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The history of marketing embraces a collection of stories about the death and displacement of once dominant brands.
Some of these falls from grace unfold where preeminence is punctured by technology, which allowed Sanyo to replace Sony to replace RCA as the leader in the color TV category.
Other fallen brands, such as Howard Johnson, Seven-Up and Schlitz, are victims of changing tastes.
The stories of brands losing positions of power are most vivid after the fact. Brand management teams which examine data and analyze research for insights they can use to grow their brand, and compete more successfully in the future, are saddled with limitations.
At the University of South Australia Business School in Adelaide, the Ehrenberg-Bass Institute is the world’s largest center for marketing research.
I recently asked the institute’s director, professor Byron Sharp, to share his perspectives on some of today’s brand management challenges.
Paul Talbot: What are some of the reasons why growth for legacy brands, notably in the CPG category, appears to be harder to achieve?
Byron Sharp: Growth is always difficult. It always has been. Most new brands earn very small share or fail. Most large brands are stable in share (“running hard to stand still”).
Research by the Ehrenberg-Bass Institute shows that over 6 years 75% of brands are within 3 share points of their year one average. Only 7% grew by 6 share points or more (1+ per year) and only 2% lost more than six points of market share.
That said, top line sales and bottom-line profit growth can come from category growth and price increases.
Talbot: When we set a target for brand growth, what considerations should be woven into the process to help insure realistic and attainable goals?
Sharp: The scientific evidence! That sustainable share growth is unusual, but not impossible. That it never occurs without the brand increasing the size of its customer base (market penetration), and that requires building mental and physical availability.
Talbot: When we suspect there is a situation where the age, the position and the maturity of the legacy brand can work against its growth, how should we validate this suspicion?
Sharp: First, be very skeptical, it’s very rare that a brand’s age is holding it back. Conduct large scale (ie. include very occasional buyers) quantitative measurement of brand rejection, reasons not to buy. The score is likely to be low. Avoid focus groups.
Talbot: Why should focus groups be avoided?
Sharp: Tiny unrepresentative samples… so we have no idea if they really represent our buyers.
Particularly, unrepresentative because we ask respondents to come to us. Skews to heavy buyers, focus group panel regulars and nutters.
There are plenty of better alternatives… like getting out of our offices and observing real buyers, or interviews in shops and homes.
Talbot: When marketers analyze brand performance metrics, what mistakes are most often made?
Sharp: Mistakes are made when analysts and managers don’t know what to expect.
Unless you are aware of the law-like patterns in such metrics you can go wrong. Wells Fargo management actually believed that they were a cross-sell loyalty leader with their customers holding more products than customers of other banks.
The Ehrenberg-Bass Institute publicly said this could not be the case, (it would break the Double Jeopardy Law) and we did so years before the multibillion-dollar scandal broke that staff had been opening fake accounts in order to hit management’s deluded targets.
