Managing Brand Equity Over Time

hould you change your brand strategy? Maybe. That depends on whats happening in your market today and what you think will happen next year. Well give you the framework to answer the question. Competitive conditions in your industry change every moment. Customers become more knowledgeable. Competitors become more aggressive. New technology emerges. These and other changes may require you to change your brand strategy. If you have ever taken a course in marketing, you know about the product life cycle.

The product life cycle shows how unit sales may change over time. It describes how competitive conditions change over time and that is why we prefer to call it the competitive life cycle. It is a descriptive model it is not intended to predict sales unless bolstered by statistical analyses. In this article, we are using it to describe how competitive conditions change and the implications for brand strategies. We will take you through a tour of the stages of the competitive life cycle and discuss what your brand strategy must do at each stage.

mind. For example, pets.com was an internet service where people could order food and The introduction stage is when a new other supplies for their pets. Pets.com raised product or service is being introduced. over US$130 million and spent much of it on What the brand strategy must do now is television ads on the United States explain to the target customers the value of professional football championship game the new technology versus the old The Super Bowl. As a result they persuaded technology. This is basic marketing - many to visit their site but relatively few Marketing 101, yet nearly all the biggest made a purchase and their losses in the last disasters in the history of marketing (Edsel, quarter of 1999 and the first two quarters of 2000 totaled US$125 R C A Vi d e o D i s c , Customers million on sales of less Premier cigarettes) are than US$23million. Their characterized by not become more share price began at talking to customers US$11 and fell to US$1.38 about their needs and knowledgeable. in just six months. When then not educating Competitors them about how the they went bankrupt, probably their most new product would become more valuable asset was a dog meet those needs better than existing sockpuppet the aggressive. New spokesperson in their ads. products or services. technology What happened? In the year 2000, many dot-com They never convinced emerges. These target customers that companies spent huge and other changes buying pet supplies from amounts of money on them was attractive. Their advertising, yet most may require you to tag line was because of them failed because they were not able or pets cant drive change your brand unfortunately their did not try to build strategy. owners could drive to the value in the customers Introduction Stage

Canada China Business Council

Summer 2004 | 9

supermarket or pet store. Branding efforts have gone beserk when a spokesperson sockpuppet becomes a companys most valuable asset. Rapid Growth Stage The main characteristic of this stage is that you now have direct competitors. These are the fast followers who have entered the market soon after your launch. At the same time, customers are starting to become very knowledgeable - and demanding regarding their expectations. It is essential during this stage to put distance between yourself and your competitors. Now is when it is most likely you will have a major functional or, better, emotional - benefit that is superior to that of your competitors. Now is the time to associate that benefit with your brand you want to own that benefit. In the late 1960s, a company today known as Kraft researched the United States market for coffee. They found that the only coffees available were brewed coffees, which were perceived to be richtasting but messy to prepare, and instant coffees, which were perceived to be waterytasting but easy to prepare. What people really wanted was a rich-tasting, easy-toprepare coffee. Kraft used processes from the US space program and introduced a freeze-dried coffee, Maxim, that was richer tasting than

the current instant coffees and was also easy to prepare. Maxim quickly achieved a 10 % share of the instant coffee market. Meanwhile, Nestle was developing their own freeze-dried coffee. They introduced it with the tagline, You know what freeze-dried coffee is, now taste the best, Tasters Choice. Within two years Tasters Choice overtook Maxim and Maxim never regained their lead. Over those two years Tasters Choice charged the same price and spent less money on advertising! When Kraft finally removed Maxim from the market in the late 1990s, Tasters Choice had a market share more than thirty times larger than that of Maxim. What happened? Kraft educated consumers about freeze-dried coffee and that was necessary to build the market. Krafts mistake was failing to put distance between Maxim and Tasters Choice by seizing the taste benefit for their brand when they had the first-mover opportunity. Once Nestle associated Tasters Choice with taste, it was too late for Maxim. The case history illustrates the power of a well-chosen, wellcommunicated brand position implemented at exactly the right time. Competitive Turbulence Stage Market segmentation begins early in the competitive life cycle but is in full bloom during the competitive turbulence stage, because customers get smarter and more

demanding as to what they want and competitors give it to them. There are many direct competitors in this stage and all their product or service offerings tend to be the same, leading to price wars and shakeout. The key to winning through this stage is targeting brand strategies must target your most attractive segments. In the United States in the late 1980s, the advertising of Pepsi Colas Mountain Dew soft drink often featured young, cleancut teenage boys and girls enjoying water sports at a lake situated in a beautiful green countryside. Not bad perhaps but those ads did not really speak to all the potential Mountain Dew customers who lived in urban areas. Mountain Dew set out to change that. They gave the Mountain Dew manager seven years to reposition the beverage for a hipper and more urban segment. That was accomplished with a carefully designed communications campaign that continually moved the position of Mountain Dew toward a much edgier position but never tried to move it so far in one year that people would not find their ads credible. What happened? By focusing efforts on specific segments and by taking sufficient time, Mountain Dew was repositioned for the urban market the water sports became extreme sports and the tone of the ads became much more hip. Mountain Dew became the number three soft drink among their target segment. Maturity Stage Competitors often consolidate during the mature stage. Now customers are very knowledgeable about the product or service and may view their purchase decision as routine. Organizations must retain their current customers by reinforcing their brand values but must attract new customers by finding what may be subtle differences versus their competitors. A large part of the auto insurance industry in the United States is very much like a commodity business where lowest price wins. Both GEICO and Progressive insurance companies have followed strategies that still utilize price but couple it with superior service. For example,

10 | Summer 2004

Quarterly Review

Progressive will send a van to where an accident occurs and settle the claim then. GEICO will review the cost of your current policy and advise you of cheaper rates. What happened? Rather than accept a commodity position, both companies found ways to differentiate themselves in terms of service. Both these companies have approximately doubled their shares over the last ten years. Decline Stage The reason the competitive life cycle declines is that a new product or service emerges that is more effective than the existing technology at meeting customers needs. At this point, the brand must be sufficiently stretchable so that the company can move to the new technology. There have been a number of brands that are dominant in a technology but have faced difficulties moving to a new technology in the minds of customers. For example, Xerox

has been associated with photocopiers, Polaroid with instant photography, and Hewlett-Packard with printers. Each is faced with the challenge of broadening the associations of their brand. In many countries Kodak is synonymous with film. That is a powerful position while film is being sold less helpful when digital cameras are becoming popular. Of course, Kodak does make digital cameras. The issue is not whether Kodak can make a digital camera but whether or not people think of Kodak when they want to buy a digital camera. What happened? In the 1990s, Kodak advertisements showed digital technology and included the tag line, Take pictures further. However, poor financial results in the mid-1990s killed that campaign. More recent Kodak ads have the tag line, Share moments, share life. Either of these campaigns might be effective in broadening the associations of the Kodak brand to include digital forms of imaging. However

these communications may be too little effort too late. Broadening the associations of a corporate brand usually requires several years of effort and Kodak may no longer have that time. In the past five years, some brand equity estimates show the value of the Kodak brand falling US$7 billion a loss of about half the brands value. Summary As shown in Exhibit 2, competitive conditions change over time and that means brand strategies may need to change over time. Companies that are savvy in managing their brands understand this; other companies lose. What is happening in your markets? What is your brand strategy doing? For comments or questions, please contact: donsexton@mindspring.com www.thearrowgroup.com

Canada China Business Council

Summer 2004 | 11