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Tuesday, 1 June 2010

The steep and slippery slope to commercial damnation – or, are Dell slowly destroying their brand?

This is Lester Wunderman – who coined the phrase “direct marketing” – and to whom I almost sold my agency.

A few years ago he and I sat on an American Express committee which met in exotic places to discuss their creative work.

Lester said little, but it was always relevant. As you might expect, I said a lot and hoped some was relevant.

I have never forgotten one thing he said when we were discussing discounts at a meeting in Kyoto. “You are training your customers to expect bribes.”

This struck me because I had already seen impeccable research by Professor Ehrenburg and Alex Biehl of the Ogilvy Centre for Research proving that those firms which advertise most and promote least are infinitely more profitable than those who do the opposite.

By promote, I mean giving things away in exchange for sales.

When you keep discounting, you are not just training people to expect bribes; you are telling them “what we offer is not good enough to sell on its merits.” You are degrading your brand.**

Which brands have demonstrated this best over the last 30 years? People like General Motors, Ford and Chrysler. All ended up in deep doo-doo.

Which brand has been losing share - and may commit slow hara-kiri if it doesn’t change its approach? Dell.

Every single message I get from them offers a deal, which over time implies that their products are not good enough to sell on their merits.

Moreover, there is no attempt to speak to me as an individual. This says they don’t care about me - another subject worth your consideration.

Fortunately for Dell most of the other computer firms have not been that good at marketing: product innovation has always driven this industry. But this will change. And Dell is worried: they've just abandoned their sell-direct model and done a deal with Best Buy, the biggest U.S. dealer.

In some markets discounting is part of the scenery. One of our clients is in such a market. They are succeeding because they are simultaneously running commercials to promote their brand.

What is the solution?

If you have to discount, always say something that strengthens your brand. Explain how what you do is better than what others do. Don’t just focus on the discount.

Also, keep doing brand advertising as much as you can; and measure your results, not just in sales or enquiries, but in attitudes to your brand.

** Nearly all the "I'll make you rich by next Tuesday" internet scamsters constantly offer unbelievable discounts. They don't give a hoot about building a brand,
any more than Bernie Madoff did, as they don't plan to stick around, but their approach hardly builds credibility.

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