After the dust settled, Folgers indeed had moved to a new plateau of market share—from which it has not retreated. But its victory had a decidedly bitter taste. What had gone wrong? We believe that the answer is yes. Conventional wisdom holds that market share drives profitability. Certainly, in some industries, such as chemicals, paper, and steel, market share and profitability are inextricably linked.
Chief among them, we discovered, was that market share alone does not drive profitability. In fact, market share explains only about half of the differences in profitability among brands; in some categories, there is hardly any correlation at all. That is, if a category is composed largely of premium brands, then most of the brands in the category are—or should be—quite profitable. If, on the other hand, the category is composed mostly of value and private-label brands, then returns will be lower across the board.
The category is what makes the difference. In other words, managers must think about their brand strategy along two dimensions at the same time. Is it dominated by premium brands or by value brands? If we visualize a matrix with those two dimensions, we can map the position of any premium brand within one of four quadrants. And each requires a different strategy. But when the company went after share, it started a price war.
Competitors responded, and a category that had once been premium became value. All players suffered. Folgers was what we call a hitchhiker. What brands in this quadrant should focus on is innovation coupled with niche marketing or variations on niche marketing.
Successful hitchhiker brands either attract and keep a narrow base of loyal users, as Neutrogena does in the facial-bar-soap category, or lead the market in a subsegment of a larger category, as Post does in shredded-wheat and banana-nut cereals. The common theme is an innovative brand for which consumers are willing to pay a premium price. Cereal, in fact, is a good example of a category in which the hitchhiker strategy can pay off.
Kellogg is the clear market leader, but Post and General Mills each control certain subsegments and do very well following Kellogg in overall RMS. For an interesting variation on hitchhiking, the automobile industry is worth a look. Over the past ten years, the category as a whole has become increasingly premium and profitable.
Automakers have figured out that it is far more rewarding to target specific customer groups with innovations—highly stylized vehicles—than to compete at the low end of the market with a high RMS. As a result, the average price of an automobile sold in the United States has risen much faster than the rate of inflation.
Entire segments—such as sport utility vehicles and minivans—are continually being created and redefined; and the traditional four-door family sedan now accounts for only a small portion of the automobile category. Chrysler has been a primary driver—and the largest beneficiary—of this change. Brands that occupy the premium-category, low-RMS quadrant can maintain healthy profit levels for long periods.
But the hitchhiker position is vulnerable—in particular to pricing moves by the market leader. But managers of hitchhiker brands must recognize and evaluate the risks. When a brand leads the market in a premium category, we call it a high-road brand. The keys to success in this quadrant are innovation, innovation, and innovation.
Consumers of high-road brands tend to be loyal and willing to pay premium prices. In return, they continually demand improvements and changes—in form, size, and function—that deliver real value. Building on its original product, Kraft constantly engages existing customers and attracts new ones with its innovations. For example, over the past 15 years, the company has introduced spiral pasta, pasta in the shape of cartoon characters, and several different cheese flavors—all selling at premium prices in what has remained a premium category.
Clorox is another good example. Not only has it innovated in its original category, household bleaches; it has also used innovation as a way to trade on strong customer equity and to muscle into ancillary categories, such as all-purpose cleaners and toilet bowl cleaners. Gillette is a third good example. The Sensor and its succeeding generations of products—along with the innovations of other companies that followed suit—restored the razor category to premium status.
When managers of high-road brands are confronted with a price war or a threat from a private label, it is critical for them to think through the consequences of their reactions. Kimberly-Clark has always responded to that threat with new technologies and applications. The result? Innovations such as Ultratrim and Pull-Ups, which allow the company to continue charging a price premium. If innovation is the most important component of a successful high-road strategy, judicious pricing is second in importance.
Educated consumers will pay more for innovation, trading up to higher-priced products. Extremely high prices can produce mind-boggling returns over the short term, but such profits are not sustainable. If there is a substantial price gap between premium brands and value brands in a category, someone will fill the breach. Our research suggests that consumers are more loyal to premium brands that are only somewhat more expensive than value brands.
If there is a considerable price gap within a category, high-road brands can maintain a pricing edge for a longer time by innovating profusely. Raising entry barriers is the third key ingredient of a successful high-road strategy. One way to do that is through product or stock-keeping-unit proliferation, as Tylenol has done. If the product is perishable, a DSD program ensures freshness.
DSD also gives the manufacturer enormous merchandising power. Because the person stocking the shelves is employed by the manufacturer, not only can the manufacturer control how the product is displayed, but it also knows firsthand what is selling and how fast. Programs like these tend to have high fixed costs; minor players find it difficult to respond effectively. Coca-Cola, Frito-Lay, and Nabisco are all good examples of high-road food brands that have erected those kinds of barriers.
Frito-Lay has expanded its product line to the point where—given shelf-space constraints—competitors simply cannot keep up. Witness the demise of Eagle Snacks. Can high-road brands fall from grace? Managers then will confront the twofold task of turning around a flagging brand and trying to increase profits in an area that is no longer primed to encourage higher levels of profitability.
When a brand competes in a value category and has a high RMS, we call it a low-road brand. In this quadrant, then, the primary goal should be cutting costs and plowing back the savings into lower prices. Managers should take a hard look at their cost structures and eliminate steps that do not add value. That way, they can free up resources to devote to building brand equity.
Managers can cut costs in many areas. One option is reducing stock-keeping units. Many low-road brands sport large numbers of SKUs because their managers believe that consumers value the variety. But in this quadrant, such proliferation does not ensure greater profits; often, it simply leads to more complex manufacturing and delivery systems, which in turn lead to higher overhead costs. High-road brands, with their strong customer equity and their position in a premium category, require the variety; low-road brands do not.
