Fix The Category Not The Brand

Walker SmithFebruary 26, 20135 min

Sometimes the problem is not the brand; it’s the category. So fix the category, not the brand.

Fixing a brand in a broken category is the brand marketing equivalent of rearranging the deck chairs on the Titanic. When the vessel is listing, the only options are abandoning ship or plugging the hole. For brand marketers, plugging the hole means category renewal and reinvention.

Increasingly, this is the brand marketing challenge of the moment.

A debate last fall between competing interpretations of consumer spending data put the issue of category weakness into sharp focus. The Wall Street Journal fired a morning salvo in a story with the headline, “Cellphones Are Eating the Family Budget.” The key chart showed a rise in spending on “telephone services” from 2007, the debut year for the iPhone, to 2011, growth that was paralleled by a decline in spending for apparel, entertainment and dining out. The implication was that everything now competes with the iPhone. Backed by interviews with consumers, the story concluded that the growing cost of cell phone data plans was forcing people to tighten their belts in other areas.

Not so, resounded The Atlantic just a few hours later in a story with this headline: “What’s Really Eating the Family Budget? It Ain’t Smartphones.” Featuring a rebuttal chart showing that spending for health insurance, rent and education grew faster than that for telephone services, the article insisted that cell phones were just “nibbling” at the family budget while these other expenses were the real “devourers.”

So which is it? Well, as one might expect, each article picked apart the Labor Department data in different ways. But even taking spending on health insurance, rent and education into account, the jump in spending on telephone services was more than big enough to force cuts in other areas. The bottom-line is that discretionary consumer spending has been affected both by the same old household obligations and by smartphones, the brand new lifestyle necessity.

But this debate, while interesting, misses the bigger point for brand marketing. The most important takeaway from these spending data is the most obvious thing shown. During the five years of recession and stagnation, spending on smartphones grew while other things like home furnishings, apparel, entertainment and dining out declined. Smartphones showed strength; other categories did not. Even as financial distress afflicted many households, smartphones held their own. So the question that brands in these other categories should ask is how smartphones could do what they could not.

A little more digging around in these data reveals that the drops in spending reversed in 2011. Almost across the board, spending went up in 2011. But this was also the year in which average incomes rose again after declining for two years. In other words, in most categories, spending declines reversed only when incomes rose. Smartphones were the exception, growing even as incomes were declining during this stretch of time.

Categories skyrocket from promise to prominence when breakthroughs in science or applications revolutionize the satisfaction of a consumer need. But over time, as categories mature, competitive pressures eventually overwhelm incremental innovations and push categories into commoditization. It is at this point that categories are unable to command value, particularly during tough times. This is a category problem that caps the growth potential of brands.

A brand in a broken category cannot be fixed. It’s probably not broken to begin with. The problem is the category. Certainly, when categories rise and fall with incomes, the issue of lost category value must be considered. Tough economies always expose weak categories – they give up sales and value while other, stronger categories hold fast. This can be easily overlooked when the rising tide of a strong economy lifts all boats. But categories in need of renewal and reinvention are the ones left high and dry when the tide goes out.

Silicon Valley venture capitalist and technology entrepreneur Geoffrey Moore laid out the category lifecycle in his 2005 book, Dealing with Darwin: How Great Companies Innovate at Every Phase of Their Evolution. When categories first take off, innovation is about creating markets and finding customers. When categories reach maturity, innovation is about deepening customer relationships and improving operating margins. When categories fall into decline, there are only two options – renew and reinvent the category or shut down the brand.

Renewal and reinvention mean returning a category to the takeoff phase, largely through new products or new platforms. This is the opportunity at hand in the marketplace today.  The robust growth of smartphones from 2007 to 2011 suggests that these devices are the first place for brand marketers in other categories to look. What is it that caused consumers to sacrifice other things in order to spend more on smartphones? This is an open research question, but perhaps the answer, or at least a big part of it, is the social dynamic. If so, this would suggest that the renewal and reinvention of other categories must entail an overlay of something social. If not in products themselves, then in the ways in which people shop, buy, use and service these products.

Brand marketers have always shied away from promoting the category for fear of helping competitors or of taking on too diffuse a responsibility. While these are well-placed concerns when categories are growing or fully mature, all bets are off when the category itself is in decline. This is the point at which the category becomes part and parcel of any successful brand marketing.

Many forces in the marketplace today, from rising energy costs to slowing economic growth to changes in household structure to the ascendance of women as an economic force and more, are leaching the traditional sources of value from many established categories. But there is no reason why these categories cannot renew their value propositions to better fit a marketplace in which smartphones lead the way. The biggest barrier to brand growth is little more than a failure of imagination, and the simple first step to imagining a different future is the recognition that, nowadays, what needs fixing is probably the category not a brand.

The Blake Project Can Help: The Customer Experience Workshop

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Licensing and Brand Education

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Walker Smith

One comment

  • Jim Matorin

    February 28, 2013 at 6:13 am

    Thanks to my morning rounds in LI, I came across your article which was posted. Whoa! Great article! Then I read that you wrote it Walker. No surprise. I always thought you got it. Jim Matorin, SMARTKETING here. We used to engage at COEX conferences. It has been a while. Is foodservice one of those broken categories? The disposable income shift definitely has impacted the number of times people eat out. However, our industry had too many seats, not enough posteriors. Now the brands, both operator and manufacturers are going to be challenged. Key: getting closer to the customer (e.g., loyalty programs), intercept marketing (e.g., mobile) and identifying alternative channels of consumption. Let the fun & games begin!

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