Rarity, Product Differentiation, Species and Brands

When you read or hear,

• The waitlist for Rolex Daytona is minimum five years and may go up to ten years
• Almost a similar thing went on for Hermes Birkin. You couldn’t simply go to the store, walk up to payment counter and walk home with a Birkin. It was even difficult to get on to their wait list.
• Ferrari shipped only 7200 cars in 2011 which stood at about 12000 cars in 2021. Ferrari Purosangue’s waiting is two years.
• Even a mundane sneaker like Nike Dunk SB Low Staple NYC Pigeon and Nike Air Force 1 Low Kith are traded on Stock X simply because they are not available
• The Montblanc Taj Mahal is retailed at about $2 m as it’s a work of artistry, exquisite material and limited edition
• Watchmaker H Moser & Cie’s produces about 2000 timepieces in a year and price ranges between Rs 14, 34, 000- 2, 77, 20, 000

It is easy to spot the commonality across these brands. First, they command astronomical prices. The dictionary explanation of the word command is connected with authority and control stemming from higher position. It is about giving order or getting someone into subservience or devotional surrender. The brands in question get their customers into parting with something precious akin to sacrifices made in religious orders. Second, these brands or products are highly restricted in availability and are in short supply and restricted to a chosen few. The lesser beings shall never be able to commune with the higher order.

So, what’s going on? These are instances where economics and psychology intersect to create an extraordinary value.

Economics: Simply put, shortages or scarcity create price increases. The scarcity could be natural (something that’s not available) or artificial (by controlling supply). Consider diamonds.  Are they scarce naturally or is their supply  artificially restricted. Rare earth materials are short in supply but have wide applications in electronics. How about aged whiskeys or wines? Long period of storage renders them scarce andthat results in high  prices. The Macallan 1926 sixty-year-old rare Scotch was sold at an auction for $ 1.9 m. Let us look at the working of rarity principle in the following cases:

•  Monalisa by Leonardo da Vinci
• A watch made of steel obtained from Titanic wreck
• A visit to depths of ocean on Ocean Gate

Scarcity or rarity is the price pusher. Abundance is a desire killer. Owning something rare is not purely about possession. It is about transformation. In a world where DNA of any two individuals on this planet is identical to the extent of 99.6 percent imagine the forces that would be at work for people to express themselves as different species than the one they are surrounded by. The rarity of things psychologically seems to create this sensealbeit in imagination. Uniforms are disgusting. So, students typically use other means to set themselves apart- bags, pens, hair styles and tiffin boxes.  Variety in supermarkets is nothing but gateway to differentiation at the base level.

Psychology: Why do people want to obtain what is rare? There is a definite pull of what can’t be had or is very hard to get. The desire is inversely related to availability. Owning something rare (gem, design, antique, craft)  gives a route to break away from what everyone has fueled by a desire to set oneself apart from the pack. The strategies could be many:

• Power and status: Expensiveness of an artifact may confer power and status. Consider a pen hand crafted and made of precious materials. A Montegrappa or Van Cleef& Arpels pen can cost upwards of $500000. Only a few can afford luxury yachts because of their prohibitive prices (JP Morgan had a yacht, ‘The Corsair’) and it is this association of the vessel with wealth that shifts its meaning from a motor boat to a class marker.
• Taste: Uniqueness stemming out of rare workmanship may act as signifier of tastethat sets you apart. It is a nuanced way of creating distinction. Not everybody is educated or encultured to have an evolved sense for appreciation of finer aspects such as the music of Mozart or the melting clock by Dali or intricate craftsmanship of Harry Winston. The connection between craftsmanship and exquisite master creations in fields like painting, jewelry, furniture, watch, saddle is chronicled in histories of kings and nobles. Taste is a class or social construct and is a powerful driver of distinction. It signifies higher aesthetic sense found in a few with the right cultural antecedents. So if you have taste you may settle for a Breguet for its history and craftsmanship.
• Pride:Rarity is exclusionary. Only a few chosen ones can own rare pieces. This sense created by limited editions has a catapulting effect by which an object is transformed into reward or prize ortrophy. One experiences pleasure and deep satisfaction upon winning or achieving something that’s out of bounds. The nation feels pride when an athlete wins gold medal at the Olympics. It is deeply gratifying. It confers honor, satisfaction, respectability. Brands thus become resources in identity construction and signification. A medal on the chest of a soldier is not only signifier of rank and achievement but also a boost to his idea of self. A brand of televisions promoted itself on the proposition, ‘neighbor’s envy owner’s pride’. The idea was its technology produced better picture quality consequently fanned envy amongst other TV brand owners.

