June 2017 - c3centricity | c3centricity

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Brand Portfolio Secrets to Success (The 5 Things You Need to Know)

How do you know when you have too many variants in your brand portfolio? In my opinion, the answer is that it’s when you can’t answer the question!

One of the most popular evergreen posts on C3Centricity is “Guide to Brand Portfolio Management.” It seems that we all suffer from a deep-rooted fear in managing and reducing our brand portfolio, especially when it includes many historic or regional variants.

That is why I decided to write about these best-kept secrets in portfolio management, which even large corporations are not always aware of!

 

More is rarely better!

We live in an over-abundant world of consumer choice, but more is rarely better. The paradox of choice is a powerful concept  popularised by Barry Schwartz.

It states that people actually feel freer when they are given fewer choices. Have you never ended up walking out of a store without the purchase you had planned because you had been faced with too many choices? I know I have – often!

It is said that the limited choice offered in hard discounters in one of the main reasons for their success; it’s not just about lower prices.

They usually present just one or two brands for each item they stock and the branded products they do stock are almost always at the same price if not higher than normal supermarkets.

In this over-abundant world of consumer choice, more is rarely better. #consumer #brand #Marketing Click To Tweet

More than ten years after the first research on which Schwartz based his theory, new studies have given some alternative perspectives on choice, claiming that large assortments are not always a bad thing. In the study by Gao & Simonson, they propose that there are many factors which were forgotten in Schwartz’s study.

You can read the full article on this latest work in Neuromarketing. What I found of particular interest, being the true customer champion that I am, is that they conclude that it all depends on understanding your customer – doesn’t everything?! Their summary findings state that:

“In certain situations (when the ‘whether to buy’ decision comes before the ‘which option is best’ decision) a large assortment CAN increase purchase likelihood. Especially in eCommerce, it is possible to reap the benefits of a large product assortment, while helping customers make choices?”

In other words, the online searches that we all now perform before purchasing will benefit from a wide selection of offers. Once we have decided to buy, then a large choice can become a barrier to final purchase.

 

Although Schwartz’s original book was published in 2006, he recently commented on the current choices facing consumers in “The Paradox of Expanded Choices.” In it he concludes wistfully by saying:

“We can imagine a point at which the options would be so copious that even the world’s most ardent supporters of freedom of choice would begin to say, “enough already.” Unfortunately, that point of revulsion seems to recede endlessly into the future.”

I for one enjoy shopping because I am always looking out for the latest introductions and innovations. For the more “normal” shopper, it looks like we need to help their decision-making by reducing the complexity of the task.

One requirement to achieving success in this is clearly a deep understanding of your customers so that you can offer the best selection of variants to consumers in each region, if not store. As I have so often mentioned (and sorry if I am boring you with this) is that it all comes back to knowing and understanding the customer. Simple really!

 

Corporations are brands too!

Brand management is essential to a healthy business, but marketing has one of the quickest promotion ladders of many professions. That’s great news for marketers, less so for brands. Why? Well because marketers want to make an impression and get that promotion as quickly as possible. And one of the easiest ways to do it is by launching a new brand or variant.

I believe this explains why we poor consumers often end up NOT buying something because we just can’t make up our minds between the vast choice of flavours, packs and sizes on display in some large hypermarkets. More is most definitely not always better when it comes to retailing as I’ve already mentioned!

Does any brand really need tens of flavours/aromas or hundreds of variants?

To answer this, I decided to take a look at the latest table of leading global brands. According to Interbrand’s “Best Global Brands of 2016:”  

      1. Apple
      2. Google
      3. Coca-Cola
      4. Microsoft
      5. Toyota
      6. IBM
      7. Samsung
      8. Amazon
      9. Mercedes- Benz
      10. General Electric

Most of these brands certainly don’t have hundreds of variants from which to choose from and therefore the customer’s final selection is relatively easy.

However, interestingly only one of these companies is a CPG (consumer packaged goods) brand, so I decided to take a closer look at the sub-category of consumer brands. (Note: Interbrand still separates alcohol and beverages from CPG!) Here are the CPG brands, including beverages, within the Top 100:

      1. Coca-Cola (3)
      2. Pepsi (23)
      3. Gillette (24)
      4. Pampers (28)
      5. Nescafe (36)
      6. Kellogg’s (39)
      7. L’Oreal (45)
      8. Danone (55)
      9. Nestle (56)
      10. Colgate (57)
      11. Lego (67)
      12. Johnson & Johnson (73)
      13. Sprite (86)
What immediately strikes me is that many of these brands are actually also the names of the corporations behind them.
 
This might explain why few consumer goods companies appear in this list because they just have too many brands and variants. A few of the larger CPGs – like Unilever and Nestle – have started associating their company name more prominently with their brands. However, they have taken two differing approaches.  
 
