data on customer loyalty and has said something along the lines of ‘there’s nothing to suggest current Apple customers are leaving’ (I’m paraphrasing, not an actual quote). And yet we will no doubt still hear these fairytales about Apple’s customers leaving in huge numbers, just as soon as X happens.
The last switching stats I saw (in an Ericsson report, shortly post iPhone 6+) were 0.4% monthly iOS-to-Android, and 0.8% the other way round. Clearly Appleward, but not one-way. Raw figures look big because 0.8% of 80% is a lot more than 0.4% of 15%, especially from the perspective of the 15% but in proportion there is no massive exodus, and the switching is fairly negligible compared to new buyers and intra-Android switching.
Some switching is always happening, both ways. That has little to do with the reality that Apple dominates the premium segment, and that dominance is growing while sales of premium Android devices have been steadily decreasing. This was predictable of course, since as the article points out Android is targeting Value, and doing very well in that space. But that naturally means Android will not be dominant in Premium. Yes, individual OEMs will have some success here and there with premium devices, but it isn’t going to be sustainable for any of them.
Pretty much all OEMs have a premium line: uninformed carefully listed only the old guard (Sony, HTC…); Huawei, Xiaomi, Oppo, OnePlus… seem to be doing OK.
I wouldn’t classify many of those as “Premium Android OEMs” just because they offer a top end model. IN the VW example elsewhere here, VW offers a premium level car, but they are not a premium brand, which is why their premium car had such difficulties.
I also think you’d be hard pressed to consider any of your examples are doing well because of their premium lines, unless you have the numbers to show otherwise.
And just to bring up an additional idea that is essential to luxury—exclusivity. Many premium products are not luxury because of this differentiation. Cool and popular can be premium, but it will not be luxury.
Hence my argument that Luxury is in the eye of the beholder just as “exclusive” is : nothing is exclusive really, as long as you can pay for it. Distribution can be a hurdle (in France, brands can somewhat limit distribution channels, but retailers cannot refuse to sell to individuals, so it’s about money really, no “we don’t sell to your kind”).
There are no premium Android OEMs. All of them (except Vertu ^^) have product lines from value to luxury. Some have premium lines (Galaxy S, Xperia Z, ONE, X, Mi vs Redmi), some have premium brands (Huawei vs Honor, Moto vs Lenovo though that one is still in progress and not clear-cut at all yet). I have no breakdown of sales/profitably by line/brand. Have you ?
We’re still struggling with the definition of value vs premium vs luxury even though I hoped this series of article would be about that. Wikipedia’s article is a sad affair. I’ll try:
Value is about getting common jobs done satisfactorily in a cost-effective way
Premium is about getting more demanding/complex jobs done and/or doing them in a way that’s time- & effort-effective, not just purchase-cost-effective. And probably TCO-optimized, not just purchase-cost-optimized.
Luxury is about intangibles and stuff unrelated to the job to be done: materials and looks, manufacturing and purchasing process, peer group aspirations…
Yes to a degree luxury is relative, King Lear quote about beggars and all. But there comes a demonstrable point where a product or brand is luxury, thus truly exclusive and not just metaphorically, to most people. We aren’t talking Kellogg’s cereal vs store brand. Not many people can afford to park their 100′ yacht in Key Largo. Not many people have a set of Tiffany… well, anything, except maybe as a wedding gift. Not everyone can get into Yale, much less afford it. American Express Onyx. That’s exclusivity and luxury.
To look at luxury without considering exclusivity or rarity is like looking at chocolate cake without either the cake or the chocolate (take your pick). The other considerations would be things like timelessness, craftsmanship, and authenticity. Those can also be reflected in Premium, so that’s why the other part is necessary.
As for premium Android OEMs, you’re the one who called them that saying they aren’t in the red, IIRC. I don’t have their numbers either, but deducing from what is available here at Techpinions as well as other sources in both profit share and product share breakdowns, it is not a stretch to conclude little if any of their bottom line is helped from their premium lines.
If these other companies are benefitting from their premium lines keeping their heads above water, then the general consensus of Techpinions writers and commenters is correct and Apple is pursuing the best branding and pricing strategy.
If their high end lines are not only, not benefitting their bottom line but also taking them down then they are clearly better quantified and qualified as value brands, both as companies and products.
Which is a great example of how Android’s brand is difficult for the likes of HTC and Samsung to overcome for their premium lines. And we’re back to John’s points that Android has an overwhelming value brand that counteracts and contradicts premium Android, never mind luxury.
So unless you have numbers to counter the position that it is a struggle to be an Android OEM, your contention that Android OEMs are doing fine is more relativistic than beliefs about premium or luxury.
Re: Luxury in general. Luxury is by definition rare/exclusive, because it is “use-less”, and few people can or choose to devote resources to that. Lots of things are rare but not luxurious, and lots of things that pass for luxury aren’t rare, just expensive. AmEx will make as many Onyx as needed, as long as they find customers willing to pay for them.
