By their very nature, brands are not for everybody. When we purchase a brand of product, we tacitly join a certain group to the exclusion of others. It’s a paradox of brand theory because in reality, brands are both inclusive and exclusive at the same time.
Yogi Berra captured this concept with his infamous quip about a New York nightspot, “Nobody goes there anymore. It’s too crowded.” He was talking about that tenuous balance between popularity and exclusivity, which the majority of brands must navigate to be successful.
Some brands seek broad popularity and are about affordability, assurance, safety, the comfort of the herd. I’m thinking of Timex, Dunkin’ Donuts, Chevy, or Walmart. Others brands offer a sense of exclusivity such as Rolex, Tiffany’s, Ferrari, Starbucks, or maybe a relatively obscure imported or handcrafted product whose brand image relies on word-of-mouth from a trusted source.
The challenge for many marketers and brand managers is how to build a balance of exclusivity and popularity that is most profitable. As brands become more popular they will typically face greater pressure to be affordable as well. It’s likely that as a larger percentage of the population buys your product, the lower their average income is likely to be.
Not all exclusive brands are expensive. (Your local Italian restaurant may be fantastico, but laboring in relative obscurity.) But most brands that live at the premium or super premium end of the scale command higher prices and seek higher margins for the “privilege” of buying their brands. For many of these companies, the elusive sense of conveying status is the most precious element of their brand promise. (e.g charging $5,000 for a watch)
Since growth for a company and its brands often means broadening the appeal of their brand, it can be contradictory to their concept of exclusivity. Starbucks is a perfect example. The first Starbucks location was very exclusive. The first one in each new town almost equally so. Then the buzz about this new kind of coffeehouse swept the country. New stores opened at a dizzying pace. Customers lined up for this very special cup of coffee, served in a very special atmosphere. It was a new kind of coffee drinking experience, a perfect example of the “affordable luxury” category, and the price was extraordinary as well: $4 or more for a cup of coffee.
But while one Mona Lisa is priceless, half a million are just hotel/motel art. As Starbucks grew from 165 stores in 1992 to more than 17,000 in 2010, their rapid growth diluted its Italian coffee house approach with every new store in a standard strip mall slot or converted gas station. (Oh, yes they did. I’ve been to one.) Now there are even several cities in the world with Starbucks locations directly across the street from each other.
As the brand became more commonplace and less focused, Starbucks customers who once enjoyed the Italian coffee house experience defected to much lower cost McCafe and Dunkin’ Donuts alternatives, even before the economy took a nose dive. Starbucks found themselves a little too pricy to be popular and a little too common to be exclusive. In the last two years they have put themselves on a program designed to reinforce their exclusive coffee purveyance by trimming over 900 stores, retraining their baristas, and most recently even requiring their employees to fix no more than two drinks at a time. (Ironically, waiting longer for your latte helps justify the extra cost.)
Deciding how exclusive you wish your brand to be can be a tough decision. As Starbucks is demonstrating, all out growth for a premium brand can be a risky proposition. In my opinion, Mercedes damaged their brand in this country by offering lower priced small cars of questionable quality in 1990’s. (Remember the Baby Benz?) By making the cars less exclusive, they diluted the value of their flagship luxury sedans and failed at their strategy of creating lifelong Mercedes loyalists.
A more successful balance is demonstrated by Toyota. Their cars come at a premium price, without really rising to the level of status symbols. (Their luxury brand, Lexus, handles that.) They are the largest carmaker in the world, but also one of the more profitable over the last decade, looking beyond recent economic and safety problems.
Companies with a clear sense of where they stand on the popularity/exclusivity spectrum tend to make better decisions about new products and pricing. Trying to reach a little too far in either direction-imagine a $1000 Timex or a $50 Rolex-can lead to confusion about the brand and lower sales overall. As Yogi explained year ago, if something gets too popular it just isn’t special anymore.