Message in a (shampoo) bottle
What really drives prices, discounts and loyalty
This is the first in a series of articles in which we use Semantics3 Brand Reports to learn more about consumer brands and the markets they operate in.
Take a look at the image below —
Does it inspire decision paralysis? A sense of wonderment?
Personally, until recently, I would’ve reacted with revulsion, since this volume of choice feels like chaos and inelegance to me. That was, until my inner data geek led me to dig deeper into an Excel report generated by my team, and discover a whole new world.
Turns out, every product category that you see in a supermarket store has a unique environment — a distinctive ecosystem influenced by forces like price, discounts, packaging, messaging, traffic, demographics and behavioral psychology, which determine which products make it to checkout.
In this article, I’ll try to give you a glimpse at one such product category universe (shampoos) and a handful of forces (notably, price, messaging and discounts) that impact it, in an endeavor to derive some simple yet meaningful insights.
Online consumers view shampoo as a commodity (by and large)
Highly reviewed products are likely to be inexpensive
The brands that sell the most are the brands that price most competitively. Market leaders such as Head & Shoulders, Dove and Pantene fall squarely into this category, with median prices of $8.49, $6.11 and $7.49 respectively.
That said, there is room for building high-volume high-margin businesses. The keys — distinctive branding and a target focus on specific niches. Amika, an independently owned boutique company with unique messaging and packaging, and Davines, a family owned brand that emphasizes sustainability and specific product types (e.g. dry shampoos), are two great examples.
Loyalty is an altogether different ballgame
Highly rated products are likely to be expensive:
Consumers will pony up those additional dollars only if brands can tangibly meet and exceed their expectations. If brand owners can build a product with clear value-add and tack on messaging that resonates with the target niche, the market will both permit higher prices and be vocal about it. Jack Black and J Beverley Hills, both of which have impeccable consumer ratings, are great examples of brands that’ve understood and capitalized on this.
Discounting buys sales, but not loyalty
Products that are highly rated aren’t discounted much, but products that are well reviewed are discounted more than normal.
If you are competing in the commodity section of the market, discounts help to boost sales and buy your way to a greater volume of sales and chatter. Consumers will bite when there’s a good deal on offer.
This foot in the door isn’t a direct path to consumer loyalty though. The brands that consumers are most positive about don’t adopt a discount-centric strategy. And if you think about it, why would they? By crafting their own messaging and conquering a unique niche, they have the opportunity to make price a secondary concern in consumers’ minds and maximize their margins.
This is just the tip of the iceberg when it comes to exploring the shampoo market, never mind diving into the larger universe of all consumer products. We’ve only touched upon a handful of fields available via Brand Reports, and not dug into these trends change with time.
If you’d like to know or read more about specific consumer brands, product categories or market forces, let us know! We’d love to hear from you about what you made of this article and what sorts of insights you are curious about.
You can email us at email@example.com, schedule a call with us or start digging on your own at semantics3.com!
Written in San Francisco by Govind Chandrasekhar and the Semantics3 Team.
Published at: July 28, 2016