Branding and Pricing in Goods vs.Services
Posted on Sun, Jan 22, 2012
What is the difference between “Ralph Lauren” and “Ralph,” between “Donna Karen” and “Donna” and between the Banana Republic, The Gap, and Old Navy? Savvy shoppers can tell you. The first names mentioned in each grouping are the flagship or premium brands. These are the ones that are the most fashionable and stylish. They also have the better materials and workmanship. And, of course, this means that they also command the higher prices. The pricing and quality hierarchy of brands, brand extensions or second-tier brands are fairly obvious for goods. But what about for services? Does the flagship service brand always provide the best service? Does one always get better service at the Marriott than at the Courtyard by Marriott or for that matter by the Fairfield Inn & Suites (owned by Marriott).
Some months ago, I lost my Blackberry and fortunately I was covered by insurance. But I was a bit irritated when the the back of the replacement device said “refurbished in the Philippines.” Anyway, sure enough, in recent weeks, the normal handling of the phone took its toll and pieces of the phone start to crack. I managed to hold the phone together literally with scotch tape. Then, certain problems started to occur with the phone signal. I put off going into the Verizon Wireless store because it is somewhat out of the way and also I usually have to wait at least half an hour to get served. But in searching on the Internet, I found to my surprise that there was a Verizon Wireless store fairly close to where I live. It was much smaller than the Verizon Wireless store that I was used to going to.
As I was waiting to be served (it turned out to be a fairly short wait), I noticed on the wall 7 or 8 reasons why I was going to have excellent customer service. Reason #1 was that this store was locally owned and operated. After reading this, I suddenly realized that this was not really a company owned establishment but one that Verizon had contracted out using what I imagined to be some kind of franchising arrangement: similar perhaps to what McDonald’s or any other franchise operation does. But while one cannot tell whether a McDonald’s restaurant is owned and operated by corporate McDonald’s or by a franchisee, I could tell that I was not in a “genuine” Verizon store, because this one was called “Verizon Wireless Zone.” I also realized that the people assisting did not wear Verizon Wireless logos on their shirts but instead were dressed in a mixture of unmarked casual attire of their choice. (In fact, one of the guys was wearing a shirt with the guy riding on the horse.)
When I buy a “Ralph Lauren” polo shirt, I assume it will be of top quality and also recognized by people as such. When I buy a “Ralph” polo shirt, I accept the fact that the quality and prestige/recognition factor may be lower. So, I thought to myself, will this also apply to “Verizon Wireless ” vs. “Verizon Wireless Zone?” I know the good folks at Verizon would hope not and that the idea is for customers to have the same experience in Verizon Wireless and Verizon Wireless Zone stores. It turned out that the service was just as good as that received in a Verizon Wireless store, without having to wait 15-20 minutes. Based on this one personal example, I conclude that the quality and prestige distinction that can be made in products does not have to apply to services. We talk about branding as well as the gross profit margin in various types of goods and services in Business Acumen: Your Key to Sucess and Marketing Mastery: Your Key to Success.