Corporate reputation: The cost of being cheap

Brands are increasingly marketing themselves as low-cost, but this approach can be risky for their reputations, finds Kate Magee.

Flying high: Ryanair CEO Michael O'Leary
Flying high: Ryanair CEO Michael O'Leary

Bagging a bargain has become a badge of honour for consumers struggling with a tough economic climate. Being thrifty - or at least being seen to be sensible with money - has become fashionable, especially after the furore over MPs'

expenses and bankers' excess. Brands have been jumping on the bandwagon, keen to emphasise their cheapness.

Ryanair, Primark and Asda have all used a reputation for being cheap to their advantage. 'Low-cost strategies can help build a brand and there is a clear appetite in today's climate,' says Good Relations CEO Teresa-Anne Dunleavy. 'People love a bargain and as long as the quality is acceptable they will share their stories and become powerful ambassadors for the brand.'

Positioning a brand as a consumer champion and using humour can create greater engagement with an audience. Dixons.co.uk's new ads, for example, use the strapline 'the last place you'd want to go'. The ads play on consumers who visit a department store, obtain advice on the best electrical products and then buy them cheaper online at Dixons. Cow PR's head of news Mark Perkins says this approach will work in the electronics market because people want the latest and best version of a product at the cheapest price.

But taking a brand downmarket has its risks. It only works, for example, if it is a long-term strategy.

Once a brand is marked as cheap, it is difficult to change perceptions.

And once the market bounces back, brands can be caught out. 'I admire companies such as Ryanair that have built a huge business on that approach, but no-one can tell me that these things don't go in cycles,' says Seventy Seven PR managing partner Alan Twigg.

Perkins agrees that brands can get left behind. 'In the boom years, brands put Swarovski crystals on everything to make a product look expensive. Then there was a back flip, with brands trying to look as cheap as possible and people talking about how much they've saved. But that will change. We're going to come out of the recession and people don't want to be aligned to "cheap". People will always aspire, it's human nature.'

Twigg also argues today's consumer is more suspicious of the quality and sustainability of low-cost products. 'Consumers are learning more about the supply chain and they are asking more questions. The mainstream consumer is a much more educated and savvy beast than these brands give them credit for.'

When considering the implications of using cheap messaging, brands also need to think about how they can evolve to avoid becoming one-dimensional. 'Brands are alive. They have to keep evolving and continue to grow,' says Twigg. 'Volumes of customers or sales may be growing, but the brand isn't if it's got nothing else to offer the consumer.'

AIR TRAVEL - RYANAIR

The message

Ryanair's main message is that it is 'driving down the cost of air travel'. It has a notoriously noisy and ballsy approach to obsessively getting that message across to consumers. It creates huge amounts of coverage by publicising its CEO Michael O'Leary's deliberately provocative comments and by floating more outlandish ideas about how to reduce the cost of flying. These include charging for the use of toilets, allowing standing passengers and charging extra for overweight passengers. Its 'like it or lump it' attitude has not stopped the airline increasing passenger numbers by 15 per cent during 2009, to 66 million. Ryanair's head of comms Stephen McNamara says: 'PR is the most fundamental part of our strategy. Why pay for a sandwich board when you can spend less on a megaphone and soap box, and get more attention? More passengers are waking up to the reality that flying is not some life-changing sexual experience, but a basic way of getting from A to B and Ryanair will get you there for far less than other airlines.'

Does it work?

The strategy is successful at getting bums on seats because the low-price message is clear. Cow PR's Perkins praises the airline for being consistent. 'It doesn't promote its service, but it is honest and upfront about that. You get what you pay for, a part of that is a bit punk rock.' Good Relations' Dunleavy agrees: 'Its positioning is unashamedly around value, but it has done some clever things that have been newsworthy and driven talkability, while positioning it as the "people's airline", such as cheap seats when O'Leary's horse won the Grand National.'

Does it go too far?

Perkins says some potential customers, himself included, are put off by this attitude, which can border on insulting.