And the “mass luxury” and fashion era is weakening the other attributes you assign to luxury. Timelessness, craftsmanship and authenticity have all taken a beating. Some stuff that passes for luxury one year is crap 5 years later, craftsmanship doesn’t always factor, and authenticity is utterly subjective (and reciprocally there’s a lot of very authentic stuff that’s not luxury at all). I used to think oysters were a luxury, now I eat them weekly for exactly the same price as a pizza, and about a quarter of what I pay for my weekly sushi. Yep, I’m hungry right now…
Sure, but I didn’t equivocate rare with luxury. I said luxury is rare. It isn’t that AmEx will make as many as needed, the point is that few are needed. And I have no doubt that should Onyx become more common, they will make another that is harder still to come by. That is what some people want.
Mass luxury is only weakening the other attributes when those attributes are taken out of the luxury context. A luxury item that is crap 5 years later will be found out not to be luxury and will lose any luxury positioning. And again, I did not say all authentic is luxury. I said luxury is authentic. Your trying to argue against my points by arguing against points I didn’t make.
I’m trying to show that definition of luxury is hard to work with because the attributes supposed to signal luxury sometimes don’t, and luxury sometimes happens w/o some/all those attribute.
Okay. Then maybe point to something that counters my suggestions. Show something that is considered luxury that is not rare or exclusive, and does not demonstrate craftsmanship, timelessness, or authenticity.
– Rare: There’s decades of them in stock (even the natural ones)
– Exclusive: expensive yes if you want natural; exclusive… not sure what that word means
– craftsmanship: some, some not
– timelessness: nope, that’s a mid 20th century “invention”
– authenticity: the whole diamond thing is a marketing campaign.
Actually I think this is a great example of both our points. There is certainly a “mass luxury” level of diamonds. They are still rare, even with decades of stock. And their is an inventory that is low cost, yet still luxury by any economic measure. Even the poorest purchaser of diamonds will try to get the best diamond for their money.
But the existence of any volume of low quality diamonds does in no way eliminate the case for higher craftsmanship, lower volume/exclusive, high “4c” metrics diamonds that would be considered luxury by any economic and class standard.
I would agree that timeless is more a 20th century phenomenon primarily because cheap knock/rip-off kitsch became so prevalent thanks to Modernity. Timeless became even more important because it could no longer be taken for granted.
Re Android premium: we’re at chicken-and-eggs again: OEMs had to fall back to Android because they couldn’t (and still can’t) put together an alternative value proposition, nor brand it convincingly. Premium Android has issues not because Android but because OEMs.
There does seem to be some learning going on, not all Android devices look & feel as “value” as they did 2-3 years ago. OEMs do seem to have awoken to the fact that luxury is not about specs. They still haven’t found a way to lock in their customers though, I’d argue that for Samsung and Sony that’d go through their other consumer goods franchises.
There’s little doubt Apple is implementing the best strategy for itself right now, but Android OEMs didn’t pull off their own ecosystem, didn’t even pull off a consistent Premium/Luxury positioning, and now it’s a bit late in the game to try and catch up. There are certainly ideas to take from Apple or other industries (leasing, warranties, Pay…) but slavishly trying to mimic Apple is letting Apple define the parameters to what they’re best at.
If memory serves me well, it’s been 30 years since attending University of Chicago studying economics. But, I believe Mr. Veblen didn’t concern himself with his research ‘The Theory of the Leisure Class’ with premium or luxury classification. Again, if I remember, his work was more about how people of leisure, the wealthy, are willing to pay whatever amount that seems ‘o.k’ with them. I believe he called it conspicuous consumption.
I believe many people associated luxury as Veblen because it’s convenient and easily generalizes consumer behavior.
Another study was about ‘The Theory of Business’. And, I suspect your frustration with Apple is based on one of the ideas raised by Thorstein Veblen. Possibly the ‘ceremonial’ part. That business are not the friends of consumer. They’ll do anything to sell a product; advertise and charging what the market will bear. It might be seen as a way to create social status by creating a demand for its good and services that appear to not add any value proposition.
And, possibly this is the root of your argument. You may not care about the perceived status manufactured by a company. You want value based on what your actual needs and desires might be. Unfortunately, economies are run by status, irrational behavior (another economic study), and many other intricate affairs controlled by a small minority of the population, but having major influence and wealth.
I’m stopping… Good luck with your soap box.
I think the shadows on a cave’s wall go back a bit further than M. Veblen ^^
That’s not an issue by itself; progress kinda requires we try to fight it though.
Re: Android and Google vs OEMs. I think a major part of the problem is precisely that Android does have a brand of its own (mostly in Google’s control) and the OEMs struggle trying to figure out their own brand that can either be independent of or in spite of Android’s.
One cannot reasonably expect to install Samsung’s version of Android on an LG phone. If one is smitten by Xiaomi’s Android version of an iOS knock-off, one can’t presume it will install on an HTC device. The openness of Android closes once the OEMs stomp on it. Sure, there’s probably some arcane way of doing these things, but is it really worth it?
