Economic and technological upheavals often result in loss of focus. Marketers become distracted by passing fads, neglecting their core – the original source of business – in the process. David Taylor describes a step-by-step process that ensures the core business is refreshed and reinvented.
Today's marketing directors are a busy bunch. They’re struggling to grapple with the challenges of social media, being told by scaremongering experts that old media is dead. On the other hand, they are being warned to ‘innovate or die’, leading to brands stretching in all directions –Tango shower gel, anyone?
And then there are those friendly retail ‘partners’. In response to ever more demanding supermarket chains, UK brands are hooked on the crack cocaine of marketing: price promotion. A mind-boggling £14 billion a year is now spent on these promotions, delivering a short-term high, followed by a crash, and a gradual erosion in brand equity.
In this frenzy of activity, one important task is being pushed to the bottom of the priority list or off it altogether: growing the core business. Selling more of the stuff you already make might not be as sexy as experimenting with Twitter, Pinterest or Instagram. Nor is it as exciting as trying to ‘do an Apple’ by reinventing your business through stretching into new markets. What growing the core does have is hard evidence to suggest that it is key to sustainable, profitable growth. Research shows that most successful businesses are built on a solid foundation of a core business where the brand has a leading position.
This core is important for two reasons. First, it is the source of brand authority and credibility, often being the product with which the brand was ‘born’. Second, the core is an important source of profit. The core business is one that the company masters thanks to many years of experience. And the size of the business means there are often important economies of scale.
Furthermore, as the brand is well known and trusted in its core area it may need less marketing support relative to sales, compared with stretching into new markets where the brand is less well known.
For example, Timberland might sell a range of clothing and accessories but the original Timberland boot is still crucial both in terms of business and brand image. The same goes for Dove and its little white cleansing bar. And Hellman’s with its original mayonnaise. Growing the core has many advantages. By selling more of the stuff you already do well, you grow without adding complexity. Instead, you make what is strong even stronger, both in terms of brand equity and economies of scale.
NEGLECTING THE CORE
Despite the advantages of growing the core, companies that successfully do this are in the minority. Instead, many companies over-rely on stretching away from their core with new products or services. Now, brand stretch can drive growth, as shown in spectacular fashion by Apple’s successful launches of the iPod, iPhone and iPad. However, companies underestimate how hard it is to stretch into a new category and take on an established brand leader in their core market.
This is why the brand stretch graveyard is overflowing with failed launches, such as Levi’s suits, Bic perfumes and Cosmopolitan yoghurts. Worse still are the new launches that survive but end up being ‘brand dwarfs’ – small products or services that add little in extra sales but increase complexity for retail partners, consumers and the brand owner.
All this risks dilution of core brand equity because the brand has to communicate multiple benefits. It also creates fragmentation of the brand’s sales, with these being spread over a larger number of smaller products, often leading to a dilution of profitability. It can also provoke a dangerous decline in the core business, owing to resources being diverted to support the ‘new toys’. Marketing budget is taken away from the core. But just as important is the tendency for the best talent in the team and senior management to be distracted from the core business.
In contrast, growing your core makes what’s strong even stronger, both in terms of your brand and business. And it does this without adding any complexity. But if growing the core is so powerful, why is it under-utilised?
One reason is that it can seem less sexy than new product development. Innovation with a capital ‘I’ is what hits the headlines, with companies feeling compelled to create new products and services that take their brands in new directions. And the tendency in the past has been for new launches to attract a greater share of the rewards and faster career advancement for those involved. But another important reason why growing the core is neglected is that it is difficult, requiring just as much creativity – if not more – than designing and launching new products.
Most marketing people have been trained in how to develop, test and launch a new product. If you need some help, there are 45,000 books about innovation on Amazon, plus countless conferences and seminars you could attend.
In contrast, there is little or no practical advice about selling more of the stuff you already make. This led to the creation of a practical eight-part programme to help teams refocus on growing their core brand and business (Figure 1).
