Last week I discussed the strategic options for market leaders and I pointed out that in most first world countries, most markets for goods and services are mature. This means that options were restricted to three main choices:
- Growth through increased usage by existing customers
- Growth through taking competitors’ market share
- Growth through finding new uses for existing products
Here are some examples of brands being built through these strategies and associated tactics.
The first example is Bailey’s Irish Cream liqueur where the brand was built through building volume of use per capita. This strategy involves shifting usage of the product from low volumes to higher volumes.
Bailey’s was a mature brand and it had developed a restrictive image. It was seen as a drinks for special occasions, particularly Christmas and New Year. Bailey’s was a drink for little old ladies and due to it’s sweet taste it was served in small measures.
For Bailey’s to improve its market position and to have long-term survival, this image had to change as did the way in which Bailey’s was used.
An extensive marketing campaign making massive changes to Bailey’s marketing mix was instigated. Advertising promoted the liqueur to young women. They were encouraged to consume Bailey’s over ice in large glasses. New Bailey’s glassware was sent to pubs and nightclubs. Consumer packs containing the larger glass were distributed to retailers. Bailey’s was promoted as a drink for any occasion, not just Christmas, a beverage for a night out on the town. Bailey’s took the opportunity to sponsor Sex and the City, at the time the most popular television programme amongst women in the 18 to 35 age demographic. the drink was reimagined as one for those who are outgoing and as one of fellowship.
This new image significantly increased usage and sales of Bailey’s amongst target segments.
There are three levels of growing usage per capita which were leveraged in the Bailey’s campaign.
- Abandoning Cost-Plus Pricing: Prices are set based on the price point of the most popular product in a geographical area.
- Gaining Local Monopolies: This does not mean gaining more than 35% of the market (the traditional definition of a monopoly situation). Local monopolies are created by flooding the marketplaces with opportunities to purchase and consume the product. Everywhere the target consumer goes or congregates, they should have an opportunity to purchase.
- Adapting Prices to the Buying Situation: So the prices for Bailey’s in a night club will be more than in a pub or bar. The price of Bailey’s in a retail situation will be lower than at a venue.
Specific marketing plans need to be created for each purchase opportunity. For Bailey’s this could mean different marketing mixes for supermarkets, bars, restaurants, vending machines and hotel mini-bars, off licences and general stores.
Coca Cola, the long time market leader in the soft drinks market has continually developed and amended such segmental strategies for decades.
In addition Coke has two critical alliances to grow sales; with Macdonald’s and with Bacardi.
The McDonald’s alliance targets young consumers and looks to continually refresh Coca Cola’s customer base. It aims to build the habit of consuming Coke amongst teenagers who will hopefully continue to consume the cola for the rest of their lives.
The alliance with Bacardi, which includes pre-mixed bottles of rum and coke, targets adult drinkers and the use of the cola as a mixer. Bacardi Rum is the world’s most consumed spirit drink.
The second way to grow a brand in a mature market is to address barriers to consumption.
Surprisingly Coca Cola were slow to address the issues consumer’s had with their product, in particular health concerns and concerns that the soft drink contained too much sugar. Sugar free soft drinks like Tab and even Coke’s main rival Diet Pepsi, were established in the market long before Diet Coke arrived.
However, Coke has used its market position to launch a series of healthy option to break down consumer’s reluctance to buy the drink. They now produce a range of low sugar and sugar free options such as Coke Life (with added vitamins), Caffeine Free Coke, Diet Coke, Coke Zero (No sugar) and Caffeine Free Diet Coke.
However both these strategies only go so far. The easiest and most cost effective option is to get your existing customers to consume more of your product.
There are two ways to increase existing consumers consumption. To get them to use more of the product and to get them to use the product more often. You want to turn consumers who only buy a small amount of your product into customers who are medium consumers and medium consumers into heavy consumers. You want to turn occasional customers into regular customers and regular customers into ‘dominant customers who will only purchase your brand)
Every marketer should be aware of the Pareto Principle (80% of your returns come from 20% of your activities). Similarly the heavy use/dominant customer group represents 10% of brand buyers and 50% of brand volume. To grow this heavy/dominant group you need to use behavioural segmentation to target particular consumers.
You need to ask consumers why they are reluctant to buy your product and address their specific barriers to consumption. You need to build a marketing mix based on specific product improvements and higher experiential benefits. It is very rare to find that consumers reluctance to purchase a product is simply to do with the product’s image.
You also need to ask why consumers prefer other brands.
The third way to grow a brand in a mature market is growth through addressing new uses and situations.
You have to ask:
- Your brand is for what?
- Your brand is for whom?
- Your Brand why?
- The brand against whom?
Consumers want solutions to particular problems. They want a five millimetre hole, not a five millimetre drill bit. Can your product solve multiple problems e.g. Listerine began life as a household detergent now it’s sold as mouth wash.
A Porsche 911 isn’t the car for the school run or going to the supermarket but the Porsche Cayenne 4×4 can be used for those purposes and provide sport’s car performance. Car firms often enter into joint venture to allow brands to meet new uses. For example, Aston Martin have a joint venture with Toyota to produce a small, fuel efficient city car.
Growth can also be obtained through getting existing consumers to ‘trade up’. This is why, when you go to a Volkswagen dealership you are bombarded with a multitude of options for your car. Brompton Bicycles go one further and allow consumers the opportunity to effectively design their folding bike from a dizzying array of product options. You can produce gift packs or extend your brand to related uses e.g. the Christmas box of fragrances which contain aftershave, deodorant, shaving balm, shampoo, shower gel, etc.
Special editions of products can also help consumers ‘trade up’. Fender guitars produce special edition models of their guitars which are produced in small numbered batches. For example, the alternative reality series where each month a short run of guitars is produced with novel body shapes, different neck woods, different switching options and pick up configurations.
Most whisky distillers give consumers to trade up to 10, 15, 20 and 25 year old maturations, they produce cask strength whiskies and age their brand in different casks e.g. bourbon or sherry casks.
Growth can be developed through line extension. Think of the number of formats and sizes in which Coca Cola is sold. Coke’s largest sales are not in bottles or cans, single items or in multipacks, it is the sale of syrup to bars and caterers for mixing with carbonated water at the point of sale.
You can provide incremental variance (e.g. Volkswagen’s huge choice of engine options)
You can multiply the physical forms of your product, so Ariel washing detergent comes as a powder, a liquid, in tablet form and as a gel sachet. You can provide different versions of your brand for different purposes; so Dettol produces an all purpose cleaner but also specific product options for bathrooms and kitchens.
Line extensions represent 85% of new products placed on the market.
However, when creating line extensions you should beware hyper-segmentation. New line extensions must have mass appeal.
To manage line extensions well you need to:
- Improve cost accounting to minimise additional costs in the value chain
- Prioritise resources to high margin extensions
- Your sales force should be able to describe the reason for the each extension in a few words
- You withdraw products as consumers move over to line extensions (you will likely need to encourage such withdrawal).
Finally, you can grow a brand through innovation. Colgate toothpaste is regularly reformulated with new innovative options such as sensitivity relief, whitening and gum health solutions)
Colgate is an example of incremental innovation so a premium product moves to being the standard product over time as innovations are introduced.
Some firms are seen as innovation champions and they are aware of the benefits and impact of an innovation from its inception. these innovation champions know they can leverage higher price points than their competitors confident in the knowledge that the innovation provides real customer benefits. Innovation champions also work to gain more prominent shelf positions, such as eye-level and aisle ends. They will be willing to pay supermarkets for these locations. Innovation champions will also clearly advertise innovation benefits including prominent display of innovations on packaging.