• Self reward: Consider brands calling out to their customers: ‘You come a long way baby’ (Virgina Slims) , ‘Have a break, have a Kitkat’, ‘ Because you’re worth it’ (L’Oreal). Common to these slogans is the inducement of underlying motivation of self reward. A Reward is acknowledgement of achievement but by others . School rewards you when you get the best score. Self rewardinginvolves self to self gifting upon achieving a milestone. It may be humble coffee or a chocolate. The Cadbury Bournville said, ‘Eat it if you have earned it’. It is an important means of self care, self encouragement and fuels motivation. Will the nature of reward change from humble chocolate to something rare if the achievement is remarkable and exceptional? The reward shall correspondingly need to be correspondingly rare in equal measure. So if you have won an Oscar, the wrist shall adorn a watch as rare as the trophy.

Product differentiation or unique selling proposition is a tried and tested tool that brands use to create inequality in order to stand out from the pack of competitors. Rarity is not about product differentiation. It is about creating differentiated customers or shall we say a different species.

Brand Positioning in Noodles Market

In a very pioneering move Nestle created instant noodles category in mid 1980s when they launched Maggi brand. Being the first mover the brand become category representative. To many people instant noodle is Maggi. It has become generic to the product category. Positioning is an important aspect of marketing strategy. Market segmentation is first step in strategy development. It is impossible for one marketing package to make sense to everybody. By dividing customer on the basis of their similarities, it becomes easier for a firm to decide where to direct its marketing efforts. This allows better allocation of finite marketing resources by maximizing efficiency and effectiveness.

Nestle also had a lot of options. The noodles market can be divided into different groups depending upon the choice of segmentation variable. For instance, there is domestic and professional segment for noodles. The market could be divided on the basis of age of consumer, r consumption quantity, geographic location and culinary treatment. Market segmentation is a matter of perception. There are people who look at the market the way everyone sees, whereas a limited few are able to uncover new customer groups who have not been uncovered by generally followed basis of segmentation. Nestle chose to target the children segment. Children frequently demand something to eat. Back then the market of snacks was not evolved. Therefore whenever mothers were pestered they were forced to provide home cooked snacks or light food like parantha, pulav, pakora, sandwich and vada

The next question was to decide upon its value proposition and positioning. How should the brand Maggi be placed in consumer’s mind? Essential to positioning was that Maggi must be perceived distinctively and of relevance to target market. Maggi was positioned as ‘fast to cook and good to eat’ 2 minutes noodles. It offered distinctive advantage to mothers in terms of ‘fast to cook’ proposition. The Maggi noodles unique formulation reduced the long grind involved in making traditional quick food. All that Maggi needed was two minutes boiling time and adding of a tasty masala called ‘taste maker’. For kids, the brand offered ‘good to eat’ proposition.

Maggi opened an entire new market for instant noodles. The next brand to arrive in the market was Top Ramen from Nissin. The challenge for the brand was how to position itself so that it could create a distinctive position. It tried to take at dig at Maggi by directly calling itself ‘ Smoodles’ or smooth noodles. It urged customers ‘Don’t be a noodle. Be a Smoodle’. The brand adopted product attribute based positioning and highlighted its smoothness.

Sensing the opportunity, HUL jumped the fray and entered the market with their Knorr brand. Knorr, originally a soups brand in HLL’s portfolio was extended to noodle category. Knorr Soupy Noodles also targeted the in home children market. It boasted of a unique product in instant category and aimed at combining the fund of noodles with the health and goodness of soups. The brand positioned itself as noodles with soup for children to satisfy the in between meals hunger pangs. The brand’s communication focuses on a situation where a child demands something to eat before dinner at about 7 o’ clock.

GSK the makers of Horlicks entered the instant noodles market with their Foodles brand. GSK continuing with health and nutrition platform created Foodles. The brand’s launch was based on research inputs that instant noodles were not considered healthy and serving them induced guilt in mothers. The key ingredient in instant noodles, maida or refined flour, was not as healthy as whole wheat. While the positions of convenience and taste were already occupied, Foodles sought to play the game on nutrition positioning. Foodles tried to break into the monopoly of Maggi with Foodles positioned as nutritious instant noodles. The company used its Horlicks brand as mother brand to support its noodles brand..

