Recently Budweiser has been taking flak for its continuing aggressive stance against craft beers. Social media reaction at least seems to be that this is an unfair fight and that the big corporate should not be competing in this way. I’m a long-time advocate of challenger brand strategy. I’m of the view that if you can goad the incumbent into a fight and portray your brand as the much smaller player with principles, then it’s game-on. But what if you’re on the other side of the counter? If you’re a major brand and you’re being hounded by an upstart smaller player, how can you respond without drawing flak or encouraging buyers to support the underdog-that-dared?
Start by recognizing the strengths that you have to play with: an established place in the market; the reach that comes with your networks; the reserves to play the long game; and the resources to at least match, and at best overpower, anything that others may throw at you. Chances are you also have history (and therefore track record) on your side and hopefully that history proves your commitment, experience and expertise. Those are a lot of attributes to work with. The key is to use them carefully.
If you don’t want to take a direct approach in response to what you are being challenged on because you are concerned, probably quite rightly, that it will play straight into the hands of those throwing stones, here are four oblique but highly effective ways to minimize the effectiveness of the insurgent.
1. Counter-offer rather than counter-attack – In the short term, go to market with a great offer that simply makes choosing you so much more attractive. In the longer term, take the opportunity to discreetly re-shape your positioning so that you are less vulnerable to the position that the challenger is taking. Be careful in both cases not to make what you are doing appear as a response to what the challenger is claiming or a competitive strike.
2. Congratulate your customers – Mount a charm offensive. Be humble and grateful. Acknowledge. Remind the market just how popular you are as the leader and what that means in terms of what you deliver every day. Position this as a key benefit for your customers that the challenger brand will simply be unable to match. This approach is an excellent way to first recognize and then galvanize those who continue to be loyal to you. It’s also a quiet but effective way of using the pressures of scale and footprint to remind your distributors of why they should continue to prioritize you and not chase the sector’s latest bright shiny object.
I love this observation by Jay Deragon about the Social Learning Curve: “All things social are creating a herd of copycats following practices, methods and behavior created by the frenzy of learning something new…”
To what end? is the inevitable question.
Once learned, something is no longer new. In fact, it retains distinctive value only while the numbers of people who have access to that knowledge remains small. And yet, thanks to all things social, the chances of that happening are becoming less and less. And the pressures to democratize what one knows are also increasing.
So everyone feels a pressure to learn, and many brands feel a pressure to share, but once accessed by many people, learning retains diminishing competitive advantage. It quite literally devolves to common knowledge. It becomes how ‘everyone’ does things, what ‘everyone’ agrees on, the way ‘everyone’ sees the world. Soon, what was new is basis.
The tipping point for example. Once breakthrough. Now mainstream.
I happen to really like Collins’ book ‘Good to Great’, but if you believe that by reading it today somehow you will emerge with an understanding that presents you with a clear competitive advantage, you couldn’t be more wrong. Why? Simply because everyone you’re competing against has read it too. And between those readings, the reviews, the lectures and assignments at every business school across the world, and the many subsequent discussions, all the learnings are now widely circulated and applied. There is no secret to be had. ‘Hedgehogs’ are now relatively commonplace.
That dynamic impacts so many brands in the knowledge business in three ways:
Most of us are ignorant about prices. Experiments have shown that people will:
- Pay more for an item priced at $39 than one priced at $34
- Spend more when the dollar sign is removed (1,500 vs. $1,500) and more again if the comma is removed (1500 vs. 1,500)
- Think that prices written in a smaller font are less than the same price written in a larger font.
- Buy relatively more premium-priced beer than standard-priced beer if a third super-premium beer is added to the choices on offer but buy relatively less premium-priced beer if a cheaper beer is added to the mix
- Pay a lot more for any particular brand of beer when it’s being sold in a fancy hotel than if it’s being sold somewhere less fancy like a grocery store
(Good summaries of these and other examples can be found here and here.)
