Branding Strategy Insider

Fighter Brand Strategy Considerations

Fighter brands are one of the oldest strategies in branding. In a classic response to low priced rivals an organization launches a cheaper brand to attack the threat head on and protect their premium priced offerings. Unlike flanker brands or traditional brands that are designed with a set of target consumers in mind, fighter brands are specifically created to combat a competitor that is threatening to steal market share away from a company’s main brand. Fighter brands are usually a classic recession strategy. As value competitors gain share and private labels grow stronger - an increasing number of marketers turn to a fighter brand to rescue disappearing sales while maintaining their premium brand's equity.

When a fighter brand strategy works it not only defeats a low priced competitor but also opens up a new market. Intel Celeron is a notable case study of successful fighter brand application. Despite the success of its Pentium chips, Intel faced a major threat during the late Nineties from competitors like AMD’s K6 chips that were cheaper and better placed to serve the emerging low-cost PC market. Intel wanted to protect the brand equity and price premium of its Pentium chips but also wanted to avoid AMD gaining a foothold into the lower end of the market. So it created Celeron as a cheaper, less powerful version of its Pentium chips to serve this market and keep AMD out. Intel’s subsequent 80% share of the global PC market is testament to the potential of a successful fighter brand to help restrict competitors and open up additional segments of the market.

Why The Saturn Brand Was Destined To Fail

It's doubly depressing to see Saturn make its final bow. Depressing, because it's always hard to watch loyal employees lose their jobs. Depressing, too, because many of the brand's newly written obituaries completely miss the real reasons behind Saturn's demise, and the real damage the brand did to GM.

To understand why Saturn was destined to fail you must travel back to a freezing cold January day in 1985 in Warren, Michigan. It was there that GM Chairman Roger B. Smith proudly announced its first new nameplate in more than half a century. Saturn was conceived as a specific response to the growing threat from the fuel-efficient and affordable cars being launched into America from Japan. In other words, Saturn is a classic example of a fighter brand — a brand created to take on low-priced competitors. Smith admitted as much at the launch event, telling journalists: "In Saturn we have GM's answer — the American answer — to the Japanese challenge."

The first Saturns hit the market in 1990 and quickly achieved some of the highest repurchase rates and customer satisfaction scores in the industry. By 1996, orders actually exceeded Saturn's production capacity, and the brand's fighting prowess was further confirmed when dealer research revealed that 50% of these orders were from individuals who would otherwise have bought a Japanese import. Many commentators look back on this period of Saturn's operations and wistfully recount it as evidence of the brand's once great success.

Covering Up The Fall Of TV Advertising

 
Last week, Deloitte released a report concluding that 'TV advertising still has the greatest impact on consumers'. This unexpected finding was derived from survey research conducted in July by YouGov on 2100 British consumers - research which, in the opinion of your humble BSI blogger, is absolute and total crap.

Let's start with the method. YouGov asked consumers to think about different forms of advertising they had seen or heard, and indicate which 'impacted' them the most. In my opinion, asking consumers to self-report complicated issues such as the persuasive impact of communications is ridiculously invalid.

It's not that consumers lie when asked a question like this - rather, they simply do not know the answer. Self-reporting data has been proven to be invalid for questions as basic as estimating a consumer's household income. It is therefore unlikely that any of the consumers in the YouGov sample had the faintest clue which advertising medium truly had the most 'impact' on them. They provided an answer, but the answer was bogus.

The Return Of Levi's 501 Brand

My wife looked at me. 'I don't know why you have a long face,' she said. 'Do some kind of analysis or something.' With that she was back inside the changing room and I was left on my own again in fashion purgatory.

Bitter experience had taught me that, had I wandered off, it would have been at the precise moment that I was summoned to provide an opinion or a different size. So I stood and sulked.

Then I saw him. The epitome of teenage angst. Pierced, pointy and filled with the unmissable insolence that only erupts in the final stage of adolescence. As he passed I noticed, with an odd flash of recognition, what he was about to try on. As unmistakable as they were unlikely, my youthful friend was carry­ing a pair of Levi's 501s.

For men of a certain age, 501 jeans retain a special place in our collective fashion consciousness. A quarter of a century ago, 501s were the height of cool. They were Eddie Kidd with a quiff, Nick Kamen in his boxers. They were male sexuality set to a Motown beat. If there was a secret combination that unlocked the 80s for teenage boys, it was the numbers five, zero and one.

Influencing Brand Perceptions Via Biased Research

The French philosopher Henri Poincaré once observed that science is built from facts just as a house is built of stones - but he went on to note that an accumulation of facts is no more science than a heap of stones is a house.

British consumers are currently faced with several towering heaps of stones, and they might do well to look at who is doing the piling. We have the Natural Hydration Council (NHC), for example, which is very clear on the benefits of drinking water. It especially stresses the benefits of consuming 2.9l (men) or 2.2l of fluid (women) a day and is keen to point out the ‘undisputed' health benefits of water over other beverages.

This advice also fits beautifully into the long-term strategies of bottled-water companies, who are keen to main­tain both the heavy consumption of water and its perception as a superior drink to juice-based competitors. It is handy, as the NHC's research is funded by bottled-water brand owners Danone, Nestlé and Highland Spring.

Brand Failure From The Vine

In 1996 the Australian government's wine authority set an ambitious 30-year sales target. Imagine its delight when that goal was reached a full two decades ahead of schedule. Between 1996 and 2007 Australian wine forced its way into markets in a way rarely witnessed in any export industry. Nowhere was this more evident than in the UK, the biggest single market for Australian wine.

