Should you stick by brand principles even when it affects profits?
On Wednesday, John Lewis announced an 18% drop in profits, which it attributed to sticking to its ‘never knowing undersold’ pledge. But is it sensible to stick to such a pledge when it can have a negative effect on profits?
Pledges like this are nothing new: you only need to look towards the supermarkets to see constant cost-cutting, each alleging to be cheaper than the others on different products. Just on Thursday, Sainsbury’s dropped its ‘try something new today’ strapline for ‘live well for less’.
Are we a nation of penny-pinchers, and fall for any marketing campaign with a strapline that promises goods for cheaper than competitors? Perhaps. But coming up with a strapline claiming to be the cheapest is not the difficult part: living up to the strapline is.
And John Lewis has found that out this year, sticking to a lower-price principle can cost - an additional £9.3 million in the six months to July 30, in this retailer’s case. This is the equivalent to around £50,000 a day.
That’s an eye-watering amount to you and me, but department stores boss Andy Street said there was ‘absolutely no plan’ to step away from the price promise. Is this because the company believes in the long term you have to spend money to make money, and that in the long run John Lewis will be able to get back the money it has lost? Or because the strapline and brand principle is burnt in the mind of the public, to the benefit of the company?
Jonathan Hemus, founder and director of reputation management and communication consultancy Insignia, told The Drum: “If brand principles are to have any real value they must be sustained in the face of short term economic impact. John Lewis’s brand values are firmly engrained in the minds of British shoppers and as a result have engendered longstanding loyalty and admiration.
“Being true to these brand values when times are tough further reinforces the brand and the bond of trust it has created with customers. Ditching them now might improve the last quarter’s profits, but destroy the long term value of the brand.
“It is to John Lewis’s credit – and business advantage - that it is sticking with its long term brand promise rather than succumbing to short term pragmatism.”