Homegrown cigarette giant studied the instant noodles market and discovered some ways to cut into Maggi’s dominance. Its studies found chinks in Maggi’s armour. Maggi came in rectangular shape. It needed to be broken into two pieces for placing it in the pot for boiling. Pots used in kitchens always come in round shape like frying pan and cookers. This broke noodles and rendered them small in length. Second, kids often do not eat the noodles immediately. Noodles are also taken to schools in tiffin. Maggi noodles if not eaten immediately tend to turn lumpy and soggy with time. They stick together which was not really a fun to eat. Maggi’s masala contributes major share to its sale.  ITC leveraged its skills and created two tasty variants to give customers a choice.  ITC extended its Sunfeast brand into instant noodles category by launching Yippee. Yippee was positioned as noodles for the curious kids as long noodles which can be played around with while eating. The brand communication very cleverly but subtly aimed to promote its unique points of differentiation as longer non sticky tasty noodles which are ‘play’ to eat.

A market is an evolving organic system. There are many other brands which wrestled for share in the instant noodle market. One of the innovative concepts was launched by Nissin Cup Noodles. The brand point of difference was its out of home access to noodles when kids are on a picnic or an adventure trek and need an escape from the cooking process however small.The other brands which operate at small scale are Ching’s Secret, Smith & Jones and Wai Wai noodles. Future Group competes with its Tasty Treat brand which is sold in its retail chains like Big Bazaar and Food Bazaar.  These brands are pushed through the retail and compete on price positioning.

The story of noodles shows positioning is not about product because instant noodle is an instant noodle. How it is converted into a consumer relevant and competitively different concept is the question.

Cross badging, consumer segments and killing two birds with one arrow

Market segmentation sits at the heart of marketing strategy. Segmentation is essential because consumers are not homogeneous. That is, they respond differently to one market offering. Segmentation is in a way a compromise between effectiveness and efficiency. Mass marketing is efficient strategy because one product is offered to all consumers irrespective of their difference. However, customization is effective because product is designed as per unique needs and wants of each consumer. But constraints at the production end often obstruct firms in their path to customization. Flexible operations permit variations of a product in which common production platform is used. This a common practice in durable products like cars, computers, televisions, mobiles and air-conditioners. This way a firm manages to extend multiple responses to cater to different consumer groups. Consider HUL has four different detergents that cater to different segments: Wheel for economy, Rin (whiteness seekers) and Surf for mid price, Surf Excel for the top end quality.

Segmentation is proper when it is based on real consumer differences. Real differences manifest in heterogeneous demand. This prevents use of one strategy (marketing stimuli) in different segment. Effectively it implies in marketing you can’t kill two birds with one arrow. Wheel does not offer correct solution to the needs of Surf Excel consumers and vice versa. Often segmentation studies reveal interesting picture of consumer differences. As consumers move up the income ladder, consumption begins to acquire psycho-cultural overtones. Consumer preferences begin to shift from real product differences to symbolic because they want their brands to reflect their personality and lifestyle. Quality excellence is essential first step in marketing to these segments as a result it ceases to be a differentiator. Consider the case of luxury perfumes, clothing, bags, shoes, and bikes. Most Italian brands provide exceptional quality of fit and fabric but their differentiation lies in heritage and signature. Similar is the case with Swiss watch brands.

One of the strategies to fire at two targets with one bullet is cross badging. This involves when a product of one firm is also sold by another firm in cosmetically changed form. One of the old examples of this strategy has been GM’s Prizm and Toyota Corolla. Geo Prizm was same as Corolla in terms of basic design. This strategy allows a firm to increase market participation by increasing its bouquet without making corresponding investment product development. Prizm allows GM to participate in sub-compact sedan segment and Toyota gains by getting a cut from sales pie of its modified Corolla. But moves of this kind can damage the cross badged brand in absence of appropriate equity insulating measures. Although Prizm and Corolla are same cars with different names yet the latter sells much better. Brand name ‘Prizm’ itself insulates Toyota from possible damage to its equity and at the same time it does not allow GM to directly plug into its huge trust (built quality) factor.

Cross badging is a common practice in car industry. For instance Maruti’s A Star is corss badged as Nissan Pixe in Europe and Toyota IQ goes as Aston Martin Cygnet. In India the cross badging is employed to its maximum by Nissan Motor and Renault. Do you get confused between a Nissan Micra and Renault Pulse; Nissan Sunny and Renault Scala. If yes, then cross badging strategy has not worked well. The internal similarity in terms of production systems is fine but if brands have overlapping image it is a sure recipe of branding disaster. Confusion is the biggest enemy of branding. Consider the case of Skoda Rapid and Volkswagen Vento. Do get confused? Probably not, their brand imagery acts to insulate one from the other although they come from the same stable.

Cross alliances and technology sharing permits firms to cross badge products with an unprecedented ease. But the real reasons for cross badging should not be internal. The differences in the market or consumers should be at the center of cross badging decisions not the manufacturing.