However, trouble is now brewing. Australian wine production is three times the level of 15 years ago, but global demand for it is tanking. In the UK, it dropped by 18% last year, in the US by 26%. According to Aussie wine critic Jeremy Oliver: 'The industry is in crisis - anything less than that is avoiding reality. It is interesting that nobody really saw this coming.'

Not quite true, Mr Oliver. Your humble BSI blogger predicted these problems in an article I wrote for The Sydney Morning Herald in 2007. In it I stated that Australian winemakers were 'on the verge of an almighty strategic blunder'. Next year is shaping up to be disastrous for Australian wine and it's not too soon to learn some lessons.

First, don't rely exclusively on sales data to plan your strategy. Booming sales of huge fruity Shirazs and oaky Chardonnays were the prime drivers of Australian success. Many wineries looked at the figures, extrapolated their growth and made more of the same. 

Unfortunately, sales data is a poor predictor of future consumer tastes. There is no replacement for recurrent qualitative and quantitative research, and without these insights, Australian winemakers have found themselves producing wine that many consumers simply do not want. 

Don't Underestimate Chinese Marketers

 
Greetings from the wonderful, if rather wet, city of Shanghai. About seven years ago I signed on with a big multi-national to train its marketing teams here in China. To be honest, when I started running the programme I had little idea what to expect. Now, however, many years later, China exerts a strong pull over me.

Each year I fly out here and review the plans of the small army of marketers that I have trained up over the years, as well as running new recruits through the programme. Seven years is a long time in China and I have watched the city of Shanghai evolve and improve at a mind-boggling rate. Each July when I arrive I find bridges where last year there was just river, amazing restaurants that have sprung up and established themselves and formerly drab streets that have become wide boulevards.

Even more impressive is the evolution in the marketing skills of my executives. Before my eyes they have transformed from anxious graduate students with no practical experience into the best marketers I have ever seen.

I have been a marketing professor for 12 years and taught all over the world, but it is only in China were I have seen my instruction executed to perfection in the field.

Net Promoter Score Defined

If you are a good marketer you've heard of the Net Promoter Score (NPS). If you are a very good one, you know what your NPS is. If you have no idea what I am talking about, read the definition at the bottom, and then meet me at paragraph two.

NPS is a rather bold little calculation. Its inventor, Fred Reichheld (pictured above), argues that a single question and its resulting score is the only metric you need to measure satisfaction. He also claims a correlation between a high NPS and future revenue growth.

And the metric has taken off. Online forums have sprung up, full of managers keen to discuss it. High-profile chief executives have publicly praised NPS and added it to their management systems. Even finance people have taken note, with several institutional investors asking for the score as part of their due diligence. But two audiences are genuinely unhappy with NPS.

Luxury Brands Stand Their Ground

Some brands are cutting prices in the face of decline, but those with real style are raising the stakes.

After a decade of unprecedented global demand for luxury, the storm clouds of recession now provide a fascinating backdrop to luxury brand strategy.

Conservative estimates, such as that issued by global management consultant Bain & Co, forecast a drop of 7% in sales of luxury goods in 2009, but others predict much steeper declines before years end.

In the face of this decline, several luxury houses have reduced their prices. Discounting is especially prevalent in the US, where demand has declined the most and a strong dollar has enabled luxury brands to offer significant discounts to consumers while increasing their margins.

Chanel, traditionally a leading force in luxury, sparked the trend in October by cutting its US prices by 7%-10%. 'The dollar's strength has allowed us to pass on greater value to our customers,' said John Galantic, the company's US president. Brands such as Versace and Chloe have followed suit. 'Never before have we done this,' said Ralph Toledano, chief executive of Chloe, which also recently cut wholesale prices by 10% on many items being shipped to the US. 'This is an unusual time. You have to be creative.'

However, Chloe's 'creativity' is seen by others in luxury as a move that could undermine the brand's cachet and hurt sales, as Jean-Marie Laborde, chief executive of luxury drinks group Remy Cointreau has argued. Despite expecting a slowdown to hit his brands in 2009, he remained committed to global price increases. 'We have no intention of giving up price increases, even if we have to suffer in terms of sales or profits,' said Laborde. 'We are targeting for the long-term and our dream is to see our brands at the top end of the pricing category.'

2009 Superbrands Rankings Shock

Imagine a world where the Ordnance Survey is a bigger brand than Disney. Not crazy enough for you? OK, how about the idea that the Royal Albert Hall's brand is twice as powerful as VW in the UK? Or how would you react if I told you that Mercedes Trucks' brand is twice as good as Tiffany? Still not convinced? Would you believe me that Royal Doulton is a more powerful brand in Britain than Tesco?

These are all part of the latest results from Superbrands UK, which released its annual Top 500 brands last week. To my mind they are utterly baffling. Can you guess the hot new brand that did not even make it into the Top 500 last year but entered it this year in 10th place? You guessed it - Encyclopedia Britannica. Obviously, it's been a good year for encyclopedias in the UK, because Superbrands rates it as twice as powerful as YouTube.

In my view, there are so many things wrong with the Superbrands rating that it is hard to know where to begin. A drunken bingo caller with a personality disorder might have come up with a more logical ranking. Perhaps this is not surprising, given the methodology that Superbrands uses to come up with its rankings.

First, a list of leading brands is compiled from secondary material and a shortlist of 1400 brands created. Then, an expert panel of marketers meets and ranks each brand on a score from one to 10 based on a definition of a 'superbrand given to them by Superbrands'. The highest-scoring 900 brands are then 'voted on' by 2100 British consumers and the 500 most popular are published as Superbrands' 'definitive' list of Britain's top brands.