And if you want the latest and greatest Android with all the most recent security updates, your choices become seriously limited.
But, at least you’re not locked-in to anything.
Agreed. That’s the OEM’s fault though: car makers have no issue branding as whatever they want even though all cars run on gasoline, same as all phones run on Android.
Hmm. You are quite good at picking apart the limitations of analogies of others. Let’s look at this one for a second.
“all cars run on gasoline, same as all phones run on Android.”
1) there is the issue of different kinds of fuel. There are branding issues around leaded/unleaded/diesel. One might even call this “fragmentation” of sorts. Note VW has particular issues now with its branding of diesel vehicles.
2) Fuel is a little simplistic. You could better say, “all cars run on gasoline, same as all phones run on 1’s and 0’s.”
Since there isn’t really an OS equivalent in automobiles, and phones also have mechanical parts, perhaps Android is better likened to the engine of the automobile.
If all automobile users used the same engines (and there frequently is overlap among engines between different car makers), then you can bet there could be branding issues. “My Skoda has the same engine as your Audi” (that type of thing, though I may not be accurate in who makes what engines).
Thus: “My feature phone runs the same OS as your Galaxy.” So, how is that user better off for “choosing Android”, given that Android is apparently so much better than iOS? At the end of the day, can that user really “do everything” an iPhone user can do (much less do it “better”).
And why aren’t the majority of Android phone users choosing “premium” Android phones (the ASP is going down and Samsung for one is in difficulty with its premium lines).
I think comparing Android to gasoline is a bit too reductionist. Depending on which Android, that wold be more like, at the base/AOSP, all car makers having to use the same drive train and motor. When you get up to Google’s Android it would be like having to use the drive train, motor, suspension, airbags, frame, and probably a few other pieces, too, essentially everything except the body and interior design.
Yeah, you’re right… make it TVs and TV shows. You have TVs from smallest econoline to largest glitziest 3D HDR Dolby AMOLED 90″ for the same content, with prices from $50 to $5.000+. Substitute phones and apps for TVs and shows: there is a luxury TV / home theater segment even though the content is the exact same than on value devices.
PS cars do share a lot of parts these days.
“I think the difference between Value, Premium and Luxury is in the eye of the beholder.”
That’s just not so. The whole point of a brand is for a company to send a message to the consumer. Some companies are good at doing that and some are not. But if your message can be interpreted as value, premium or luxury in the eyes of the potential purchaser, then you have the opposite of a brand. Rather, you have no compelling message at all.
Reminds me of one of my first marketing class in the US in the early 90s: the teacher mentioned endorsement by Paul MC Cartney as a way to target the middle-age middle class; the French and Indian students in the room were flabbergasted.
A lot of good points in the comments, both pro and con re:the article. One thing I am curious about, particularly regarding tech companies, is why it is so often difficult for a company to identify its or its product’s brand. Twitter and Yelp are two companies that come to mind quickly. I think Apple is very clear about and in communicating its brand. I think Google is very clear with Android, though many OEMs seem to struggle finding their place in the Android continuum. Particularly the old cell phone guard who were long in total control of their own brand, now at the mercy of another vendor’s positioning.
Facebook has struggled trying to restructure their product into a sustainable income generator, but I think it has a basic understanding of why customers use Facebook which is why it hasn’t taken any major hits.
I think MS has an understanding of their enterprise brand, but their failures in the consumer space everywhere but gaming consoles, show they totally overestimated their consumer brands, or at least over-estimated their OEMs.
In the arts many people, myself included, talk about the affect of the viewer/audience and how they perceive the work is even more important than the artist’s own intentions. To the Modern artist, this is understood, which is why many will not talk about what they “meant” with the work and instead ask the viewer what they think.
Its tough trying to figure out why people like something you’ve done. In the arts it is less important (or not?) than in business. Maybe it is the same. Art seems strongest when the artist and the viewer aren’t trying to make the work something it isn’t and accept it for what it is. Twitter, Yelp, Yahoo, and many Android OEMs seem to be trying to “make” their products into something they aren’t (either to generate revenue or they just plain don’t know what it fundamentally is). So they struggle.
Many of the comments criticizing my article are fair. It’s simply impossible to explain branding in a single, short article. People devote their whole lives to the study of branding, yet they will readily admit that they still have much to learn.
In general, I just wanted to lay enough of a foundation that we could discuss the branding of tech companies intelligently. In particular, I wanted to introduce the concept of Veblen goods into the discussion of tech brands.
Not knowing crap about marketing, I simply took what you defined as the rules of engagement for this thread. And that’s probably more than good enough.
That people devote their lives to the study of branding is indicative of the difficulty of the problem, if there even is a problem.
“If you can’t explain it to a six year old, you don’t understand it yourself.”
In other words, it’s not your fault. In fields where opinions count as facts, they will never be fully understood. In the case of the arts, they shouldn’t.