With brands facing pressure from the drop in store traffic and consumer belt-tightening, many have resorted to price cutting or opening up distribution to a wider audience.
Rather than pursuing a path to promotions, Daniel Langer, the former general manager of Henkel Beauty Care North America, proposed brands adopt a premiumization strategy. That’s the backbone of his new marketing company, called Èquitè. Langer formed the company following Henkel Beauty Care North America’s moved from Scottsdale, Ariz., to Stamford, Conn.
In addition to drawing upon his experience at Henkel, Langer spent more than 20 years working in the beauty and consumer goods industry with major roles at L’Oréal, as well as broadening the reach of logos such as Right Guard and Axe.
During his career, he studied the psychology behind why people seek out premium brands and has published books on luxury marketing. Langer believes the seismic changes in the beauty industry brought about by merger and acquisitions and changing consumer habits, signals that it is time to take products “upward.” He defused the thought that an entry-level product means the customer is introduced to a brand early in the purchase cycle with hopes of trading up. “Brand equity should not be traded for easy growth,” he said. Brands that fall into the trap of lowering prices, he maintained, lose the gamble because growth comes at the expense of profit. Sales also become dependent on adding outlets or more promotions.
WWD asked Langer to elaborate on why luxury is the place to be, especially with Millennials.
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WWD: There’s so much competition in beauty categories breeding price wars and promotions. Yet you suggest the key to brand building is premiumization. Why and how can that be accomplished?
Daniel Langer: Many brands lack relevance in their positioning and don’t apply enough precision in defining their brand equity. They don’t resonate with Millennials and the Gen Z, and they don’t master the digital challenge. Not surprisingly, their market shares are stagnant or declining in markets that typically show little or no growth. In this situation, strengthening of the brand equity is indispensable. It doesn’t matter where a brand originates — there are always opportunities to move upward and become more premium. One example is limited editions, which work well when priced right. The key is to identify growth strategies to make a brand more exciting and relevant to the consumer. That allows you to grow markets and become more profitable by making offers with higher price points.
WWD: What are some of the hardest decisions brands have to make?
D.L.: I would like to give you four different examples: luxury, start-ups, private equity and celebrities. When luxury managers talk to me, there are two clear pain points: pricing and line extensions. Many luxury brands made the mistake to launch too many items, too accessible — and solving this is their headache. Also, line extensions are difficult to decide — in which segment should we launch? What should be the right price? For luxury brands, these are decisions that are game changers, decisive for their future success. We help them with our expertise and data-driven tools to take those decisions on a sound base. But it does not stop there — imagine you just launched a start-up and have “all hands-on deck,” getting the product offer right. Branding is often the last decision point, while it should be the first, adding “human touch” with the right brand proposition. Private equity approaches us to gain external perspective in taking tough investment decisions and identifying gaps and opportunities for fast turnaround and growth within their brand portfolios. Lastly, celebrities become more and more aware that they are brands, too, and we can help them to define their “identity” and to decide which brands are the best match for them.
WWD: What are the biggest challenges you see?
D.L.: All brands need to be relevant and exciting for consumers. It sounds simple, but it’s the hardest task. Those who master the challenge are rewarded by strong growth in brand value, revenue and profit. And this is relevant for corporate brands as well. Consumers have a choice. And they vote with their wallets for brands that are close to their heart.