Being first: gaining and maintaining leadership

Gaining and maintaining leadership
Market Leader Summer 2010

The recession has been a long overdue wake-up call for marketing and business in general, forcing companies to take a more pragmatic and bottom-line-driven approach. In particular, successful companies have refocused their investment and effort on gaining and maintaining leadership, recognising the significant brand and business benefits this can confer.

Leadership can mean outright market leadership, as in the case of Tesco or Walmart in supermarkets. Or it could be leadership of a specific sector, defined by target group, channel or price positioning.

People like to portray Apple as a 'challenger brand'. In fact its successful turnaround came from focusing on segments where it could be the 'leader brand'. It has a 90 per cent share of the US PC market for products over $1,000 (£620). And it has a 70 per cent share of the MP3 player market with the iPod.

BUSINESS BENEFITS OF LEADERSHIP

The business advantage of leader brands over 'follower brands' is demonstrated by data from the PIMS institute (Figure 1). This extensive analysis of more than 3,800 companies showed that businesses with large shares (50 per cent plus) had rates of return more than three times greater than small-share businesses (10 per cent or less), for a given level of quality. Let's look briefly at the reasons for these superior returns.

OWNING THE CENTRAL BENEFITS

Leader brands tend to own the 'central benefits' of their marketplace, underlining the thesis in Barwise and Meehan's Simply Better (1). Rather than having a strong image for a specific benefit, they score highly across a range of key attributes.

For example, in the UK mobile network market O2 is seen as the best for service, handset quality, network quality and popularity. Rather than being different, leader brands have a distinctive execution of the core market benefits.

O2 has used a consistent and impactful marketing mix with the 'blue and bubbles' brand world, combined with constant renovation, to maintain and even strengthen its image across this range of benefits. This makes it very hard to attack and forces follower brands like 3 to focus on niche markets such as the youth sector or being a price-fighter brand.

HARD-WIRED CHOICES

Over time leader brands build strong 'brand properties', executional devices that aid recognition and reinforce communication of the brand idea. Examples include Dove's 'drop shot' to communicate ¼ moisturising cream, Tesco's tagline 'Every little helps' and Intel's 'Ding ding ding ding' sonic sign-off.

Used consistently, these networks of associations become hard-wired into our brains. This gives leader brands a key edge when shoppers are choosing from a crowded shelf in the supermarket, or a crowded results page from a Google search.

BARGAINING POWER WITH RETAILERS

Leader brands' sheer negotiating power is a critical advantage in an age of increasingly powerful retailers. Shoppers expect and want to see leader brands stocked, as demonstrated by data from Superbrands research showing that more than 40 per cent of shoppers wouldn't switch to own label from the leader brands surveyed at any price.

Follower brands are in danger of being screwed for higher profit margins, or being squeezed off the shelf altogether. As Miles Roberts, chief executive of own-label product manufacturer McBride, says: 'Brands are consolidating, and even large manufacturers know their B brands are going to fall to private label.'

WINNING THE 'WAR FOR TALENT'

A final advantage for leader brands is the roles they play in helping attract the best people. This advantage is described in the book The War for Talent (2) as follows: 'The company's role in the marketplace, either as a product or market leader, can prove to be a major pull factor.' Based on research on more than 100 leaders, we identified eight key behaviours to help gain and retain brand leadership. We will focus on three of these.

Follow the Money

The most fundamental characteristic of leader brands is following the money. This means taking a pragmatic and bottom-line focused approach to branding, concentrating effort and money on the businesses where there is a competitive edge needed to gain or retain leadership.

This can be in terms of product categories but can also include geographies, channels or price segments. For example, the J20 brand of juice drink started by creating a leading positioning in the CHR channel (cafes, hotels, restaurants) before expanding into supermarkets. It also means focusing on the marketing activities and actions that really drive growth, not the latest sexy innovation or communication campaign.

Killing the dwarfs

Following the money highlights the strong, profitable businesses where a company can gain or retain leadership. It also highlights the 'dwarfs': small and weak businesses where the company is a follower. These dwarfs distract senior management and drain resources from the core business. Increasingly companies are recognising this and taking bold action to clean up their portfolios.

This can mean pruning the portfolio of brands within a given market to focus investment on the one that can gain or retain leadership. When Alan Mulally became the CEO of Ford he saw that its premium car brands were diverting attention and funds away from the core Ford brand, at a time when the market was weakening.

He sold Jaguar, Land Rover and Aston Martin and has also put Volvo up for sale. At the same time he cut back drastically on the range of cars from 97 to 40.

Ford's focus means it is the healthiest of the big US car makers, giving it an opportunity to build share rapidly while its competitors are down and out. Following the money also means focusing efforts within key brands. For example, Unilever recently discontinued its Persil washing-up liquid to focus on laundry cleaning after spending millions of pounds trying to compete with P&G's Fairy Liquid.

Marketers need to be more selective when stretching beyond the core into new markets. This means spending less time on branding theory and more time on business issues. For instance, rather than asking questions such as, 'Could Special K stretch into diet drinks?' the real question is 'Can Special K make any money out of diet drinks?'

The difference is not just semantics but reflects a harder-edged commercial focus. When a brand that is strong in one category is looking to enter a second, it helps to look at two main things: size of prize and ability to win.

Size of prize = market attractiveness × brand added value

Size of the prize first looks at the market we want to enter in terms of size, growth and how intense the competition is. The next critical question is 'brand added value': do you have a concept that genuinely brings something new to the market?

Many brands still make the mistake of believing their brand name and emotional values are enough to take on and beat well-established leader brands.

Ability to win = business model

Having a winning concept and product is a great start, but can we make any money out of it? This is where too many marketers fall down, wasting millions of pounds in the process. It's one thing to launch a new product, but another to compete over the long term and create sustained growth.

