Insulate Bargain Alternatives’ Image Damage

Soon after retailer Williams-Sonoma added a $425 bread-making machine to their merchandise line, sales of the $275 unit doubled. The $275 unit seemed like more of a bargain compared to the substantially more expensive alternative.
     But did the introduction of the $425 model lower consumers’ perceptions of quality of the $275 model? Research at Miami University and France’s ESSEC Business School suggests that if, in these circumstances, the $275 and the $425 models carry the same brand name, the introduction of the more expensive model might actually enhance perceived quality judgments of the less expensive model. The researchers assessed the degree to which study participants liked the product and accorded it prestige.
     And how about allowing bargain versions on your shelves? The researchers used as an example the introduction by Charmin of a lower-quality Charmin Basic product and Foster’s Beer producing a lower-quality Foster’s Grog. Would adding these bargain versions to your store’s merchandise mix lead to lower quality ratings of the flagship versions?
     Yes.
     In the current price-sensitive retail marketplace, it is good for you to make bargain alternatives available. At the same time, you want to preserve the quality image of items that yield higher per-unit profitability. The Miami/ESSEC findings and other research suggest ways to reduce the damage to the image of the higher-priced alternative:

• Check that the bargain brand does still competently fulfill functions the shopper is seeking. The price is lower, so the purchaser expects compromises. But if there is not sufficient value, do not carry the item.
• Begin introduction of the bargain versions with product categories where you already have a better-best set. When there is a premium version in addition to the flagship version, introducing a lower-quality alternative has less negative impact on the brand image.
• In ads and in-store selling, give shoppers examples of the breadth of product line you offer. This message encourages consumers to think of the bargain alternative as an opportunity to choose rather than as a reflection of the brand quality.
• Put more gusto behind the marketing of the better and best versions than behind marketing of the good, but bargain, version. Consumers have a natural tendency to credit the brand with characteristics of its best example. Support this tendency.
• Physically segregate the bargain version from the flagship version and any premium version. A stigma can rub off from cut-rate merchandise to other merchandise that is adjacent.

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