Unilever places its corporate logo on the back face of their product’s packaging, leaving the brand logo as the hero on the front.
 
Nestle, on the other hand, incorporates its logo into the front panel design of most of its brands. There are a few noticeable exceptions which include their waters and petcare brands. Both of these are run as stand-alone businesses, which certainly explains this. 
 
I am assuming that both organisations did this to increase corporate reputation and also consumer trust, especially for their lesser-known brands. I am closely watching to see if this strategy results in increased loyalty in the long-term because for now, their performances are not demonstrating a positive return.

 

Businesses are focusing better 

An interesting trend in the past decade or so, is that some CPG leaders, such as P&G and Unilever, have significantly culled the number of their brands’ SKUs. In some cases, this has meant reducing them from thousands down to “mere” hundreds and they continue to do so on a regular basis.

Taking Pareto’s Principle as a guide, it should be relatively easy to cut the bottom 5%, 10% or even 20% of brand variants without losing any significant share. This is why both companies continue to do this on a frequent basis, it just makes good business sense.

A newer, alternative strategy some of the better-managed companies are also using, is the selling off of certain brands or even categories. This enables them to better focus on their core businesses.

After a long tradition of the big buying the small – and often more successful competitors – the trend seems to be reversing.

Katie Rothschild from Interbrand noticed this too. In her analysis she says:

“A number of FMCG brands have a stronghold within the BGB table, such as Gillette (#24), Pampers (#28) and Kellogg’s (#39). These are global household names that possess a combination of strong heritage, positive family associations, and the trustworthiness that is all-important for brands that are bought on a daily basis and consumed instantly. 
However, it is becoming increasingly apparent that the success of smaller, niche brands is starting to chip away at the market share of these global giants and shake up the traditional approach of FMCG marketing. 
Niche brands cleverly make use of their nimble size to tap into new trends, be first to market, and win new audiences through visual and verbal storytelling. The big guys are taking notice. 
Niche brands focus on a particular market position, demographic, or unmet consumer need, and with this focus comes deep understanding of consumer’s needs and wants. What can established global businesses learn from the success of these brands, and what growth opportunities do they represent?”
What is surprising is that most CPG giants still don’t focus, or at least not to the same extent as many startups do! But it looks like they are going to have to change if they want to stay in the race. For now, it’s as if they know theoretically that they should be making cuts and some do make a few of them. But in the end, they don’t go far enough perhaps because they’re scared of losing share.
If you are struggling to make this difficult decision yourself, then perhaps I can provide a few reasons to convince you to make that much-needed pruning:
  • Those multiplications of flavours, aromas, packaging etc you are making are renovations, not innovations. Wake up marketers, you are not innovating! Renovations should be primarily replacements not additions to your already over-extended brand.
  • Retailers can’t stock every variant, so the more you offer the less chance you have of getting wide distribution. Think back to your pre-launch market assumptions; I bet they included a wildly exaggerated level of distribution in order to get that precious launch approval!
  • Precise targeting and a deep understanding of your consumers are the most successful ways to limit SKU explosion. If you are suffering from too many variants, then perhaps you should go back and review what you know about your consumers and what they really need.

Arguably some categories need constant renovation. (food and cosmetics to name just a couple) but even that’s no excuse for simply multiplying SKUs. Use the “one in, one out” rule I mentioned above, because if you don’t, the retailer probably will. And with little concern for your own plans and preferences.

 

The Secrets

In conclusion, to summarise the best strategies for brand portfolio management, which seem to be secret since many corporations still ignore them, are:

  • Remember, that if you offer a vast choice of variants for each brand, consumers could get analysis paralysis and end up walking out of the store without buying anything.
  • You need to manage the corporate brand just like your other brands, especially if it appears prominently on packaging and other communications’ materials.
  • Make an annual review of all your brands and variants and ruthlessly cut the bottom 20%. If you want to keep any of them, then you must have a good reason – such as that it’s a recent launch – and a plan to actively support them.
  • Innovate less but better. Be more targeted with each of them and include your customers in their development.
  • Be realistic in your distribution targets. Know what will sell where and why. Not only are you more likely to keep your share, but you’ll also make friends with your retailers.

 

Coming back to the leading consumer brands from the Interbrands’ list, all top ten excel in brand portfolio strategies that are precisely differentiated, clearly targeted and well communicated.

David Aaker wrote an article on L’Oreal a few years ago that explains the above theories very well. Even if it’s from December 2013, not much has changed and it still makes a great read, highly recommended.

I believe most brands with tens or hundreds of variants in a market, are being managed by lazy marketers. People who don’t have the courage to manage their brands effectively by regular trimming and who can’t face up to the lack of success of some of their “babies”. Are you one of them? What’s your excuse? I’d love to hear your reasons for keeping all your SKUs.

This post had been updated and adapted from one which first appeared on C3Centricity in May 2014

C3Centricity used images from “Winning Customer Centricity” and Dreamstime in this post.