For instance, you may not immediately think that an event venue would be seen as a competitor to a flower shop, but when a bride and groom are planning their wedding with a limited budget these two different companies are now competing for a spot on their wedding day.
Unfortunately, we see this happen all the time. We see this especially true in the restaurant industry. Too many business owners believe that customers will just show up just because they have good food. Often less than a year later, their doors are closed.
From the very first moment someone interacts with your business, there are perceptions being created. This will often happen without even a word said. Too many businesses are spinning their wheels with ineffective marketing and wasting a lot of money in the process. Top performing companies know this, and the sooner you have a brand strategy in place to help you accomplish this for your own business, the better.
This is because they are able to communicate the value of what they provide, separate from the price they charge. This is a bad place to be as a business. There is always going to be someone who can provide a service or product at a cheaper cost. A brand strategy will give you the confidence to position your business as a better option outside of price alone.
A good example of a strong brand position could be an auto repair shop that has built a strong position as being the most knowledgeable in their industry. Now when a customer is making their purchasing decision, they are often more willing to spend a premium amount for a premium service. Best of all, when this company delivers on the promises they make, they are building very strong brand loyalty.
When it is completely integrated into the fabric of your company a brand strategy will impact your culture, your systems, your management, your daily operations, and will provide more clarity and direction for your entire organization. His career has centered around helping leaders build influential brands by telling more compelling stories in order to connect on a deeper level with their audience.
The company usually consults a design firm or design team to come up with ideas for the visual aspects of a brand, such as the logo or symbol. A successful brand accurately portrays the message or feeling the company is trying to get across and results in brand awareness , or the recognition of the brand's existence and what it offers. On the other hand, an ineffective brand often results from miscommunication. Once a brand has created positive sentiment among its target audience, the firm is said to have built brand equity.
If done right, a brand results in an increase in sales for not just the specific product being sold, but also for other products sold by the same company. A good brand engenders trust in the consumer, and, after having a good experience with one product, the consumer is more likely to try another product related to the same brand. This phenomenon is often referred to as brand loyalty.
For example, the oldest known generic brand still used today is an herbal paste from India called Chyawanprash. In the 13th century, Italians began putting watermarks on their paper as a form of branding.
The term "brand" also refers to the unique marks burned into the hides of cattle to distinguish the animals of one owner from those of another. Company Profiles. Marketing Essentials. Financial Statements. Alternative Investments.
Your Money. Personal Finance. Your Practice. Popular Courses. Business Marketing Essentials. What Is a Brand? Companies become very closely associated with their brand, if not synonymous with, their brand. The consumer is bombarded with brand messages all day, and inundated with more information from influencers, friends, experts, critics, and competitors.
While the internet makes shopping easier, consumers must now filter out tons of information daily. Five main touchpoints reach consumers, including the brand promise, brand story, innovation, purchase moment, and consumer experience.
Regardless of the order, they reach the consumer; if the brand does not deliver a consistent message, the consumer will be confused and likely shut out that brand. While brands cannot control what order each touchpoint reaches the consumer, they can undoubtedly align each of those touchpoints under the brand idea. Use the brand idea to inspire a simple brand promise that separates your brand from competitors. Position your brand as better, different, or cheaper.
Brand story:. The brand story aligns all brand communications across all media options. Build a fundamentally sound product, staying at the forefront of trends and technology to deliver innovation. Furthermore, steer the product development teams to ensure they remain true to the brand idea. Purchase moment:. The brand idea must move consumers along the purchase journey to the final purchase decision. The brand idea aligns the sales team and sets up retail channels.
Consumer experience:. The brand idea guides the culture of everyone behind the brand who deliver the experience. Apply those resourses to the smartest ideas that will drive the highest return. Make the best financial investment choices. Furthermore, make the best decisions on how to deploy your people. How to define your brand positioning so you can drive new growth.
How to write a smart brand plan that gets everyone on the same page. Our readers tell us they reach for Beloved Brands a few times each week as a reference toolkit to help them with the day-to-day management of their brand. With Beloved Brands, we want to challenge you with questions that get you to think differently about your brand strategy. Our process for defining your brand positioning will open your mind to new possibilities for how you see your brand.
We will show you how to run the creative execution process, show you how to write an inspiring brief, and make decisions to find both smart and breakthrough advertising. You will learn new methods to analyze the performance of your brand with a deep-dive business review.
Skip to content graham beloved-brands. Our brand strategy roadmap combines long-range plan elements with our brand idea map. Start with a rough draft with your long-range plan elements. Align the brand idea across five consumer touchpoints.
Use the brand idea as an organizing tool Five main touchpoints reach consumers, including the brand promise, brand story, innovation, purchase moment, and consumer experience. The brand strategy roadmap aligns and focuses everyone.
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|Brand investment strategy||But oftentimes, delivering a consistent brand identity and brand promise across a multi-channel environment can be challenging. Brand investment strategy it is reassuring to know the solid evidence exists to support the general assertion that brand investments, on average, have been shown to pay off. As a result, Toyota Corolla had higher awareness and credibility the elements of relevance plus higher perceptions of quality and features. Managers also should scrutinize the designs of their products and packages. Deciding on a price per can that they believed would be acceptable to consumers, they set out to cut internal costs to meet that goal. Chrysler has been a primary driver—and the largest beneficiary—of this change.|
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