In previous blog entries we have discussed the Ansoff matrix which stated that the least risky way to grow was to penetrate your existing market and that the most risky growth strategy is to diversify. Diversification is selling new products to new customer groups. Between these two positions are market expansion; selling your existing products to new customers, and new product development/extension; selling new products to your existing customers.
Ansoff was quite clear about the use of his matrix. You should only move to the next level of risk once you have exhausted all the opportunities with your existing growth strategy. So you only expand your market once you have maximised all the potential market penetration strategies. you only diversify once you have exhausted extension opportunities.
Today, the most common form of brand growth is line extension. In his book, The New Strategic Brand Management, J.P. Kapferer examines brand growth strategies.
Kapferer believes that many brand manage ignore the most obvious way of growing a brand; getting your existing customers to buy increased quantities of your products or to get them to buy more often. Instead, brand managers focus on Ansoff’s definition of market penetration by growing market share or taking market share from competitors.
Bailey’s Irish Cream Liqueur is an example of a brand which used promotion to get its existing customer base to buy more of their product more often. Bailey’s had traditionally been seen as a seasonal product. The vast majority of its sales took place at Christmas and New Year. The product was consumed in small measures in traditional liqueur glasses.
A promotional campaign was created telling Bailey’s drinkers to have it on the rocks. The ‘Bailey’s on Ice’ promotion was a huge success. To drink the product on Ice took it out of its seasonal image. It also required larger glasses, so more of the liqueur was poured. Ice cut the sweetness of the liqueur making it more appealing for consumers to have a second glass. Sales of the liqueur rocketed. There was a big increase in brand volume per capita.
The Bailey’s on Ice campaign had a second outcome. Previously Bailey’s had been seen as drink for old maiden aunts. The ‘on Ice’ promotion helped Bailey’s move out of that segment and attract younger, more fashionable female drinkers.
Other firms have increased volume per capita using strategic alliances. Coca Cola linked with McDonald’s to attract the teenage market who frequented MacDonald’s stores. They also have a strategic alliance with Bacardi to sell Coke as mixer with the spirit brand’s rum.
Another way to increase volume per capita is to address barriers to consumption. In the early 80’s Coke saw that many health conscious individuals were avoiding their brand due to its high sugar content. Diet Coke was introduced so that the health conscious felt less repulsed by the high sugar content.
The Pareto principle states that 20% of those involved in an activity consume 80% of its resources. So most firms expect 20% of their customers to buy 80% of their output. You may find that only 10% of your customers are heavy buyers of your product segment who buy 50% of your product in that segment. Using increases in volume per capita;
- by turning occasional purchasers of small quantities of your brand into frequent buyers of small quantities; or occasional purchasers of larger quantities; or,
- by turning frequent buyers of medium quantities of your brand into buyers who only purchase your brand; or into customers who by heavy quantities of your brand,
you can achieve the Pareto ratio.
A third method of growing your brand is to find new uses and situations for the sale of your products. An example is Captain Morgan’s Rum. Originally this was seen as a spirit drink with a male macho image. The Captain decided to segment the spirit drinks market by the drinking situation. The image was changed to a young good-looking pirate captain. The first situational segment entered was the party. This is where groups of young drinkers met, danced and partied. Night clubs and music venues were a significant part of this market. Captain Morgan’s Spiced rum was developed and marketed at young partying individuals.
Morgan’s then looked at the cocktail market. This is where young, predominantly female consumers met to chat and drink cocktails. The first attempt, a coconut rum (similar to Malibu) failed as the pirate image didn’t meet segment expectations. Parrot Bay, a drink only endorsed by Captain Morgan, was developed. this product matched the feminine and sensuous nature of the cocktail market.
A fourth way of growing brand volume is through trading up. This is where selected consumers perceive an upgraded product or service from a brand. This could be through the creation of gift packs or special series of products. Reebok produce limited editions of their sports shoes. Lynx, the deodorant brand produce gift packs containing not only a spay but shower gel and talc.
Trading up as a strategy is common in the Scotch Whisky market. Base products tend to be blended whiskies. Medium level products are single malts. Traded up products are older single malts aged 15 or 20 years. Glenmorangie produce a range of single malts aged in different types of barrel, for example, old bourbon, sherry or Madeira casks. Top of the range whisky aimed at collectors, may have an increased cask alcohol strength or are produced is small single cask quantities.
As stated earlier, the most common form of brand growth is through line extension. this is not to be confused with brand extension. Line extension is the addition of different flavours or pack sizes to the existing product range. For example, if you produce strawberry jam, you add raspberry jam to the product range. If you sell your jam in 440g pots, you start selling individual serving sachets.
Brand extension is where you take a brand into a new product category. For example Mars originally sold confectionary but moved their brand into desserts (Mars Ice Cream) and energy drinks (Mars milk drink). Peugeot began making bicycles but extended their brand to make cars.
Other forms of line extension include:
- Offering a variety of ingredients e.g. Coke Zero Sugar, Coke Life with vitamins and Caffeine Free Diet Coke.
- Offering a variety of forms e.g. Ariel washing powder, Ariel liquid, Ariel liquitabs.
- Offering multiple products for specific functions e.g. Cif Multipurpose, Cif Bathroom, Cif Kitchen, Cif Power and Shine
You can grow a brand through cross-selling. Acushnet own several brands in the golf industry. People who purchase Titleist clubs may also buy Footjoy clothing, Scotty Cameron putters and Pinnacle balls. the brand is promoted through the sponsorship of professional golfers and if you watch a major tournament those players were clothing marked with both the Footjoy and Titleist brands. Similarly professionals wearing Adidas clothing will use the associated Taylor Made brand of clubs.
You can grow a brand through new product development and the creation of new markets. The iPad is a great example. The iPad a product which industry experts did not see a demand for. It wasn’t a phone, a computer or a music player. They didn’t see that the iPad was the ideal product for those with only a casual interest in each of these sectors who would buy a ‘halfway house’ product. Following its launch the iPad grew to become the dominant household IT product and vastly expanded the Apple brand.
Finally you can grow a brand through internationalization. This usually occurs where a domestic market is mature. Brands are extended into less mature markets with an appropriate price range. Often this takes place through an appropriate allegiance with a brand already operating in that sector. For example Evian, the French mineral water brand extended into the USA through a strategic alliance with Coca Cola. Coke was a high sugar carbonated soft drink, the market for mineral water was distinctly different but allowed the two firms to expand their coverage of the beverage market.