REFOCUSING ON THE CORE
Growing the core requires a change in marketing mindset. Rather than core brand growth being a ‘nice to have’, one-off activity, it becomes a way of working. It involves an ongoing process of idea development and implementation to keep the core business growing. It’s important to remember that every brand has a ‘leaky bucket’ of users, with some leaving each year. This means that just to stand still, a brand needs to bring in new users.
‘Waves’ of renovation activity on the core business keep it moving forward by driving penetration levels of the brand, so that before the core business can plateau and start to decline, the next wave of activity hits the market. This wave of activity has been under development while the core business was still growing. In other words, you don’t wait for the core business to start declining – you keep it healthy and growing.
An example of this approach is the Scooty brand of scooters for girls in India. It has become a successful and well-loved brand, thanks to waves of renovation. The brand’s core vision is ‘to empower the expression of femininity’, seeking to help women succeed in a man’s world but in their own way. A key way to express this brand vision has been through colour. Indian women enjoy sporting vibrant and cheerful colours every day and the brand team found it odd that they had to compromise with the colour of their vehicles.
Scooty’s first renovation wave was offering a dramatic pink colour – a first in the auto category. Female consumers lapped up this expression of their femininity. This was rapidly followed by several colour collections, taking inspiration from the fashion world. But the ultimate renovation wave came when the brand introduced an unlimited colour choice, ‘99 colours’, which allowed girls to express themselves in the most unique shades. This became a big hit and allowed the company to charge a premium price because customers were ready to pay more for a colour they felt expressed their feminine selves.
GROWING THE CORE
Grow-the-core workouts fall under three main headings. The first is making the core of your brand as distinctive as possible. Second is driving distribution through both existing and new channels. These first workouts are focused on helping you to ‘SMS’ – sell more of the stuff you already make, with no added complexity. Finally, there is core range extension, by offering the core product in new formats or versions.
The strongest brands don’t rely on communication to grow the core. Instead they ‘bake the brand’ into the product or service to make it distinctive. A good example of this is Galaxy chocolate, which took its product truth to a whole new level, helping outgrow its key competitor, Cadbury’s Dairy Milk. The brand is positioned as being ‘your partner in chocolate indulgence’. The product truth to support this idea is the smoothness of the chocolate, with the brand having a famous advertising endline of ‘Why have cotton, when you can have silk?’. Brand owner Mars invested in amplifying this product truth on several levels:
Shape: a ‘wave’ design was introduced to make the little squares of chocolate themselves smoother in shape, in contrast to the sharp edges of Cadbury’s Dairy:
Milk. This made the in-mouth taste experience much smoother.
Chocolate: the chocolate itself was refined to make it taste smoother.
Packaging: the feel of the wrapper was improved to make it feel smoother.
Brand activation is another way to create distinctiveness for your brand. In contrast to price promotion, brand activation enhances brand equity while driving sales, rather than eroding it. An example of this approach is the ‘Be the Coach’ campaign for Carling Black Label beer in South Africa. Eleven million consumers voted by mobile phone to pick the teams in a pre-season match between South Africa’s two biggest soccer clubs. Fans could also vote by text during the match to make a live substitution. The campaign drove volume growth while enhancing the brand’s image.
Distribution isn’t the sexiest part of marketing – far from it. There are plenty of conferences on the red-hot topic of social media at the moment, but try to find a conference on increasing distribution and you’ll struggle. And yet while no-one has proven that terrific Tweeting or fabulous Facebook pages will grow your core, I’d bet my life savings that being sold in more places will help you sell more stuff.
Distribution gets your brand in front of as many people as possible, including the important group of light and non-users. Simply put, if your brand is not available at the moment when these floating voters decide what to buy, you have missed your chance to build the penetration of the core.
At the simplest level, distribution is about making your brand available in existing channels. For a typical consumer goods brand, this means maximising presence in the major supermarkets. Distribution is also about looking at new ‘routes to the consumer’ by opening up new channels. For example, The UK’s number-one coffee shop chain, Costa Coffee, has focused on growing its core by creating new routes to the consumer to drive penetration. It has added drivethrough outlets, ‘Costa Express’ vending machines at service stations and even in-school coffee shops.
