By Mubarak Sooltangos
Some months ago, I explained how powerful brands are made. A brand is never the product of a hazard or a coincidence. It requires a lot of crucial components and building blocks, of which product fundamentals like quality, durability, performance, security which are called concrete competitive edges. Over and above these objective components, building a brand needs subjective elements like product positioning, choice of a target market, knowledge of customer behaviour and communication which appeals to the target market in terms of language, frequency, sophistication and choice of media.
As much as brands can be built, they can also be destroyed in lesser time that it takes to build them. They can be destroyed by forces outside the control of the brand owner, like high inflation in a supplier country, which makes them go beyond the affordability of their users, drastic drop in demand on the market in prolonged periods of slump, where customers switch to price brands out of necessity and technological advance in competitor products which the brand owner is unable to match because of lack of financial means.
But sadly, brands can also be destroyed by carelessness like declining quality of the product or of the after-sales service, reckless and regular price increases to compensate declining productivity in production, losing touch with the market, inadequate communication resulting in a loss of presence in the minds of customers, failure to read changes in the market, loss of contact with the customer base and failure to adapt to change. As we move, I will quote examples of destruction of brands, past and present, on the international scene.
Decline in product quality
Inflation is a fact of life which we must all face. In such circumstances, all brand owners are likely to witness an erosion of their gross profit margins. The smart business driver will increase his prices and will accompany this move with an enhancement in the product. It can be an added feature, a change of look or a give-away gift for some time, until the market gets used to the increased price.
When nothing concrete can be done, there is a last resort, that of the enhancing of the packaging to produce the illusion that it is a new and better product. The golden rule, in such cases, is to invest one rupee in the product and charge two rupees more for it. Reckless brand owners, especially in food products like ice cream, pizzas, cooked meals or pastry often take the suicidal route of reducing their product quality to save on cost by decreasing the quantity of the most expensive raw material inputs, decreasing volume or switching from an expensive ingredient to a cheaper one.
Bad perception stays in the mind and is a brake to sales.
This manoeuvre may take a few months before being noticed by the consumer on his palate, but once this becomes strongly felt, the destruction process of the brand is well under way. Once a product creates a negative perception in the minds of people, it can produce a lasting stigma which destroys brand value. Perception can be objectively driven by a loss in quality of the product, but once it is rooted in the minds of people, it is there to stay, because from then on, it obeys no rules. The product quality and taste can be improved to win back the customer, but the bad perception stays in the mind and is a brake to sales, likely to stay for a long time.
Losing touch with the market
A recent example which few people have noticed is at the heart of the failure of the Airbus A380. It is a gem of a product, comfortable, velvety ambiance in the cabin, noiseless and spacious. Airbus may also have offered, at its launch, very attractive packages to the big airline companies, giving a mix of competitive prices, lower fuel consumption per passenger and interesting selling price accompanied with soft credit proposals. Barely a few years after its launch, it has failed because airline companies are unable to sell all the seats on a flight to passengers, leaving plenty of empty seats in this huge plane, and of course making substantial losses.
What Airbus has overlooked is that it has a dual customer base, the airlines and the travelling public. Many people like the ambiance inside this plane and the comfort that it gives, and will gladly choose it again on their future trips. But there are lots of passengers, like me, who do not manifest their feelings but who are very scared of turbulences, to varying degrees, going up to silent panic. It so happens that this gem of a plane beats turbulence, well beyond the Boeing 747, which it has replaced. Airbus has never thought that this specific quality could be sold to its passenger customer base, as a competitive edge, with aggressive communication so that it creates what we call the “pull effect” from the customer.
This consists in travelling passengers consistently asking to be booked on the A380, whatever the airline company and creating an obligation for airlines to satisfy them. Airbus would have compelled airlines to use their carrier by the sheer pull of airline travellers, in the same way as no food store, hypermarket, snack and fast-food seller can afford not to have Coca Cola on its shelves. This sad story is the direct resultant of losing tough with the customer base, nearly ignoring it and failure to become aware of its aspirations and satisfying them, when the product is impeccable and can satisfy any exigency.
Trying to enlarge the customer base of a premium product
This is the story of the once unbeatable Parker Pen. Decades ago, Parker was producing high quality pens for the topmost segment of the market, as a luxury product. It had practically no competitor and its market dominance, in its niche, was total. In these days, all important people who wanted to make a statement about their status were users of Parker pens. Like all up-market, premium or designer products, there was a strong element of subjectivity in the mindset of Parker pen users, like having an urge to make a statement about their status as mentioned above and keeping a distance from ordinary people by their purchasing power. Smart businessmen usually take advantage of this ego in selling their products at very high prices.
At a certain point in time, Parker decided to take a larger chunk of the market, touching on the mass market, which can be viewed as a commendable growth strategy by many businessman minds, but it turned out to be a catastrophe. To do this, they had to propose a cheaper product, but clad in the prestigious Parker gown to give the illusion to ordinary people that they can become Parker users. Parker produced a new range of pens to target the lower segments of the market. It was a sort of “me too” product, of very average quality to be able to satisfy the price exigency of customers in the price conscious market, but it was mounted with the famous arrow which was the character and the visual identity of the Parker brand.