Last February, for example, the airline responded to a blogger who said he had found an error on its site, by saying it was not its policy to 'waste time responding to idiot bloggers'. Dunleavy also points to the recent negative coverage around the airline's 'stealth charges'. 'There does still seem to be a lot of public support, with recognition of Ryanair's achievement in driving down airline travel costs across the industry, but it is increasingly becoming the airline that people love to hate. For me, it has crossed the line,' she says.

HIGH STREET - PRIMARK

The retail phenomenon

Primark has been trading in the UK since 1973, but in the past few years it has seen a dramatic rise to fame. Dubbed 'Primarni' by many of the young fashionistas who shop there, it sells the latest trends much cheaper than its rivals. But Primark does not advertise, run promotions or have a large PR operation. It has one freelancer who handles product PR, yet it has avoided the snobbery attached to many of the cheap clothing brands. Carrying a Primark bag has become acceptable.

How did it become 'cool'?

Parent company Associated British Foods' head of external relations Geoff Lancaster plays down the role of PR in Primark's success. Indeed, he points to getting the product right. 'This is a triumph of marketing rather than PR. We're almost an antidote to PR,' he says. He believes a key factor was opening stores in places such as Oxford Street where the 'London-centric media' are based. Word of mouth and social networking sites such as Facebook and Twitter have also been crucial for the brand. Good Relations' Dunleavy believes the brand has been aided by the current economic climate and adds that in a time when getting a bargain is cool: 'People are quick to share their stories, so the talkability factor has worked well.'

Attracting criticism

Where a brand is popular and well known, it is also fair game for criticism. Primark has attracted attention from Panorama and anti-sweat shop protesters who question how its workers are treated in its factories in the developing world. Lancaster says: 'It's the classic "fame is a doubled edged sword". There are problems in the developing world, but they are not exclusive to us. Most of our suppliers work for other chains as well. It's something we take seriously, but we would argue we are unfairly singled out.' Perkins says this is one of the risks in presenting your brand as cheap. 'That's what you get for talking up your price. People focus on that and will trace it through your supplier chain. The brand gets into the issues of ethics and people start to question the brand's credentials. If you are going to market yourself on your price, you need to be prepared with a defence.' Dunleavy believes that, in the recession, Primark's core shoppers are unlikely to listen to these criticisms, but adds it may present a bigger problem in the long term.

PRICE WARS - HIGH-ENDERS TAKE ON THE SUPERMARKET GIANTS

The market

In the recession, supermarkets have been trying to position themselves as the consumer's best friend. All, including the higher end brands such as Waitrose and Marks & Spencer, have entered the fray with own-label brands and cut-price offers. But this has led to a very cluttered marketplace, which runs the risk of becoming too competitor-focused.

What to do

'The short, medium and long-term brand impact of projecting a low-cost positioning is a crucial consideration for all supermarkets,' says JCPR's brand director Ruth Warder. 'The real win here is to maintain strong relevance and customer loyalty as the economy fluctuates, not to only be relevant in times of hardship or indeed prosperity.'

Asda, for example, has consistently marketed itself on price, garnering coverage through its 'we have the cheapest product' stories, as it did with its £60 wedding dress offer in 2006.

Perkins says: 'It's a great PR strategy that creates lots of media cut-through in the prevailing public mood, but has to be reappraised long-term, especially when we come out of the recession and consumers want a halo away from value and price.'

What not to do

In the race to the bottom, supermarkets need to be careful not to be short-termist and devalue their own proposition by cheapening their brand, or creating concern about their quality. They also should avoid becoming overly focused on their competitors at the expense of the consumer and their own core values. Twigg argues that the consumer is becoming increasingly wise to the idea of loss leaders and understands that because one product is cheaper, it does not mean they all will be. 'They can all cite product lines and promotions which are cheap. Everyone has become wise to loss leaders. No-one can win that war,' he says.

Supermarkets should not forget that, when it comes to food, the cheapest does not always win. As one agency PRO says: 'Does anyone really want a cheap Christmas meal? It's the one day you want to feel a bit special.'

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