Volume/value dilemma

Four strategies

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There is a paragraph in Keith McNally’s memoir, “I regret almost everything,” which talks about how McNally’s Balthazar co-chefs Riad Nasr and Lee Hanson were so overwhelmed by the restaurant’s demand that they were worried that it would impact the quality of the dishes they were putting on the tables.

This dilemma - meet the volume and sacrifice value or maintain value at the expense of the volume - is at the center of the most of brand positioning, competitive, and growth strategies.

This isn’t a straight-cut dichotomy: there are scenarios where the value is just good enough to sustain large volume (once masstige, now aspirational brands), or where there’s neither volume nor value (a discount rack).

Similarly, when high-value, low-volume brands (like luxury fashion brands) adopt high-volume strategy, their perception of value is impacted. Or, when low-value items, like t-shirts, caps or other merch, assumed low-volume, limited-edition strategy, their value skyrockets.

Decision where a brand will sit in the value/volume environment impacts its sales and pricing strategy as well as risk and profitability. It also influences what types of products a brand makes and how it markets them. Keith McNally could have listened to his co-chefs and restricted demand, creating long lines and waitlists. He could also have had reduced the care that went into prep of the dishes. Neither would have made Balthazar into what it is today. The first approach would created allure, but customers, tired of waiting to try a new place, would eventually moved on. The second approach would worked short-term, until enough people realized that the food is bad and told others about it. McNally chose to have a busy kitchen instead.

Applied to the brand world, the volume/value matrix links consumers’ brand perception with its business performance. There are four kinds of strategy: aspirational, luxury, mass, and “last chance” (which is more of a failure of strategy). Volume/value matrix can also generate the hybrid strategy within brands, whereas organizational functions move at different speeds (more about this in the September 22nd installment of the Sociology of Business).

A brand’s position on the matrix is not psychographically or geographically uniform. It depends on customer segment, location, region, context, etc. For certain customers Haagen-Dazs is aspirational; for others it is mass. In some regions IKEA is considered mass, in others, it is deemed aspirational. In certain contexts, Beluga vodka is aspirational, and in others it is luxury.

Aspirational strategy makes a brand both representative of its category and distinctive (due to its brand codes, product or retail innovation). Aspirational strategy gives everyday goods higher prices. Example is strategy pursued by Haagen-Dazs, Talenti, Guinness, Shake Shack, Chipotle, Cos, Zara, Whole Foods, Pandora, St Ambroeus, Linus, IKEA, BMW, Nomad, Balthazar. These brands are differentiated, but also have wide appeal, and take advantage of both high sales volumes and premium pricing. They are well positioned to launch innovations (like Zara capsules, IKEA collaborations and sustainability initiatives or