Parker pen established and traditional customers did not appreciate being lumped in one category of users and not being able to demarcate themselves from the mass, visually, any more. They abandoned the Parker ship, and Mont Blanc astutely entered the market with a small range of high-quality pens, smartly couched in black colour, reminiscent of luxury perfume brands. The genius of Mont Blanc was to sell its pens at three times the price of a luxury Parker to create a definite feeling self-satisfaction, achievement and sense of superiority in its users, when the cost of production was probably not higher than the Parker equivalent.
Parker had unknowingly developed the perception of it being an average quality pen in the minds of affluent people, and this negative perception has prevailed for a long time. Recently, a friend told me that Parker had recovered ground in the premium market and is again the market leader. Being a leader in a market which no longer exists is hardly an achievement. Who really uses a pen in these days of dominance of the laptop?
Watching the case of Haagen Dazs live
This ice cream brand was created to challenge the then market leader Baskin Robbins in the top segment of the market. It has done well, with an excellent product quality, and was sold mainly in ice cream parlours. Like Parker pens, its owners have been trying for some time to win a bigger chunk of the market and achieve volume growth. It has been introduced in hypermarkets a few years ago.
One peculiarity of the market has certainly escaped the minds of its brand owners: that people do not go to ice cream parlours, and pay three times the price of an off-the-shelf product only to eat ice cream. The affluent consider it as a family outing, and, accessorily, they want to be seen to be able to afford expensive ice cream. As I said above, this is the subjective part of consumer behaviour: that of being prepared to pay a higher price to be singled out as someone special, and astute businessmen take advantage of this crave to factor in higher profit margins. This is part of standard, upmarket customer psychology, and it is based on 100% subjectivity.
Entering the hypermarket segment requires different product attributes and a different marketing strategy because it is largely a price market, albeit a mass market. Price is the rule of the game in hypermarket trade, as the major part of their communication hinges on frequent price promotions where there are invariably a number of products sold at cost price to attract customers, products commonly called “loss leaders” in the trade. Haagen Dazs had to cope with this reality, but it would have been suicidal for them to barter their product quality for increased sales. They have had the good reflex of not doing this, but they have had imperatively to cut other costs. This has been achieved by offering the product in a cheap, common plastic container, hardly any different from its competitors, sitting next to it in a freezer.
A brand can be destroyed by untimely and loud advertising, with a frequency and an over killing that puts off an upmarket customer.
This gives rise to two setbacks. Firstly, the layman who sees side by side Haagen Dazs, Unilever and Nestle ice cream will not ask any question, and in comparing their prices, he will settle for what, in his mind, is a value for money product. With this mental set up, and ignoring what Haagen Dazs stands for, he will opt for cheaper alternatives than Haagen Dazs.
Secondly, the affluent customer who knows what ice cream quality and eating sensation mean, asks why he would buy his preferred brand at an expensive price in an ice cream parlour when he can get the same at a much cheaper price in a hypermarket. In the bargain, Haagen Dazs is destroying its brand and opting for 30% margin in a price market, compared to a 200% margin in an ice cream parlour.
There is a third problem. How does a brand owner communicate to two market segments far apart in sophistication, at the same time, in a common language? The two segments are not moved by the same message and do not have the same aspirations, one of them having the urge to consume a quality product, albeit expensive, and the other, looking for a price argument. This is where a brand can be destroyed by untimely and loud advertising, with a frequency and an over killing that puts off an upmarket customer.
Missing the train
This is the case where immediate or short-term considerations, like banking on an established product, selling at cruising speed, creates a veil which hampers forward thinking and leaves the brand owner insensitive to what can happen further, which will cause a complete paradigm shift in the market.
The Eastman Kodak company, up to 15 years ago, had dominated the photography market with its flagship photographic film product, Kodak, for a century. Its challenger, Fuji Film, was miles behind in market share and consumer perception. A senior Eastman Kodak executive is reported to have said that photography without film cannot even be imagined.
But inventors, driven by challenges to try the impossible have always existed. One (or a group) of them developed the digital camera, and it would not surprise me if this invention, like Dell computer, was made in the garage of an enthusiastic handyman engineer. These innovators rarely develop their own production set up, because it is an uphill battle to fight against established competitor products and requires monumental financial means. They usually sell their patents to established manufacturers and, in the end, they get either a royalty or a small percentage share in the expected business, with big volumes being generated. It would shock me if the inventor did not try to sell his idea to Eastman Kodak. In his place, any sensible person would have knocked at the door of Kodak as a matter of priority.
Whatever happened between the inventor and Eastman Kodak, which its owners will never disclose, the digital camera escaped their attention, or rather met with a brick wall at Kodak, and it landed in other hands who may have been trying for decades to find a challenger to Kodak films. The bottom line is that today, the Kodak ground breaking photographic film has disappeared from the scene, and replaced by the digital camera which only calls for an initial investment to buy the equipment, and no production cost at all for any number of photographs.
If we add to this the instant production of the digital photograph, its almost eternal shelf life and easy storage and the number of devices and equipment where digital camera technology is being used, from smart phones, watches, pens, home document scanners to sophisticated medical equipment like ultrasound (echography) and professional quality scanners, we realise how deep and broad is the failure of Eastman Kodak. Once a giant, it now produces only films for X-ray photography.
It is a classic example of “missing the train”, like the British car industry and Hoover vacuum cleaners, lagging behind the Dyson bagless vacuum cleaner, a ground breaking invention which powerful manufacturers discarded because of their then thriving vacuum cleaner bag business. James Dyson’s landmark advertising headline “Say Goodbye to the Bag” is not likely to be forgotten soon by his competitors.