The importance of brand equity

The retail channel is a vital route-to-market for A-brands and local assemblers in the Middle East. Just how much impact does brand have on consumers' buying decision?

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By  Stuart Wilson Published  February 7, 2004

Walking into the glitzy superstore of a major IT retail chain is like opening a ‘Who’s Who’ book on global PC brands. Special displays, advertising hoardings, promotional offers and backlit brand logos bombard the senses and tempt customers to play it safe and stick with brands they know and love.

There is a very good reason for this: brand equity still plays a vital role in the Middle East market and heavily influences customers’ choice when selecting a new desktop PC or notebook

Some might call it brand snobbery, but be that as it may, the vast majority of customers would rather sport a slim wireless-enabled A-brand laptop and pose with it in their local hotspot-enabled coffee shops, as opposed to turning up with a laptop from a little known local assembler tucked under their arm.

The relationship between brand equity and value for money is a complex dynamic in a maturing PC and notebook retail market. Brand often wins out in a wealthy developing market, but over time, a top tier of local assemblers emerge to challenge the A-brands head on by offering a value for money alternative.

Some customers will always want the top of the range model from the trendiest vendor going. But as customers become more educated and start buying their second or third PCs, so their evaluation process alters. They realise that the innards of each vendor’s PC are practically identical and start eying up the specification carefully looking for a bargain and paying slightly less attention to the brand logo.

Over time the price points, product portfolio and business strategy of A-brand vendors and leading local assemblers will converge. In fact, it becomes more and more difficult to distinguish between the two classifications. As this happens, expect to see a select group of locally assembled brands gracing the shelves of the high street retail giants. Several retailers are already in negotiations with local assemblers about just such a tie-up.

With retail sales staff often paid a commission of the margin made, it is logical to believe they will still steer the customer toward expensive brands. But local assemblers are adamant that their lower production costs, short lead times, and ability to source cheap components quickly from the local channel means they can combine value for money for the customer with a compelling margin proposition for retailers and their sales staff.

A-brand vendors can of course respond by building local manufacturing facilities. HP’s assembly plant in Saudi Arabia can produce units with production costs that work out up to 15pc cheaper than importing a unit, giving the vendor the opportunity to either pass this saving on to the channel and customers, reinforce its margins, or compete aggressively on price.

The strategy of both A-brand vendors and local assemblers depends heavily on their assessment of market maturity and opportunity. Some customers will always pick the cheapest option and go for a small local assembler. Others will buy top-of-the-range and be unconcerned by hefty price tags. It is the middle ground between these two groups where customer’s assessment of brand and value mix hazily together that is most interesting. A-brands and local assemblers are edging closer together and both sides need to carefully assess their target market and customer proposition from both a brand and value for money perspective.

Is brand the most important factor in retail PC and notebook sales? Or is it value for money that really excites the customer? How will retail competition between A-brands and local assemblers develop in the future? Let me know your opinions and views.

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