Positioning of new paints

The high prices of oil-derived raw materials forced many formulation companies to compete in premium segments with higher added value and price. What is the formula here for not failing in the process?

by Herbert Martínez

Sacrificing margin, reducing costs more, seeking substitution of raw materials, expanding the portfolio through the incursion into niches of greater added value, price and technology were some alternatives. Several companies moved towards this last option when they saw that the scheme of competing with prices in medium and low segments was no longer viable. They wanted to venture into high technology with the idea of competing in smaller but highly profitable niches.

Successfully penetrating new markets requires a very detailed knowledge of the needs, expectations, interests and desires of the final consumer of the painting because the marketing strategy is completely different depending precisely on those behaviors. It is more advisable to start from scratch with a brand and look for a positioning based on the attributes of the product, than to reposition an already known brand.

If a company owns a product located in medium or low price segments, it has already developed an experience there and the customer will classify it like this. If that company wants to promote any of those brands to a niche of greater added value and price, the consumer will lose credibility in that product.

Therefore, it is advisable to start with a new brand for those segments with greater purchasing power. The positioning of new paintings is a process in time that requires a lot of strategy and care to successfully mix concepts such as the distribution channel, communication, advertising, price, market and loyalty.

The key is to look for comparative advantages in my product that last over time and in the coherence between what is said about the product and the quality of it. How to seduce consumers in these segments to choose my brand and not those that have traditionally been in this market for years? On these and other topics, we spoke with Claudio Fazzone, who is the manager of the Argentine consulting company Venmark that specializes in marketing for formulating companies.

New brands

What should be the right strategy to position premium products?

I think the market is providing opportunities to develop new types of products but you have to be careful because the consumer today is more informed and has a high degree of preparation. A high-priced product that does not meet special conditions will have a very difficult time. I think it is very important the marketing work that companies do to position a brand in that segment of the market and that it is supported by a really important comparative advantage.

It's easier to position a brand from scratch than to reposition one. It is better to launch a new brand with high prices, do a good job of marketing but not raise the price of one of the current ones. It is necessary to make the consumer understand the reason for the high price of a brand, that there is a differential attribute that justifies this price increase.

What difficulties would a company that wanted to reposition have?

It is easier to launch a product with a high price level and then "skim", that is, take it to the mass by lowering the price. The reverse strategy is very complicated because a product that was always medium or low price, when raised, will lose credibility in the market because it increased.

It may also happen that in the market all brands go up in prices and there would be no problem, but if it is only one that does, it will have many difficulties. Keep in mind that they are 2 completely different markets. If I had my collaborators and product line prepared to give the battle in medium and low segments it is not easy to fight in high price levels. This influences not only the products but also the way I will go out to sell. This will require a cultural change that can generate successes but also failures.

We suggest that if the profile of the company is of medium and low price segments, rather than raising prices to increase profitability, I would see how to optimize costs. It is true that certain raw materials have risen and that they are going to make my profitability shrink, but that will happen to the whole market because slowly it will go up that step of prices to be able to survive.

Customer knowledge

What should a formulation company think about that wants to position a new painting? The important thing is that each company knows its market and the needs of its customers well. A wide range of colors can be a differential attribute for a new brand, so could new types of finish. Not to stay only in the traditional finishes such as matte or satin but in an intermediate one.

There must be an anchor in some differential advantage where the brand can be supported. For example, there are companies that have licenses of brands such as Polo that are high-priced brands that seek their differential in relation to fashion, with trend colors, etc. When a product is launched, it is necessary to know perfectly what the consumer cares about.

Tell us about some experience of successful posing with a brand that started from scratchWe did we recently launch a brand that Sherwin Williams bought in the United States from a company that is older than her. This brand was launched in prestigious stores in Argentina. This brand was the one with the highest price positioning and was launched at a time in the market when the Argentine economic situation was still possible in that market context.

The fundamental thing was that each of the strategies that Sherwin Williams developed with Prestigio as a marketing channel were justifying the high value of the brand. This is because special sales places were prepared: they had a conditioned place and a different atmosphere from the rest of the painting shop. The product offer had two additional finishes to the traditional matte and satin, there was a range of metallic color paints, etc.

That is, there was a sum of products that made the brand position itself very well in a high price segment. The communication strategy that was focused on high socio-economic sectors, with people related to the world of fashion and entertainment, helped to generate a very specific image linked to high-level conditions.

Brand consistency
How should promotion be approached?

Positioning has to be focused on where the market opportunities are. There is no general rule for this. The markets are different. For example, tintometric development in Argentina is different from that which may exist in Peru. One here can consider a development based on a collection of a very broad tintometric system and base their strategy on that. Suddenly in other markets this is not necessarily the case.

There has to be a coherence that exists in saying "I am going to communicate a product that has a high added value and to do so I have to think about what points of sale I am going to sell it, how my sales force should be trained, what merchandising elements as support I am going to give to the brand". Logically, the product has to respond in terms of quality to what is being shown. What we can not do is not be consistent because the consumer discovers where there is a fault, the brand ceases to be credible and that is the worst thing that can happen.

What we have to take into account is if it is a product of high added value and price, I will not be able to have a massive distribution due to several factors. On the one hand, if I place my product in a point of sale where the population is low income, it will cause two things: that my brand is affected by the image of that point of sale and the second thing is that my product will not have rotation. The above will not be a good investment for the trader because he will have a high-priced product without an audience that can acquire it.

Poscionamiento by attributes
What are the stages that follow after launch?

When you pass the launch stage you have to look for how to create more volume because you look at the yield and profitability curve and it shows you all the money that was invested making the volume grow slowly. Hence, our results table in the first months and even years, is negative. You have to look at our action plan in the long term and look at how I will position my brand in 5 years and how I expect my results to balance in the first 2 years and start earning from the third year.

Logically, the deadlines are long but let's think that we are generating a mark for the long time that exceeds 5 years. We can not despair because the cash flow is negative at the beginning and point to the medium term our brand begins to generate profitability. If the brand is well positioned and worked from the beginning, it alone will generate income through the launch of new products and by-products.

Which is more convenient for a painting: positioning it from its attributes or its technical characteristics?

What is important is what the consumer thinks is important. When you launch a high-priced product, you need to think more about the end customer than the professional. The individual does not know the technical characteristics of the product and that is why we must talk about the attributes in terms in which he can understand. Over time what we have to achieve is that over time to the extent that this product is incorporated into the market, the professional will also know the technical characteristics of the product. We must work on both fronts but giving priority to the first, the end user. Today, ecological awareness is more and more immersed in us.

If one thinks today of a long-term brand, it has to respect the basic ecological principles. This issue is an attribute that today is important in this era, but that in 5 years will be vital. Those brands that do not respect these conditions will not be able to continue in the market. Today that is a reality in Europe and in Latin America we are just entering that, we still have time. If a product is launched today, these concepts must be incorporated.

How to build consumer loyalty?

Companies from the point of loyalty of the final consumer do not have a high degree of possibilities of action. Let's say that the one who can do it is retail. Factories today to build loyalty always have to maintain their quality standards, show a transparent brand and concerned about the customer. Loyalty is taking care of your relationship with the final consumer. On the other hand, we must look for the way in which the factory can approach retail, points of sale and implement some loyalty system of direct action at the point of sale.