3. Core range extension
Extending through packaging formats can be a great way to grow the core. The big advantage of this form of extension is that you are selling more of the same core product, rather than adding new products. You reinforce what made you famous from a
brand standpoint – and you increase economies of scale for the business.
One of my favourite examples of pack extension is on WD40, the multi-purpose lubricant that stops squeaks and unlocks stuck bolts, among its many uses. This brilliant brand has delivered sustained and profitable growth over many years with a single core product. WD40 used to come with a little straw taped to the side of the can, used to help direct the spray. The problem was that people would often lose the straw. This led to the creation of Smart Straw, a new WD40 pack with an integrated straw that flips up to use, and back down to store.
Smart Straw solves a real problem, and makes the product easier to use. It also delivers the double whammy of penetration and premiumisation. It offers consumers real added value and so is worth paying a bit more for, being sold at a premium compared with the normal can. And this premium more than recoups the extra cost, making WD40 Smart Straw more profitable. The core extension has become very popular with consumers, making up 15-20% of the brand’s sales where it has been launched.
The final way to grow the core is range extension through new versions of the core product. This is still focused on selling more of the core, in contrast to brand stretching that takes the brand into new markets. New versions can help deliver new benefits and target new occasions or user groups. This is especially powerful when these new benefits help to premiumise the brand.
A good example of this is the Ryvita brand offering three new ‘seeded’ versions of its crispbreads with added sesame or sunflower seeds. These core range extensions have played a role in repositioning the brand from being a diet product that consumers eat out of necessity to a tasty, crunchy and healthy product that buyers eat because they want to. The core extensions deliver a more interesting and tasty eating experience while also offering extra health benefits. And these extra benefits are worth paying more for, supporting a 60% price premium compared with standard Ryvita.
REINVENTING THE CORE
So far, we have focused on how to use an ongoing programme of renovation activity on a core business to keep it healthy and growing. In some cases, disruptive technology changes mean that a more radical reinvention of the core may be needed to survive. The risks of not keeping the core up-to-date are shown by the dramatic demise of once leading companies such as Kodak and Blockbuster.
TomTom is an example of a business trying to reinvent its core and avoid the fate suffered by Kodak. TomTom grew rapidly from 2004 onwards following the launch of satnav devices for cars that helped users navigate to their destination. However, many smartphones now have built-in satellite navigation and maps at no extra cost for users.
As smartphone sales exploded, TomTom’s business imploded. Revenue dropped by 24% from 1.67 billion in 2008 to 1.27 billion in 2011, with share price down from 60 in October 2007 to 3.
A crucial first step in reinventing the core is to redefine the market, based on consumer benefits, rather than products. In the case of TomTom this means redefining the market as ‘personal navigational services’, rather than ‘satnavs’. This helps to identify threats and opportunities beyond current products, such as smartphones. This new definition of the core helps to inspire and guide reinvention of the core.
For TomTom this means repositioning from being a seller of satnavs to selling software and services. As chief executive Harold Goddijn commented2: “It’s our ambition to enable customers to use world-class applications. Whether it’s on a smartphone, in a dashboard or on a website, that doesn’t really matter.”
Initiatives include providing special software for internet-enabled phones, following the purchase of TeleAtlas in 2008 to get the necessary software, technology and content to connect cars with the internet. TomTom is also providing technology for UK insurance broker Motaquote’s Fair Pay Insurance product. This bases premiums on driving behaviour, rewarding good driving with lower premiums.
In conclusion, a strong core is essential for brand and business success. And growing the core has many advantages over the riskier alternative of stretching your brand into new markets. It makes what is strong even stronger, both in terms of your brand and your business, reinforcing what made you famous in the first place. In the words of Pierre Chandon, professor of marketing at INSEAD: “Brand stretching can be fun, but growing your core is a must.”
David Taylor is founder and managing Partner of the Brandgym. This article is based on his sixth book, Grow the Core:How to Focus on Your Core Business for Brand Success, published by John Wiley. Contact David: [email protected]
This article was taken from the March issue of Market Leader
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