HULU, News Corp – You must’ve missed that class in brand management, eh?

One of the first lessons I learnt in branding was that if you start selling a product at a certain price, you can always move to a price lower but never higher. Why is that you ask? Well, it’s a simple concept – consumers tend to develop a certain perception of quality for a product or service based on the price they paid for it. Once this perception is established in a consumer’s mind, it’s extremely difficult to change it for the better. Easy to change it for the worse though.

So what are the Marketing geniouses at Hulu and News Corp thinking? First, they offer their product for free and then, expect consumers (who’ve had free access all this while) to suddenly be willing to pay for the same content?! That’s absolutely absurd. I would understand if these companies were at least thinking of offering some premium content or add-ons for paying customers (you know… the “Freemium” model). That may possibly work, some day. For now though, I’m confident that this path that they’re choosing to take, will not lead to profitville.

Thoughts?

Losing the “star” and giving up the “bucks”

Starbucks is one of my favourite places to go hangout, hold meetings, read or just chill. However, of late the company seems to be losing sight of this very “value” that it provides to its customers.  

The worst thing that Starbucks could do at this point is compete on price (especially with McDonald’s posing a huge threat). We all know how that will turn out! As hard as it may be in these tough times, the company needs to find a way to improve on its Unique Value Proposition (think in-store experience not price) if it wants to continue to lure people in to its stores. Lowering prices will have 2 very significant impacts on the Starbucks brand equity:

1. Consumers tend to correlate quality with price. A change in price could reduce perception of quality and overall value.

2. Lower prices would attract consumers who are not traditionally Starbucks consumers. As nice as that may sound, it significantly affects starbucks’ “exclusive”, “upscale” image.

Another point to consider is that during a recession, loyal Starbucks consumers might actually continue to buy coffee from Starbucks and make cutbacks elsewhere (as they might perceive Starbucks as that little bit of pampering they need to get through these tough times).

In the end however, it boils down to the company’s ability to stick to its guns and innovate – so as to provide a truly unique experience. During this recession, we are going to witness the death of many brands. I sincerely hope that Starbucks is not one of them.