The impact of price comparison on brand

I’m on a plane going through some old email and have just read an interview Roberto Munoz of UK car insurance company More Th>n did an interview for e-consultancy in early August on topic of price comparison sites. This particularly caught my eye:

Previously an insurer’s reach was more or less proportional to their marketing budget. Now, we can all reach the same amount of people just by taking part in the aggregator market.

Making sure people know about a product – i.e. reach – has historically been an important driver of marketing spend. This is another example of the internet uncoupling distribution from spend/control of the medium.

I think the impact of this will be to reduce the economies of scale and the impact of brand in the delivery of commodity products.

In the information age there is less requirement to rely on a brand to tell us about the quality of a product – we can just look it up, or check out reviews. Price comparison could therefore spread and we could start to buy all commodity products via price comparison sites or via price comparison mechanisms imported into standard ecommerce sites. For example Tesco’s could offer price comparison on products like washing powder and basic foodstuffs such that people shift brands more frequently then they do today – forcing companies like Unilever and Proctor and Gamble to focus more on price and raw product quality.

Remember I am only talking about commodity products here. For more complex and for newer products, and especially for products that carry social stigma brand will continue to be an important driver of value.

  • For commodity products, you could well be right. But we know that price is often a small part of people’s purchasing decision, even for commodity stuff, so the comparison sites will thrive best amongst those who are particularly price sensitive. I’m not sure insurance is a commodity product yet, and I’d certainly like to know that a company will provide a good service if I need them – like a replacement car, quick and easy claims process etc. In this instance, review sites, or better still the recommendation from my friends, is going to be more valuable to me.

    Brands have value, but the true value must be apparent to the consumer. Comparison sites will highlight the cheapest offers, but brands have opportunities to demonstrate the more intangible values, by engaging with customers, offering great service and getting their customers to become advocates for the product.

  • For commodity products, you could well be right. But we know that price is often a small part of people’s purchasing decision, even for commodity stuff, so the comparison sites will thrive best amongst those who are particularly price sensitive. I’m not sure insurance is a commodity product yet, and I’d certainly like to know that a company will provide a good service if I need them – like a replacement car, quick and easy claims process etc. In this instance, review sites, or better still the recommendation from my friends, is going to be more valuable to me.

    Brands have value, but the true value must be apparent to the consumer. Comparison sites will highlight the cheapest offers, but brands have opportunities to demonstrate the more intangible values, by engaging with customers, offering great service and getting their customers to become advocates for the product.

  • nic

    Thanks Campbell.

    As well as showing price comparison sites also perform the function of saying which products are equivalent, or of highlighting the important differences so consumers can quickly make trade-offs against price. If a trusted brand, like Tescos, steps into this space then they could even start to establish the parameters on which goods should be compared.

  • nic

    Thanks Campbell.

    As well as showing price comparison sites also perform the function of saying which products are equivalent, or of highlighting the important differences so consumers can quickly make trade-offs against price. If a trusted brand, like Tescos, steps into this space then they could even start to establish the parameters on which goods should be compared.

  • I agree Nic, and I think this extra comparison information will improve. I suppose my point is that if a brand wants to compete on price, the comparison site can clearly help emphasise their discount. For other brands, factors like great service may be more important. This is something that is probably best assessed based on the recommendation of others, rather than the comparison site or even a trusted brand. The recommendation of a peer or friend is probably the most valuable.

  • I agree Nic, and I think this extra comparison information will improve. I suppose my point is that if a brand wants to compete on price, the comparison site can clearly help emphasise their discount. For other brands, factors like great service may be more important. This is something that is probably best assessed based on the recommendation of others, rather than the comparison site or even a trusted brand. The recommendation of a peer or friend is probably the most valuable.

  • nice point about the “showing the comparitors” as a way of undermining scale of reach in branding as a differentiator. I’d love to see a scaled model of traditional brand creation/ distribution and one that uses “click-visibility” or some such value.

  • nice point about the “showing the comparitors” as a way of undermining scale of reach in branding as a differentiator. I’d love to see a scaled model of traditional brand creation/ distribution and one that uses “click-visibility” or some such value.