Monthly Archives: March 2012

Climbing The Brand Ladder


I have been having a number of discussions lately with Marketers about how to build “brand ladders” particularly in the Consumer Packaged Goods (CPG) and beverage alcohol space. 


 


In my discussions there seems to be some confusion about what exactly a brand ladder is and how it works.  A brand ladder is a series of items in a product category that have a common brand name and are priced at different points in a category.  There is generally some way of differentiating the individual items based on product features/benefits.  The concept is that an entry level consumer starts at the bottom of this price/feature ladder and as they gain expertise they begin to climb the ladder to more complex and higher priced items.


 


For example for years now we have seen this in a number of hard goods categories such as running athletic shoes.   You start off with what is an entry level shoe for people just getting into a sport or activity priced at the bottom of the category as a “value brand”.  You then add features/benefits and increase the price point along the way to the point where you a number of distinct items at various price points.  In the case of athletic shoes these can range from $50 a pair to several hundred dollars a pair.  Certainly that is the brand model that companies like Nike and New Balance have employed with great success.  The more committed/expert you get the higher up the ladder you climb.  Note that when they launch a new line/ladder they do so with multiple items with varying features at different price points at the same time thus constructing their ladder at the time of initial launch instead of doing what a lot of packaged goods people do; start with one item, generally at the bottom of the price range and try and add new items as premium extensions over time.


 


Perhaps that is why when one looks at a lot of grocery items there is relatively little being done in the way of building brand ladders.  What tends to happen instead is that new premium lines are launched as new brands; even in the most indulgent/luxury categories such as ice cream.  In the ice cream category the producers launch products with discernible differences at different price points but under different names.


 


Most line extensions for grocery brands tend to be based on flavour and tend to be line priced even when there are distinct differences.  I know that a number of years ago when I worked at Coca-Cola we discussed premium pricing for Diet Coke because the product cost versus regular Coke was much higher but in the end decided we could not justify a premium price to the consumer and simply ate the extra cost.


 


In beverage alcohol there has been a mixed bag in terms of results.  The keys to success in building a ladder are the starting price point for the ladder, the number of items initially launched and most importantly discernible differences between the various items under the same brand name.  As a result some categories such as vodka are a virtual graveyard of ladders that didn’t work while others such as scotch and wines have achieved a measure of success because of their ability to accentuate the points of difference as a rationale for a higher price point.


 


Take a look at the Johnny Walker ladder of whiskies as an example of something that works.  The starting point, Johnny Walker red is at a premium price point to begin with and as you go up through Black, Green, Gold to Blue there are distinct differences in the product and taste profiles with which   consumers can readily identify.  That is why it has now been ranked the number 1 wine and spirit brand in terms of brand value.  On the other hand their parent, Diageo has been singularly unsuccessful in building a ladder for their Smirnoff brand despite several attempts to launch a premium Smirnoff Black extension as people just did not see a difference that justified the price premium and frankly in most markets did not see Smirnoff as a premium brand.


 


This experience has carried over into wine brands as well.  There are any number of mainstream “fun/lifestyle” brands that have attempted to build a premium extension, usually by tacking the descriptor “Reserve” before the brand name.  As a colleague once remarked to me in regard to a leading US wine brand “I have a tough time believing that a wine brand that is poured out of a beer like draft tap from a 50 gallon drum can also be a $100 a bottle estate bottled wine as well.”  Further it begs the question as to why you would want to pollute the image of your wine by having a cheap wine by the same name.


 


In short in my experience if you are looking to build a brand ladder, in CPG or beverage alcohol you need the following:


 



  • A premium price starting point for your base brand.

  • Having at least two if not more brands in your ladder launched at the same time.

  • Clear points of differentiation between the rungs of the ladder that is you have to give the consumer a clear and compelling reason to climb the ladder and ideally it is because he is going to get a perceptively better quality product.

Building a Brand


I believe there are two types of marketers; the technicians who focus on the process of marketing and the champions who are focused on the brand(s) themselves and become strong advocates for their brands.  I must confess that I am much more of a brand champion than a brand technician.


 


When I first started in Consumer Packaged Goods marketing at Unilever I was passionate about the brands for which I was responsible.  I was famous for going into the bathroom cupboards of my friends and expressing shock if they had another bar soap instead of Dove or another toothpaste instead of Pepsodent or Close-up.  I felt it was my duty to cure them of the error of their ways and to ensure that in future they only bought the brands for which I was responsible. 


