OPINION: MILLS ON ... PREMIUM-PRICE POSITIONING

So Levi’s is in a mess. Are we surprised? No, users of the Mills Corporate Adometer(TM) model (Campaign, 19 February) would have spotted that the ’Kevin the hamster’ ad series was a portent of things to come.

So Levi’s is in a mess. Are we surprised? No, users of the Mills

Corporate Adometer(TM) model (Campaign, 19 February) would have spotted

that the ’Kevin the hamster’ ad series was a portent of things to

come.



I mention this not to take pleasure in Levi’s difficulties but because

one of the qualities of Levi’s advertising (pre-Kevin, anyway) was its

effect on price. Did people balk at paying pounds 40-50 for a pair of

501s?



Of course not. The advertising convinced us we should pay that much.



One of the functions of advertising is to create and then sustain a

premium-price positioning. And there’s nothing wrong with that. But in

the wider world there is a change of mood of which advertisers must

beware. The Chancellor, Gordon Brown, wants the European Commission to

look at price disparities across Europe. The Office of Fair Trading is

close to publishing its report on supermarket pricing practices. In

short, anti-profiteering - and there are plenty of votes to be had in

that line - is now the mood of the moment.



As The Guardian showed last week, there is at least a case to

answer.



According to its reporters, in the UK a BMW costs 10 per cent more than

in France and almost 20 per cent more than in Germany. Similar

disparities are evident in other products: perfume, Nokia phones, Sony

TVs, Timberland boots and Beefeater gin. And by sourcing through the

grey market, the likes of Asda and Tesco have exposed the massive

mark-ups used by brands such as Nike, Adidas, Tommy Hilfiger and,

inevitably, Levi’s.



Of course, this is a complex business.



Retailers blame the brand owners, and vice versa. There are many factors

involved - currency, distribution, economies of scale in purchasing, a

low-inflation climate in which price rises are difficult to push through

and so on.



But there is also an advertising issue. Almost without exception,

advertising for the products mentioned above is designed, often but not

always in an implicit way, to create a premium-price positioning.



And why not? For some consumers, the benefit is the price - we buy in

order to demonstrate taste, prestige, status and so on - rather than in

the product itself. The price and the advertising work together to leave

us with a feel-good emotion. UK ads for BMW don’t say it, but they are

all about exclusivity through price. Ads for Stella Artois do say it:

’reassuringly expensive’.



Are they profiteering? Or does price equal quality? Well, since

consumers are buying more BMWs and cans of Stella, it must be the

latter. Nonetheless, if the EC and OFT reports leave the public with the

perception they are being ripped off - and it’s irrelevant whether it’s

by the retailer or brand owner - then advertisers and their agencies

will have to pick their way through a potential minefield. On one side

lies the spectre of price control legislation, on the other, public

scepticism. At best, premium-priced products will have to market

themselves in a climate of suspicion.



At worst, they’ll all have to do a VW and find a way to produce

brand-led price advertising. And as we all know, that’s hard to do.



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