Companies highlight value to consumers

As talks of a recession continue, it's not just Wal-Mart that's on the low-price bandwagon

As talks of a recession continue, it's not just Wal-Mart that's on the low-price bandwagon

On February 26, Wal-Mart's stock closed at $51.40, the highest since March 2005. This result, given the murmurs of recession and the downturn in retail sales, prompted Daniel Gross, Newsweek senior editor and columnist, to propose four reasons why Wal-Mart might be doing so well. Reason number two: Americans are trading down.

"Wal-Mart's 'cheapo' reputation is serving it well," Gross writes. "As the latte era grinds down and credit tightens, Americans have stopped trading up and started trading down. That plays right into the hands of Wal-Mart, whose brand identity is all about saving people money."

Perhaps anticipating the economic trouble that consumers are now experiencing, back in September, Wal-Mart ditched its motto of 19 years, "Always low prices," and introduced "Save Money. Live Better." Price has always been a part of the retailer's branding message, but in emphasizing it, it now seems to have something to say that belt-tightening consumers want to hear.

"It resonates with everyone that needs to stretch [his or her] dollar," Nick Agarwal, Wal-Mart VP of corporate communications, tells PRWeek. "In tougher economic times, there's an opportunity for us to showcase our focus on price. It's a helping hand."

However, what works for Wal-Mart won't work for everyone. Marketers who leap to respond to the financial turmoil may find themselves making a U-turn with their message when things improve.

"Anyone who uses it as a lead point will be [using it] for short-term promotion," says Julie Winskie, president and chief client officer at Porter Novelli. "Cost is a component of your value equation. For the smartest consumer, it's really not an isolated variable."

When making purchases these days, consumers have a better sense of what they're buying. The need for accessories, additional services, and other add-ons come into play when making a purchase. Therefore, in considering value, marketers need to have a greater knowledge of their customer.

"[The economic environment] will make every brand re-evaluate [its] value proposition," Winskie says. "You have to understand more acutely in a time of scrutiny why customers are buying you, and what you need to continue to do to earn their dollars."

Brands have been raising the level of engagement with customers, which will work in its favor when overall value is a consideration. By hoping to create a deeper connection with clients, price will become a small component of the value proposition.

"The emotional connection can help brands be even more meaningful when consumers may be questioning their choices," says Caroline Dettman, EVP and US consumer practice director at Edelman. "Brands are taking stock right now, looking at 'Are we still meaningful, and are we solving problems for consumers?'"

Another factor to consider is the retail landscape, which has changed dramatically in recent years. In fashion, designers that once created their clothing exclusively for the well-heeled customer, have now gone mass market. Isaac Mizrahi, who will leave behind his successful Target label to become creative director for Liz Claiborne, is probably the best example. His collection, which began selling at Target in 2003, has made about $300 million per year. Many other designers have since followed. The proliferation of premium names at the mass-market level has injected a sense of value for many consumer goods, another reason why price need not be at the front of a brand message.

"Retail is an interesting place because, right now, you're seeing a lot of quality brands at retailers you didn't find years ago," Dettman explains. "Now consumers have options to get higher-quality brands at all different levels of retailers."

So, with greater options, consumers don't have to feel like they're giving up a lot in service of their wallets.

"It's not trading down," Winskie says. "People are buying smarter."

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