7 Reasons Companies Fail to Adopt a Customer First Strategy (And How to Succeed)

By now, every CEO knows that a stronger customer focus is the answer to many of their business challenges. Why therefore do so many companies still struggle to adopt a customer-first strategy and culture?

Read on for my own thoughts and perspectives on what should be a top company objective for proven business success.

1. The CEO has stated it as a company objective but has not detailed what and how the organisation will change

While it is essential that a customer-first strategy has a board-level sponsor, it is important that every employee understands their role in making it happen. It should not be treated as just another project but as a long-term company top 3 objective.

When this happens, every division is obliged to see how they will be impacted and what part they will play in meeting it. This is one area where the CEO can’t set it and forget it. He/she needs to be regularly informed of progress and ask “awkward” questions to ensure that everyone is embracing it. Without company-wide support, it will never succeed.

The CEO needs to ask the awkward questions to ensure everyone is embracing a customer-first strategy Click To Tweet

2. The organisation has not fully embraced the strategy

As mentioned above, everyone has a role to play in satisfying and delighting the customer. It is not the job of marketing, sales or market research alone. It is vital that each employee thinks customer first and ensures that every action and decision they make is customer centric.

One easy way to do this is to ask this question at the end of every meeting: “what would our customers think of the decision we just made?” If there is something they wouldn’t like or you know that you yourself wouldn’t approve of, then it needs to be reconsidered.

What would our customers think of the decision we just made? #CEX #Customer Click To Tweet

3. The project is treated just like any other

As with every well-defined objective, it is important that there is a leader supported by a team, to make progress while also adapting and adjusting as challenges arise in its execution. The same is true for a customer-first strategy.

However, unlike most other projects, this one will not have an end date! It should have a timeline to identify milestones, of course. But as the customer will continue to change, the actions needed will need constant adaptation. I like to say that “customer-centricity is a journey, not a destination.”

Customer-centricity is a journey, not a destination. #CEX #Customer Click To Tweet

4. The initiative does not have a visible leader

The initiative must have an executive sponsor and a passionate and charismatic leader, to excite and drive the whole organisation towards a more customer-centric approach to business.

Once the board has endorsed the initiative, the every-day leadership should be handled by someone who exemplifies customer-centricity and has a passion for customer delight. In the most customer-centric organisations, this person is a Chief Customer Officer who sits on the executive board alongside the CEO, CFO and CMO.

According to this recent article in Forbes, the responsibilities of a CCO are to:

  • 1. Bring The Customer To Life
  • 2. Reach Outside The Organization
  • 3. Involve The Front Lines
  • 4. Embrace The Data

As you can see, these are actions that demand specific capabilities that complement rather than replace those of the heads of sales, marketing and PR. That is why a customer-first strategy needs a separate functional head. Trying to integrate these into the responsibilities of these leaders is unlikely to meet with much success.

 

5. No-one understands how to move the initiative forward.

When you don’t know where you’re going, most people are afraid to take the first step. But that’s the only one you need to know. It’s easier to course-correct when you are moving than when you’re standing still. As already mentioned, customer centricity is a journey, not a destination.

That’s why many organisations now work with a business catalyst to help them take those all important first few steps. Once the project is up and running, occasional sessions are then sufficient to keep the internal excitement for the customer growing.

Successful businesses work with a business catalyst to help them take the important first few steps of a customer-first strategy Click To Tweet

6. Everyone in the organisation is not clear about their role in satisfying and delighting the customer.

It is well-known that companies such as Amazon and Zappos have new employees enjoy direct contact with the customer from their very first days working in the company. However, this is something that should be encouraged on an ongoing basis as well.

Ideally, every employee should get the chance to watch, listen and interact with customers regularly. The best organisations have such connections on every employee’s annual objectives, specifying such exchanges on a monthly basis as a minimum.

7. They think it costs too much

While this may be the perception, in reality, it costs a lot more NOT to adopt a customer-first strategy. It makes both business sense AND customer sense.

There has been so much research done on the impact of a customer- first strategy that there is no doubt that it provides a positive ROI (return on investment):

  • Walker found that 86% of buyers would pay more for a better experience.
  • Genesys showed that improving the experience for customers is the key to increasing retention, satisfaction and sales.
  • Deloitte and Touch claim that customer centric companies are 60% more profitable.
  • Bain & Company research shows that increasing customer retention rates by 5% increases profits by between 25% and 95%.

These numbers should be sufficient to convince every CEO that a customer-first strategy is worth investing in. In fact, it is an essential strategy every CEO would be wise to adopt, no matter what industry they are in.

So what are you or your CEO waiting for? Did I miss a different problem you are currently facing? What other challenges have you faced or are now facing in adopting a customer-first strategy? Please let me know by adding your comments below.

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