reveries - discussion - at what price value?

What are the most effective ways to add value to a brand? When does a discounted price add value? Which companies are best at adding value, and why? A roundtable discussion featuring: Scott Moffitt of SoBe Beverages, Scott Deaver of Avis, Tim Mapes of Song Airways, and Jean Mojo of Einson Freeman.

What are the most effective ways to add value to a brand?

Scott Moffitt: In the beverage space, we view adding value as meaning more than just refreshing the consumers, or giving them a good taste. We want to deliver functional features that enhance people's lives and provide more than refreshment.

One of the ideas that we kick around a lot is benefit stacking. If you can have just a regular old beverage, or if you can have a beverage plus echinacea that helps maybe ward off illness, which would you rather have? And if they cost roughly the same, which would you rather have?

Nobody is going to settle for the car that doesn't go over curbs, if you can buy an SUV for the same price that does go over curbs, even if you don't need that every day. So the SUVs are more commonly going to the mall and going around town than they are out off-roading. But people buy over-engineered products on the chance that they may need that feature someday.

Scott Deaver: The most effective way to add value to a brand is to improve the degree and consistency of positive consumer experience, and to concentrate it in the basic brand promise.

We add value to the Avis brand by improving the service level of the experience than by improving the attractiveness of the price. Both help my brand, but it's more important for Avis to be in the "try harder" space than in the "great value" space. However, for Southwest Airlines, it's more important to be in the "great value" space because that's their footprint.

Tim Mapes: In a service industry like the airline business, the actual customer experience plays a far greater role in building the brand than traditional marketing communications.

The most effective ways we can build the Song brand center on ensuring a positively differentiated experience in what is increasingly seen by customers as a commoditized business.

Tangible brand attributes that benefit the customer -- things like more personal space, simplified access to everyday low fares, organic meals and snacks and free access to the latest in entertainment technology --like 24 channels of live TV and hundreds of MP3 audio downloads -- have a far greater impact on "brand registration" than any advertisement could ever hope to have.

Jean Mojo: What we're really talking about is doing something that further defines the brand, that makes the brand more relevant or more accessible to a consumer -- something that is going to create a more enduring relationship.

AT&T Wireless, with its American Idol program, did a great job of adding value to its product by making text messaging one of the ways that consumers could vote. In addition, offering the sweepstakes and all the things that came with that (trivia, email alerts, etc.) helped make the consumer relationship much tighter. It also made the product more integral to consumers and their lives.

In most cases do you view adding value as a tactic or a strategy?

Deaver: In the world of marketing, everybody knows that one person's tactic is another person's strategy. But I think, really and truly, adding value is a strategy. There are tactics that grow out of it, of course.

The Avis strategy is that we're going to add value by improving the in-car experience. The tactic is that we're going to give you a 100-channel cable radio and a CD player with a CD.

Mapes: For Song, added value is clearly strategic. In setting out to transform the low-fare airline category, and in fact the market for domestic US aviation, we experienced an interesting dilemma -- how do you provide more at a lower cost?

The answer ultimately rested in the ability to genuinely deliver more within the context of what the customer really wanted. We're creating a sense that Song reflects their personal sense of themselves; that the Song brand enabled their own self expression.

Interestingly enough, our focus on women as the primary target is "attitudinal" in nature. The women we're after lead an active lifestyle, care about style and fashion, are into entertainment and health and wellness. While the experience on Song has been built around this, and in fact is designed to appeal to women, it is "inclusionary" rather than "exclusionary." Men, seniors, young adults and parents traveling with kids find it equally appealing.

Mojo: I strongly believe that adding value is a strategy. If you are trying to define your brand and what that brand means to your consumer, then the value-add must be your strategy. Otherwise, you're in-and-out, and that's really no better than price discounting because you are not ensuring that the brand promise is fulfilled.

Moffitt: It could be used as a tactic as well, but for SoBe it's a core strategy. It's fundamental to the brand's product design -- although not necessarily to the category -- because I don't think it's foremost in the minds of every beverage company.

How critical is adding value to a brand's success today?

Mojo: It's absolutely critical -- and increasingly important -- because increasingly brands are in competitive environments where they're very similar. They often have the same features or benefits and compete in commodity-type categories. Under those circumstances, the added-value is often viewed by marketers as being the tiebreaker.

However, we don't see it as a one-time tiebreaker -- we see it as part of the brand. It's taking something like a credit card, of which there are maybe three or four major brands -- and then sub-brands within that -- and making it stand out. The goal is not only to distinguish that brand, but to make the added-value become part of that brand's character.

If you're not doing that, you're running the risk of being out promoted. Price becomes more of an issue because there is no differentiating aspect of the brand. The added-value takes the brand above and beyond some of the product elements and allows the marketer to start creating more of an emotional link with the consumer, as opposed to just a functional link.

Mapes: Success in marketing is defined on the demonstrated ability for a brand to be either worthy of a price premium or preference within targeted customers at the exclusion of all other competing brands. Therefore, adding value to an extent greater than that attempted to be offered by your competitor on a sustained basis is everything.

Deaver: Adding value is practically the only thing that matters. One of the things that was sad and comical about the Internet bubble was that brand advertising and promotion were equated with brand value. I experienced that when I was with Move dot-com. Brands were treated as if they were made out of advertising and money, and they're just not.

All the advertising in the world doesn't really help that much if you're not adding any value to the brand. If you're not adding value, then you better be low cost to market because you're operating in a low-price world.

