What crosses your mind first hearing Apple, BMW or Dr. Oetker? Most likely, you connect these names with concrete images, emotions and thoughts. This is exactly what each manufacturer tries to achieve: building and preserving a positive brand image.
However, lots of manufacturers consider this to be in danger since brand – and price transparency are increasing. Due to price dumping or the even worse price collapse the thoroughly established brand image suffers.
What makes a brand?
Simply spoken, a brand’s fundamental meaning is the image a company or product is represented by customers. The image we connect with the product consists of associations and emotions, knowledge and heard facts, read information and experiences. If this image does develop its own dynamic being disconnected from the company one can call it a brand. The brand AEG represents high quality electronic devices while the company does not exist independently anymore since 1996.
However, how does a company or product become a brand? As soon as we hear a certain company – and product name we ideally link it to positive features, pictures and characteristics. Since they help and guide customers choosing the fitting product out of the vast mass of articles all these associations are significant. Nevertheless, this brand image only develops from positive and sustainable experiences customers have with a certain manufacturer. If promises of quality turn out to be reliable the company can be sure of the customers’ loyalty.
The brand image that is developed by means of complex strategies and the closely linked customer retention is being threatened by the steadily growing ecommerce – at least this is what most manufacturers think. Since customers are increasingly often given the opportunity to compare prices and to find the cheapest offer at any time the fear of price slumps is becoming deeper. More and more frequently, customers find products on price comparison portals and online market places. “Showrooming” is every manufacturer’s nightmare. Customers demand extensive consultation in a stationary store just to go and find the lowest price for the respective product on the Internet. Thus, quality offers are squeezed out of the market and the value of product brands is damaged deeply. This is what Prof. Dr. Georg Rainer Hofmann – the head of eco’s (Association of the German Internet Industry) ecommerce group – predicts.
Fearing the loss of image
Thus, several manufacturers adopt drastic measures. Adidas and Asics prohibit their retailers to distribute at marketplaces such as amazon and ebay and to utilize price comparison portals. Already in 2013, outdoor manufacturers like Mammut, Lowa and Deuter decided to proceed similarly. This shows very plainly that manufacturers do take this problem very seriously. The stated reason is the effort that has to be expended in order to give appropriate advice on the products. This required service is not provided by third-party suppliers distributing on sales platforms. So much for the reasoning. However, there is an entirely different suspicion in the background: The low prices on the Internet simply detract too much customers from the stores. The Federal Cartel Office has adjudicated this restraint to be a serious restriction of competition and initiated proceedings against manufacturers such as Adidas and Nike. They stated such a control of the price competition was not valid for the purpose of free online trading.
The association of online retailers also gave positive feedback since they consider medium sized companies to have improved possibilities refusing to accept prohibitions and constraints by manufacturers.
Innovative concepts lead to success
Such restrictions of competition are not appropriate. Anyway, manufacturers do legitimately want their products to be sold as valuable as possible. They still should handle the challenges of ecommerce applying other concepts and taking advantages of the online trade’s peculiarities. Thus, the problematic price transparency can become a profitable market transparency. An important control mechanism does result from the possibility of monitoring merchants and market places. If manufacturers keep an eye on their distribution partners’ pricing they can react on aberrations much faster. Clear market overview is a crucial factor concerning the effective preservation and strengthening of the thoroughly built brand image.
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