If I buy something on sale, what should I get? 40% less – or 40% off? They are very different things.
If I purchase something for 40% off, that means I get what I would have got if I’d paid full price but I get a 40% reduction on the asking price for the very same goods or services. The result, as we’ve discussed many times, is that the brand’s perceived value deteriorates and, if enough retailers participate, the actual market value of the brand also drops.
40% less on the other hand means I pay a lesser price but I get less for that price. How can that be? Surely a pair of shoes is a pair of shoes, right? Not necessarily. One of the first rules we were all taught in direct marketing is that it is much more economical to give than to take away. In other words, it is much more economically sensible to add services to a product in order to make it more valuable than it is to discount the asking price.
That’s because the price I can pay to add perceived value is generally much less than the cost of taking money away. Airlines are very good at this. You pay a lot more for a Premier seat than you do for an Economy seat – and in exchange the airline gives you a bigger seat, a different menu and perhaps more movies. They add to what you get, at a lower cost to them, than the revised price they ask you to pay.
The model for achieving ambitious growth is well documented: a combination of organic and inorganic growth that sees companies looking to gain market share at the expense of their competitors in markets they already occupy, as well as looking for inorganic growth through an adjacent market strategy and/or prospecting for high-return greenfields markets beyond that.
Organic growth often stems from increasing brand likeability within the industry that your consumers already associate you with. In today’s economy, in most sectors, it’s a zero-gain scenario. In order for you to win market share, someone else has to forfeit.
There are at least two other options for organic growth that we should discuss. You can look to specialize within a market – selecting niches and tapping them for profit. It’s not always the easiest way to find above-market margin, but it’s certainly an option in sectors where specific skill adds value and the field is swamped with middle-market generalists. Or you can execute the classic ‘Schlieffen plan’ strategy and look to pincer your middle market competitors by having offerings on either side of them – below them, to compete on price, and, above them, to compete on prestige, with an “upgrade” strategy between those two stations to pull consumers through from high volume to high profit. In most cases, the zero-gain dynamics still apply, at least for now. To win, you need to take market share off an incumbent, and keep it away from them.
At the other end of the growth opportunity spectrum, the high-risk, high-return innovation of green field industries takes capital, faith and patience, and lots of each.
But what of adjacency? As convergence brings us closer to what Charles Prabakar refers to as the “boundaryless industry structure” inherent in the social media/digital technology driven global business environments of today, what opportunities for growth exist there?
It wasn’t that long ago that competition took place between products, and the criteria for choice between rivals was customer benefits. Product vs product. Today, for globally scaled brands, the competition is really between the reach and co-ordination of different configurations of value chains, and the criteria for choice for customers is the quality of the experiences delivered as a result.
It’s fascinating to see how this is playing out in the CPG aka FMCG space – because here the global brands are amongst the most valuable in the world. The 2014 Brand Footprint reveals all top 50 global CPG brands were chosen at least 500 million times over the past year. They made it into shoppers’ carts through a range of strategies: they talked to consumers’ heightened awareness of health issues; they delivered convenient solutions for people’s busy lives; they were smart sized in ways that made them affordable; they were genuine and relevant in their communications and encouraged consumers to talk amongst themselves; they were increasingly personalized in order to build deeper and closer relationships; and more and more they were weighted towards one of three categories – affordable luxury, premium, or basic.
What surprised me the most though was that, according to Brand Footprint, there are still significant opportunities for these huge consumer packaged goods brands to grow their footprints. In fact, the average market penetration across the entire Top 50 is just 20%. That means their value chains have some way to go if they are to dominate across markets.
Making people more interested in your brand is one challenge. Making them more loyal is quite another.
The widespread availability of plate glass in the second half of the 19th century gave retail store owners the technology required to begin constructing windows that ran the full length of their street-fronts. According to Zada, it didn’t take long for department stores in particular to spot the advantages of showing off what they had inside. In 1874, Macy’s upped the ante by creating a holiday window display featuring porcelain dolls from around the world. As major retailers gravitated to major cities and competition between them increased, the displays in their stores also became more elaborate.
140 years on from that first holiday window display, retailers are still looking for ways to entice people to visit – except now the windows are digital as well as physical and the stores too are just as likely to be online. And in this world of the increasingly mobile consumer, timing is everything according to this study. Just as display artists sought to stop people in their tracks and to lure them inside, moments-based marketers are using offers to tempt online passers-by their way. The study found that consumers respond to rewards (no surprises there) but the real shift in inclination comes when those rewards arrive at a moment when people are most engaged and receptive. Think of this as an “experience halo” in effect. While you’re here. Using the energy of an experience to propel buyers into making a further commitment in exchange for something that feels good right now.
It sounds like a big data dream. Track the behavior patterns so that you know where people are likely to be and what they are likely to be doing, then deliver offers, rewards and ideas that ensure everyone gets a little uplift at the time they feel most inclined. Maybe that’s a tactical challenge for marketing in the years ahead. Not just reaching buyers. But connecting with them at a time when they are most impulsive.
As you plan to grow your brand the logistics of making growth happen should be strongly influencing the targets you set.
Most of us would agree there are four ways to strategize for growth: increase the share you hold in the markets you are strong in; develop new products for those markets; extend your reach by finding new markets for your current brands; and develop new products that cater to new markets.
But while the strategies themselves are well-known, your capacity to expand is of course directly proportional to your capacities to generate demand and to fulfill. It’s tempting to pluck a number that’s x percentage points above organic growth. But as the old direct marketing adage goes – be careful what you ask for, because it might just come true. Here’s 7 factors I suggest you look at to navigate a responsible course between stretch and over-reach.
1. Access – will your distribution strategy allow you to grow volumes of either current or new lines to the extent you need to? If reach is finite and static, your ability to physically deliver into market will bottle-neck. What have you done to open up access – and is doing so in keeping with your brand’s position in the marketplace?
As my colleague Brad VanAuken points out here: “Distribution contributes to customer brand insistence in two ways. First, it increases brand accessibility so that brand preference is more likely to be converted to brand purchase. But, more importantly, it increases brand exposure, which increases brand awareness … The only situation in which extensive distribution may not be right for your brand is if it is positioned as an upscale or luxury brand. Limited distribution in limited upscale places can add to the cachet of “exclusive” brands.”
Will you be available, not available or too available as a brand for the targets you are setting?
2. Speed – can you deliver enough product fast enough to meet the demand? At one level, this is about pure fulfillment. At another, it’s about making sure that you have paced the introduction of new product and the upgrade of current offerings at just the right speed to avoid simply trying to shovel more and more of the same thing into a market that’s tired of what you’re offering.
How have you timed your innovation/improvement program to coincide with your expansion plans? Too slow – and your brand will lack dynamism. Too fast – and you risk overwhelming consumers with too many choices and cannibalizing your own releases.