Moffitt: For me, the answer would depend on what the category is doing, what the growth dynamics are of the business I'm in. If you're trying to grow in a competitive category and increase share, it's critical.

If you have a new brand that is in a booming category, it may not be as important. There's organic growth to be had for everybody. Getting trial, getting awareness and getting distribution are what I would focus on. If you're in a category where the growth is slowing and it's still share game, then you need to have a more compelling offering than your competitors.

If the category is a little more mature, the bond you have with your consumers is even more essential. You're going to grow by being better than the next alternative. One way to do it is to add more value, and the other way is to discount price, which is a way of improving your value. So you're either going to add features, add benefits, or discount price to improve your value equation.

Are there any instances in which a discounted price can be perceived as added value?

Mapes: With the increasing appearance of so-called discounters in virtually every category, I don't think so. Added value comes when other key drivers of purchase within a category are met at comparable levels and the decision as to which brand to purchase is made on dimensions beyond "price of entry" metrics for consideration like price.

Moffitt: A discounted price doesn't add value, but it can improve the value equation. Distribution can be an added value. Where you're distributed can communicate messages about what kind of product it is and how special and unique it is. For some products, if you're available everywhere, that is added value. In the bottled water category, which is booming, the only added value is making it portable and convenient.

Promotions can add value, but is something I haven't really dived into because it's not as big for SoBe because our contents and our packaging are unique. But certainly on the soft drink side, and for a lot of other categories, promotions add a ton of value and are a way of improving your value perception.

Deaver: Southwest Airlines is a good example of discounted price as added value. Their brand promise is, "we'll always give you a really great price -- you'll be surprised how great." With that brand promise, every time they discount pricing they're strengthening their brand because they're strengthening the thing that makes their customers love them and loyal. They're inside their promise; they're inside their footprint.

Now for other brands, it's bone-headed to do a lot of price promotion. At Avis, when I first got here, in the first half of 2001, we were in a big travel slump. The dot-com bubble was breaking and we thought we had hard times, but we didn't know anything of what was ahead of us.

So we stuck some price advertising out there to stir up volume and it just failed. It drove a little business but it didn't drive much. More to the point, I realized over time if I was doing anything to my brand, I was doing it harm. To discount Avis doesn't add any value. Similarly, if Lexus started offering $2,000 cash rebates, that wouldn't add any value to that brand. So, whether discounting can add value really does depend on the brand.

Mojo: A discounted price is sometimes a benefit in that consumers are able to buy a product that they want, or they may have wanted to try, because of the discount.

But that doesn't fulfill the bigger definition of adding value, which is all about creating a more enduring relationship. The problem is, if you go back to your regular price, there are no assurances that the consumer is going to buy again, or that the relationship is any tighter. Perhaps you've created the beginnings of a relationship, but a price discount doesn't create the enduring relationship that is so important.

Which brands, other than your own, have done the best job of adding value and why?

Deaver: Obviously, you can tell I think Southwest Airlines does a good job, mostly because they know who they are. But also they continue to execute well inside their space. They continue to offer better pricing, and open new airports. They add value on their website by making the online buying experience a branded experience.

They do things on their website that really are added value. We do the same thing at Avis.com. Buying a ticket on Southwest.com or renting a car at Avis.com feels kind of like flying on Southwest or going to Avis and getting the car. It really doesn't, but it kind of does.

I give Continental a lot of credit for the same reason. They don't fight the good fight on pricing as much as they fight it on better food and first class. But they definitely stand for something and have succeeded in a parity-product field and turned around their total business. MTV is another great example of a brand that adds value by branding the entire MTV experience.

Moffitt: JetBlue certainly comes to mind. They're an airline, that for a similar price, you get a spacious seat and you get free entertainment via DirecTV, that's customizable. That's a tremendous value for similar-type service.

Harley Davidson comes to mind. The totality of the experience -- they're selling a lifestyle, they're selling freedom, they're tapping into some very high-end emotional benefits there with what they sell, far beyond just a piece of machinery. In the hotel category, The Four Seasons is one example that has great service value.

One of the best service improvements has been the whole Avis Preferred program. They get you out of the car rental place fast instead of going to the counter and waiting for a long time. American Express has also added a whole bundle of benefits and features. They have a lot of features to their card and their value-added services.

Mapes: There are obvious choices like Target and Starbucks. But some less-obvious brands, like Volkswagen, W Hotels and Apple Computer, have achieved a great deal of perceived added value in the form of "style" that matches and reflects the personal sense of their targeted customers.

Mojo: There are some interesting, added-value dynamics going on in the cereal category. Froot Loops, for example, runs a contest asking kids to vote for the next color and Lucky Charms runs Lucky Keys (find the key that will unlock Lucky's treasure). These promotions not only add value but also define the brand.

Home Depot has established itself as not only the big warehouse that sells tools and lumber, but also as the retailer that teaches you how to use the materials they sell. Everything that they advertise and promote keeps reinforcing that basic added value.

VW's Jetta initially offered Trek bicycles as a promotional offer, and that also helped define the brand. What's happened over time is that the added value component has become part of the product itself. The bikes help define a tighter, more enduring relationship with the consumer. Westin Hotels add value with its heavenly bed -- and everything that's promoted and advertised supports that.

All of these brands have done a really good job. Home Depot is not just that big tool store, JetBlue is not just another discount airline and Westin is not just another hotel. These brands have all defined themselves by adding value as a major part of their overall brand strategy and carrying it through all of their marketing elements.