This was the case with Heinz's failed attempt to enter the UK chilled soup category with its Farmer's Market soups, going head-to-head with the formidable Covent Garden. The issues were more to do with the business model:

  • No economies of scale in chilled soup. Heinz does canned soup really well but has no competence in the UK in chilled soup.
  • Lower price. Had to offer a 25 per cent lower price vs Covent Garden = less gross profit for marketing.
  • New part of store, where Heinz has no presence, and Covent Garden has a wall of chilled soup.
  • No added value, versus Covent Garden, that does a great job and has been doing it for 20 years.
  • Cost of rewiring people's brains. It would have taken more millions than Heinz had to get loyal Covent Garden fans to not only try Heinz chilled soup, but keep on buying it.

Grow the Core

Leader brands have a strong core product or service – defined as being the main source of profit and authority – and invest time, effort and money in growing this business.

Growing the core starts with simply selling more stuff, finding creative ways to encourage more usage of the core product. A great example of this is Gillette actively promoting all-over body shaving for men. This approach has several advantages:

  • It drives increased usage of blades and shave gels.
  • As Gillette has 85 per cent of blade sales, it makes sense to grow the category, as it is the category.
  • No cost at all for new products, packs, formats.
  • Taps into a consumer trend and shows Gillette is in touch.

 The next way leader brands grow the core is by upgrading their products or services, as shown by the impressive turnaround of McDonald's. After a crisis in 2005 when UK profits fell from £96 million to £36 million, the brand has gone on to create sustained growth. Some of the many changes to upgrade the core brand included:

  • revamp of stores – 140 UK stores upgraded in 2007, 200 more in 2008
  • free wi-fi in all branches
  • competitively priced fresh ground coffee that beats Starbucks in blind tests
  • newer, healthier options such as fruit bags, 30 million of which have been sold since launch five years ago
  • reducing salt levels – cut by 24 per cent in fries and 30 per cent in Chicken McNuggets.

3. Remember and Refresh

Gaining brand leadership is a big challenge in itself but it's only part of the battle. Leader brands need to stay fit to stay ahead, constantly improving their offering.

Those that become complacent and neglect the need for constant renovation risk losing their leadership position, as happened in the UK cat food market, where Whiskas lost leadership to Felix.

The Felix brand invested in product quality and used a highly distinctive mix using Felix the cat to grow share from 6 per cent in 2000 to 26 per cent over a three-year period, while Whiskas dropped from 30 per cent to 24 per cent.

Sustaining brand leadership requires a delicate balancing act. There is the need to remember what made you famous against looking forward to new trends to help refresh and stay relevant.

Looking back: a bit like 'brand archaeology'. You dig into your past marketing mix and look for hidden treasure.

When was the brand 'hot', growing share and sales? Here you are looking for two things: first 'the message' (the brand promise) the brand was making. Second, executional elements such as endlines, creative ideas and visual devices.

Looking forward: at how the world is changing. You need to consider how culture is evolving – are the fundamental category needs changing in any way?

Review direct as well as indirect competition to see where other brands might go and how that might change the landscape you want to lead. Consider the way the iPhone has changed the mobile phone market. Was Nokia looking at Apple and evolving its offer in advance of its entry? It appears not.

BRAND IT LIKE BOND

One leader brand that has done a great job of remembering and refreshing what made it famous is James Bond. The 21st and 22nd Bond movies, Casino Royale and Quantum of Solace, smashed all box office records for the Bond franchise, each grossing $590 million. Looking at the enduring success of the Bond brand we can see what the producers have taken into account:

Looking back: there are a number of elements that have been constant over time. First, there is the fundamental 'brand idea' which could be summarised as 'Bond beats the bad-die to save the world'.

In terms of executional devices, the list includes:

  • The gorgeous girls, at least one of whom is actually up to no good
  • The car that goes fast but also has loads of gadgets
  • The music
  • The catchphrases: 'Bond. James Bond'; 'Martini, shaken not stirred'
  • The characters: Q, M, Miss Moneypenny.

Looking forward: Bond has also responded to relevant trends. The stronger role of women in society means the female characters are much more than just babes.

The rise of global terrorism means the Bond baddies have had to get badder. And most importantly, Bond's direct competition has got tougher, with the emergence of other action hero movies such as the Bourne series and the imperfect, hard-edged hero Jack Bauer in TV series 24. This led to the new, grittier Daniel Craig version of Bond.

Waves of renovation

As a brand leader, growing the core should become a way of working. Have 'waves' of renovation activity on the core business to keep it moving forward 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 developing while the core business was still growing.

The Axe/Lynx brand of body spray introduces a new fragrance 'concept' each year. When the Berlin Wall fell it launched Phoenix as a symbol of optimism and rebirth. This constant renovation has been a key part of the brand, retaining leadership in established markets and pulling off the amazing feat of gaining leadership in the US market.

CONCLUSION

Gaining and retaining brand leadership starts with following the money and focusing investment where you have a real ability to win in the marketplace. It means having a ruthless focus on growing the core.

Leader brands never forget what made them famous and keep an eye on direct and indirect competition to stay ahead of the game.

Staying on top requires continual renovation, with waves of activity primed to go off one after another, keeping the core healthy and integrated with selective innovations. Being a follower may be fun for a while, but long term being a leader is better.

REFERENCES

1. Barwise, P. Meehan S. (2004), Simply Bate, Harvard Business School Press

2. Williams, M. (2000), War for Talent, Chartered Institute of Personnel and Development

ABOUT THE AUTHOR

David Taylor is managing partner of the brandgym

David Nichols is managing partner of the brandgym

[email protected]

This article is based on the latest edition of their book 'The Brand Gym: a Practical Workout for Boosting Brand and Business'