The True Value of Value-Priced Product Lines

A marketer’s dream is to achieve healthy profit margins on every product sold. The fundamental customer value equation of benefits received compared to costs to acquire and consume suggests increasing value is as simple as either adding benefits or reducing costs. Product positioning can follow one of these two routes, focusing on either value via a benefit provided (e.g., quality, craftsmanship, performance, or image) or cost (e.g., low price or extended payment terms). In order to succeed in staking a distinctive position for value proposition and positioning, it seems inevitable that a decision must be made to focus either on benefits or costs. What if I told you it may be necessary to deliver value through more benefits and lower costs?

Wendy’s Split Personality
One brand that realizes a need to offer value in the forms of benefit focus and cost focus is Wendy’s. The quick service restaurant chain is locked in a battle not only with direct competition from burger chains like McDonald’s and Burger King, but gains by Taco Bell and Subway are an additional threat to business. Wendy’s has experienced modest store sales increases, but management is concerned about sluggish sales of its value menu. Wendy’s was a leader in establishing the value-priced category more than a decade ago, but it has been eclipsed by McDonald’s in appealing to the taste buds of price-sensitive diners. At the same time, Wendy’s has worked diligently to carve out a brand position of quality and premium products that can command higher price points. Can Wendy’s be an upscale burger brand and a value-priced brand at the same time? Not only can it, but Wendy’s must be both.

The Benefits of Multi-Segment Targeting
Positioning a brand to appeal to two different market segments seems to run counter to admonitions to focus and not try to be all things to all people. However, there are compelling reasons to develop separate product lines for upscale and value markets:
  1. Captures greater sales potential – There are sales to be had in both upscale and value markets. A decision to focus on one segment only is a choice to forego revenue opportunities. In Wendy’s case, it is not a great price distance between the premium-priced fast food burger and the value offering. Thus, the brand position is not compromised by selling products at different price points.
  2. Can bring new customers to the brand – Value priced offerings can be viewed as a form of sampling. They can be a way to bring customers into your business to try your products. If they are strictly buying on low price, you have something that appeals to their needs. If they can be up-sold, the value line has served to build brand credibility and opens the door to extending the relationship by selling more profitable products.
  3. It is a competitive necessity – Sometimes, offering a downscale product line may not be a desirable decision, but lack of a value-priced line could put a brand at a competitive disadvantage. In Wendy’s case, it may be tempting to say “forget the value menu- let McDonald’s have those customers and focus on the upscale market.” Nice concept, but it could create a disastrous scenario in which customers switch to a brand that offers greater choice.

There’s the Beef

The above points support a brand segmenting the market to appeal to value conscious buyers as well as tapping more profitable opportunities by offering products that have benefits valued by buyers. I like how Wendy’s has its value menu positioned as “Right Price Right Size.” This approach is not strictly about low price; consumers concerned about calorie intake would perceive value in this product line for reasons other than low price points. Therein is the key consideration: Multi-segment targeting is not about high price and low price; it answers the buyer’s question “what’s in it for me?” Reality is that one product line cannot appeal to diverse customer needs. It is OK to take a brand downstream to serve price conscious buyers… to a point. If brand credibility can be maintained, moving into lower priced markets can be a way to find new customers and fend off competition.

Nation's Restaurant News - "Wendy's Aims to Recapture Value-Conscious Consumers"

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