This is a cautionary tale for brand owners who are feeling the heat from the supermarkets demanding significant cost reductions. The request by the supermarkets has come at a time when shoppers have taken control and moved online, leaving order fulfilment in the hands of the store pickers.
In addition, brand owners know that a reliance on artificial stimulants called price promotions doesn’t help build long term value.
Now for the meander…
I’ve just finished watching a Netflix documentary on record producer Clive James. Now in his 80s Clive James has started 3 wonderfully successful record labels including CBS and Arista and is credited with discovering more musical talent than anyone else. He is credited with signing Janis Joplin, Laura Nyro, Santana, Bruce Springsteen, Chicago, Billy Joel, Blood, Sweat & Tears, Loggins & Messina, Ace Of Base, Aerosmith, Pink Floyd, Westlife and Whitney Houston Consequently Clive is renowned as the best A&R man in the business. Puff Daddy owes his success to Clive who helped Puffy launch Hip Hop into the mainstream.
What’s this got to do with brands?
One sentence stuck out in that film. Clive James said, “it’s about signing enough artists so you look successful while some of those artists that you thought would be successful, don’t make it.”
The lesson is any brand wanting to survive has to do all they can to survive.
Back on course
There is no doubt that online has been very successful in the last 18 weeks (for very obvious reasons) but this doesn’t mean that this phenomenal growth will continue. Estimates suggest that online share has moved from 10% in 10 years to 26% in 10 weeks. (source: Kantar) It is widely anticipated that this will fall back to 18%, which is still significant growth. However, over 82% of the volume was still purchased in-store. Whether this level of instore volume continues throughout 2020 will be a voyage of discovery.
Will the proposition support persist for online shoppers?
Currently, there’s a great deal of subsidising going on for the shopper.
· Delivery is free (subject to minimum order values)
· Selection is free
· Time taken to complete a shop is reduced.
The shopper assumes this won’t change, but already there is talk that the government will start to tax online delivery and the shopper will be charged by the stores for delivery.
Therefore, the model will change. It is no coincidence that Ken Morrison was against online delivery. He recognised it couldn’t be commercialised in the current environment and therefore Morrisons was one of the last to open, online. Was he right?
So back to the brand that’s under threat from own label and over promotion.
Brand value is created by differentiation using one or a combination of the three p’s product, place and promotion.
It’s easy to remember that you can double the value of the brand to the consumer by adding equity and becoming relevant to the consumer and shopper. Many brands use this strategy by creating differentiation and giving the brand identity. The usual tactic is to reduce the price to increase volume.
The opposite is true as well.
The higher the price the smaller the quantity of the product sold. Product scarcity increases desirability and price, but the brand proposition has to support this positioning. Now the rules that we play by have also changed.
Any supermarket looking at a category is seeking the brand that resonates with the category, shopper and consumer. In this scenario, every buyer is the record labels A&R man, and they are looking for the next best brand to attract the footfall.
The brand’s purpose today, is to ensure that they are indeed the next best thing fo the buyer. If you’re like Milli Vanilli, your toast
Welcome to portfolio rationalisation and RGM justification.
Good luck and if you need any help our contact details are below.
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