When items that were once exclusive, sought after and expensive become commodities, branding suffers. 2 examples:
The Wall Street Journal had an interesting report this week about the recent pet food contamination incident in the US. A bad batch of wheat gluten caused more than 60 million cans of pet food to be recalled.
Pet owners were surprised to learn that a single company, Menu Foods Inc., manufactured all this pet food for dozens of competing brands. While the recipes (and supposed quality) differed, the contaminated wheat gluten did not.
“The sheer magnitude of how many branded products come from one source erodes the whole basic premise of what branding is in the eyes of the consumer — they feel duped,” says Eli Portnoy, who heads Portnoy Group Inc., a Los Angeles-based brand-strategy firm.
Pet food is especially interesting because its purchase plays upon the emotions of pet owners—no pet owner wants to “mistreat” his or her pet by giving them bog-standard pet food. Jack Trout, president of a marketing strategy firm in Connecticut said:
If the public begins to get the perception that there’s not much difference, then you can’t hold your prices — that’s the bottom line of the whole [pet food] scandal. Commoditization is the real enemy of branding.
Commoditization is also happening in electronics. Wal-Mart, with its extraordinarily efficient supply chain, got the ball rolling towards making flat screen televisions commodities by offering 42–inch sets for less than a thousand dollars during the past holiday season. This significantly undercut “big-box” retailers such as Circuit City and Best Buy; they had lousy first quarters because demand for their more expensive TVs dropped.
Wal-Mart offered both little known brands (Viore) as well as mainstream brands (Panasonic) for significantly less than competitors. I can imagine two things going through customers’ heads as they’re staring at TVs in a Wal-Mart: (1) there’s no reason to pay more for this well-known brand at another retailer and (2) the difference between this well-known brand and this unknown brand is pretty small—let’s get the cheap one.
Effective marketing can combat these sorts of thoughts and bring luxury back into the equation. However, this is difficult when people are reminded by things like the pet food scare that the products they select might not be as different as they seem.