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harvardbusinessonline
If Brands Are Built over Years, Why Are They Managed over Quarters?
Companies become so entranced with their ability to price and
sell in real time that they neglect investments in their brands’ long-term
health.
by Leonard
M. Lodish and Carl
F. Mela
The numbers tell a sobering story about the state of branded goods: From
2003 to 2005, global private-label market share grew a staggering 13%.
Furthermore, price premiums have eroded, and margins are following suit.
Consumers are 50% more price sensitive than they were 25 years ago. In recent
surveys of consumer-goods managers, seven out of ten cited pricing pressure and
shoppers’ declining loyalty as their primary concerns.
Brands are on the wane. For the many consumer-goods companies struggling
against this trend, it’s tempting to blame the big-box discount retailers.
Plenty of anecdotes support their point of view. Recall what happened to
Vlasic, for 50 years a beloved brand in America’s kitchen cupboards, when
it started discounting its pickles by offering them in gallon-size jars in the
late 1990s. Wal-Mart began selling the product for an unheard-of $2.99—a price
so low that Wal-Mart soon made up 30% of Vlasic’s business. The supercheap
gallon jar cannibalized Vlasic’s other channels and shrank its margins by 25%.
When Vlasic asked for pricing relief, Wal-Mart responded by refusing an
immediate price increase and reviewing its commitments to the line. By 2001,
Vlasic had filed for bankruptcy.
Wal-Mart and other powerful retailers have undoubtedly weakened some brands,
but a number of consumer-product companies have done a better job than Vlasic
at managing both their relationships with retailers and their brands. For
example, when Foot Locker cut Nike orders by about $200 million to protest the
terms Nike had placed on prices and selection, Nike cut its allocation of shoes
to Foot Locker by $400 million. Consumers, frustrated because they couldn’t
find the shoes they wanted, stopped shopping at Foot Locker. Sales at a
competitor, Finish Line, increased. In the end, Foot Locker acceded to Nike’s
terms.
At the core of the differences in how Vlasic and Nike managed their brands
is a crucial disparity in strategic perspective. Vlasic used a short-term sales
strategy, focusing on a single, large channel partner and discounting its
product to attract consumers. In addition, the company reduced advertising by
40% between 1995 and 1998. Nike, on the other hand, positioned itself for the
long term. It maintained strong relationships with a variety of retailers and
invested in brand equity, allocating $1.2 billion annually to its advertising
budget. By setting its sights on a distant horizon, Nike continued to own its
customers—and its brand—while Vlasic ceded both to the channel.
Our research into the role of marketing strategy in brand performance
indicates that companies are paying too much attention to short-term data and
not enough to the long-term health of their brands [leggi tutto]
marketing
| inviato da
miles silvae il 18/2/2008 alle 22:3 | |
