Advertisers try discount cold turkey
Professor Kim Fam says that New Zealand retailers in particular discounted too heavily over the global financial crisis.
Industry experts say brands are trying to wean themselves off discounting but it is a long, hard task, and Professor Kim Fam from the School of Marketing and International Business says New Zealand retailers in particular discounted too heavily over the global financial crisis.
While this improved cashflow, there is now no quick fix to damage done over several years, Professor Fam says.
"Companies need to invest in making sure their brand message is consistent.
"And then over years people will see the difference between a good brand and a bad brand."
The problem is especially seen in the grocery sector, where Nielsen research indicates buyers are increasingly choosing whatever is on special. In a typical shopper's basket, 58% of items chosen will be goods that are on promotion.
DDB managing director Justin Mowday says that weaning brands away from discounting is the biggest challenge facing advertisers this year.
"Any client knows it can sell product when it is discounted. It’s not particularly hard.
"What is hard is creating engagement with consumers, which is two way, evolving and means the customer prefers your brand when its not on special."
Barnes Catmur & Friends managing partner Paul Catmur says brands are locked in a cycle of discounts that is difficult to break.
"Brands were too reliant on discounts before the global financial crisis; it just gathered more brands to join the fray."
Mr Catmur says the discounting has meant margins are being degraded in the race for the bottom.
"Successful brands have their margins cut, lesser brands go bust and the cycle starts again."
Professor Fam also believes the success of imports coming directly from Asia mean the importance of brands is fading.
"A watch from a good brand like Rolex will still tell the same time as a lousy brand watch. As technology has improved you can still buy items of a cheap nature but a high quality."
Source: National Business Revue