What is a marketer to do when faced with such ignorance? There’s economic reward to be gained by devising pricing and payment strategies that confuse the hapless consumer into handing over more money. But what about the impact on brand reputation?
Unbundling: Unbundling means pricing items or services separately rather than as part of a package. It’s been a lifesaver for the airline industry generating a lot of additional revenue. (Spirit generates almost 40% of its revenue from these non-fare fees.) Consumers hate these fees but pay them anyway because they shop on fares and just grumble about the add-ons. That makes the economics too compelling for airlines to ignore whatever the cost to the brand. Southwest is an exception. With a brand built on being a consumer champion and acting differently from the main carriers, it’s committed itself to a no-added-fee strategy and has made that an important part of its overall marketing message. It’s cost them a bundle but, in this case, adding the fees would have been off-brand and even more damaging to its reputation than it’s been for other carriers.
Consciously or not, many brands are now running a freemium model. They are giving away a lot more than they used to, particularly across social media, just to keep up with the changing competitive landscape. And they are hoping to recoup on that significant content investment when consumers do buy. So has any of this changed the fundamentals of brand economics, or has it merely altered the manner in which brands achieve visibility?
By way of a sanity check, I went back to this paper from some years back to assess what still holds true.
Brands continue to simplify recognition and selection, and to instill trust in a world bulging with options. They continue to offer a simple way for time-poor consumers to filter the choice set. Consumers still buy because they identify with what some brands stand for – although one could argue that the criteria themselves may be shifting, particularly with younger buyers, as ethics becomes an important judging point.
Brands continue to draw on the associations they generate to seek extension and licensing opportunities, and my assessment is that this exploration of brand “green-fields” shows no sign of slowing down as brands look to broaden reach and multiple returns through a single relationship. But we are also seeing major brand portfolio managers like P&G focusing their assets much more specifically within set categories. It will be fascinating to see how these contrasting strategies – intensification and diversification – play out in the years ahead in terms of returns.
Brands continue to build value through emotion – but there are two changes in dynamics here that I think are worth noting. Firstly, the nature of the emotion generated. In a less connected world, brands sought to build emotional connection on a more one-to-one level through reassurances around quality and features. In theory, buyers saw an ad, were convinced and acted. Today, as quality becomes more consistent or at the very least more tiered and defined, brands must look to generate likeability at a highly collective social level as well, and the timeframes within which passions, good or bad, can grow has condensed enormously. These macro-attitudes can significantly affect the trending power of a brand – making it hot or not.
1. Remember your roots
Strong brands come from people, places and times, and they remember it whether they are luxury brands or not. Brands too often forget about or ignore their origins, and marketers in the English-speaking world are the guiltiest of it. For example when Starbucks lost its way, the real problem was that it forgot its origins. It took former chief executive Howard Schultz to return to the company and help rediscover its roots. All brands have a story of their founding: it describes why the business came into being. Most marketers don’t know how powerful theirs is.
2. Work out what’s in your brand’s DNA
A brand’s DNA should comprise just one strong concept and no more than five words that define how it behaves. In luxury it is defined by history and the consumer has no say in it. But brand DNA is about walking the walk, not talking the talk, and it isn’t necessary to communicate explicitly what it’s made up of. People find George Clooney sexy for what he says and does, and for the way he looks, not because of the structure of his genes. Brands that have their words hanging up in the lobby are missing the point. If a consumer doesn’t repeat those things back to you verbatim, it’s not a problem.
3. You can play with your codes
Codes are what make brands recognizable to their consumers – they are not just logos and they are not just visual, but they are motifs that the brand unmistakably owns, however they appear. Brands need to recognize that they can and must play with their codes to balance heritage with modernity – the constantly changing Google ‘doodle’ on the search engine’s homepage being one example.
This also means brands shouldn’t submit to “logo tyranny”, where marketers think the same typefaces, colors and proportions have to be rigidly repeated. This is not branding. This is what people do when they don’t understand branding.