 


Needless to say this activity did not necessarily endear me to my friends, particularly those who worked for a competitor.  In fact it got so bad once I moved to Coke and one of my best friends moved to Pepsi that our wives had to make a rule that we were not allowed to talk business after the first 30 minutes and neither of us was allowed to extol the respective virtues of our brand to others, especially bartenders or restaurateurs when we went out for dinner or to meet with friends.


 


When I joined IDV, now Diageo the Managing Director George Bull used to start just about every presentation he gave with the opening line: Brands! Brands! Brands!  George was a passionate champion of brands and encouraged everyone in the organization to think about brands.  The company even had an incubator new brand development program that was theoretically open to anyone in the company who wanted to develop their own wine or spirit brand for the company.  It was in this environment and culture that my championship of brands came to fruition.


 


This blog is dedicated to the idea of how to build brands because brands are the foundation of any good company regardless of the business it is in; consumer facing; business facing or both.  The essence of brand building for me is understanding who your consumer is and what their wants, needs and most importantly their desires are.  They may not be able to clearly articulate them for marketers but it is critical that we as marketers, understand them.

It’s the Consumer Stupid!


A number of years ago as part of my initial orientation program at Unilever I was taken on a plant tour of their laundry detergent facility.  As I toured the site I was asked by one of the production foremen if “I was going to be the guy who put in or took out the blue sparkles.”  When I asked him to explain what he meant by this question he told me that every few years the marketing person responsible for laundry detergents changed and the new person decided to reformulate and most of this reformulation was simply cosmetic, adding or deleting a consumer cue like blue sparkles.  I asked him if it made any difference to the performance of the detergent and he said no it was just “a marketing gimmick”.


 


While one can argue that blue sparkles are in fact a cue to consumers that there is something different about the detergent it is also a sign of what I call a “marketer’s shinny object syndrome”.  All too often we get caught up in the next new innovation in terms of product or packaging in our search for a USP or competitive advantage versus our competitors but we do so without thinking about what our consumers will think about it.  If their reaction is “so what” then we are wasting our time and effort in promoting this new item.


 


We need to start with the consumer and build our brand proposition and identity based on understanding what their needs and desires are.  This is not to say that we should necessarily be researching every idea with consumers only that we need to look at our brand proposition from a consumer’s standpoint. 


 


A lot of people have cited Steve Jobs statement that he did not believe in consumer research because consumers didn’t necessarily know what they wanted or needed but that doesn’t mean he didn’t create his brands without regard for the end consumer. 


 


Take for example the iPod.  By itself it was nothing more than another mp3 player but Jobs saw the potential benefit to tie it into a system whereby you could purchase music to play on it in addition to what you already owned and launched iTunes at the same time.  In this way he met a new consumer need/desire, that is to be able to cheaply purchase single tracks of music that could be downloaded to his iPod from your computer thereby gaining a competitive advantage over the competition that they could never overcome.  The net result was two category killers; the iPod in the mp3 player category and iTunes in the way we purchase music. 


 


Compare that to what RIM has done with their tablet compared to the iPad.  I am hard-pressed to think of another brand/product launch that was as poorly thought out from a consumer perspective as the Blackberry Playbook.  Like the launch of the iPod the Blackberry Playbook already had a standard from the consumer’s point of view, the iPad.  What RIM failed to do was to understand that what consumers expected with the Playbook was the next generation of tablets not a regression.  The Playbook needed at a minimum to have every important feature of the iPad plus some new bells and whistles or applications that were unique to the Playbook.  Instead RIM focused on the technology of their Playbook and not on consumer expectations.  We therefore had the launch of Playbook without some critical features such as e-mail.  They therefore are left with the last refuge of a poor marketer, price.  Sales of Playbook have only taken off when it was discounted to under $200 or less than half the price of an iPad.


 


RIM’s failure to understand and anticipate consumer wants and needs has led it to the price death spiral it is now in, not just in the area of tablets but in smartphones as well.  Their focus from day one has been on their technology, their bright shiny objects and not on building a consumer friendly phone.  Unless and until they get ahead of the consumer’s expectations in these markets they are doomed to be also rans and potentially out of business.  RIM needs consumer marketers leading their company now not technicians who are fascinated by the next iteration of blue sparkles.  The best marketing advice for them is to start by determining who their consumer is and then building something that meets their needs.  Incidentally their consumers may not be the same as Apple’s, in fact they would be better off if they could focus on another group but they do need to focus on the consumer and not on the product if they are going to be successful.