The thumbnail version:
- Tees became commoditized a decade or two ago
- Price cutting leads to commoditizing of a product
- Commoditizing undermines brand loyalty
- You can take measures to create brand loyalty
The full version:
I was re-reading a Harvard Business Review marketing article I’ve had since 2007. I kept it at the time because it was relevant to the printed T-shirt market and the fact that Tees had been allowed to become commoditized through competitive price cutting.
I’d seen textile screen printers struggling because they were under-quoting each other until the price for a print got so low that I wondered if there was any margin in it at all. I remember that it was particularly bad in the GTA and that some significant printers went out of business as a result. To further commoditize the Tee, at about the time of the article screen printer’s began buying garments directly from manufacturers thus cutting out the bit of margin a printer could make by supplying the Tees for a print order.
So what advice did the HBR article offer to a printer not willing to participate in the price race to the bottom where it was no longer worth the risk and effort it took to print Tees?
Here are some quotes from the article to cast light on the topic:
“By focusing consumers’ attention on extrinsic brand cues such as price instead of on intrinsic cues such as quality, promotions make brands appear less differentiated. Consumers, over time, become more price sensitive, and the product becomes commoditized.”
“When one firm increases its discounts, others usually follow suit. As a result, individual promotions increase but overall sales do not, further lowering everyone’s margins.”
The essential message of the article is that fighting a price war should be avoided. It’s more productive to differentiate your brand on quality and service and to market your brand accordingly and repetitively.
The single takeaway line that sums this all up? Price cutting dilutes brand equity thereby giving no reason for brand loyalty.