System Beaters, Brand Loyals, and Deal Shoppers: New Insights into the Role of Brand and Price

David Meer
Vice President, Analytical Services
The NPD Group, Inc

Imagine for a moment a world without brand equity. What would it look like? First of all, the brands competing in any category would be perceived as being identical in quality, price/value, and variety lineup. Consumers would purchase whatever brand happened to be cheapest when they needed the product. There would be no loyalty - a consumer's probability of purchasing any brand would be that brand's market share. Obviously, no brand could command any type of premium pricing, because there would be no reason for consumers to spend more for any one alternative. Distribution would be the major battleground.

What would happen if one of the competitors, in an attempt to improve profit margins, introduced a reformulated product that was less expensive to produce? As long as consumers did not notice the difference, nothing would happen. But if consumers began to detect a drop-off in taste, efficacy, quantity for the money, or another dimension of importance, suddenly, there would be some discernible brand equity in the category. The brand whose quality had slipped would have negative equity versus its competitors, while the other brands, though remaining at parity with each other, would all enjoy an equity advantage versus the renegade brand.