Within our current portfolio our leading SKU is a 60g jar. Most of the competitive products are in 30g tubes, which gives them much better size impression and perceived price advantage, as their pack is cheaper than ours, although per gram we are much more attractive.

There is an idea of launching a smaller size pack – 30g tube. It will bring us closer to competition (but our tube will be visually smaller in size than theirs) with a little better pack price. Does it make sense to launch within established portfolio a small pack? Would it drive overall sales and increase penetration or just cannibalise existing portfolio, hitting our profit? Would you have any learnings on such cases?

We find that any extensions to an existing range tend to predominantly be bought by existing brand buyers – most specifically, sub-brands appeal to people who already buy the brand.

However, even with this overlap in the customer base, there is still an increment increase in penetration, i.e. the penetration of A with B in the range is greater than if there wasn’t B in the range.

One thing with a smaller pack size is that unfortunately the cannibalisation you will experience will come from people who would have bought the larger size, so trading bigger for smaller which is less attractive from a revenue standpoint. If the margin is a little better on the smaller pack, then that might offset the revenue shortfall from people transferring from 60g to 30g . That said, if you don’t have a 30g size, and are losing out to competitors because this is a popular size (or a growing-in-popularity size), then it could still be a sensible addition to the range because total unit sales could grow.

One way to assess this is to look back and analyse the cross-purchasing that occurs across brands and pack sizes currently. If, for example, pack sizes didn’t share buyers that much and formed separate kind of sub-markets you would be more confident in launching the 30g knowing it won’t hurt the 60g sales too much.

J.D.
15 June 2021

In chapter 5 of the book “How Brands Grow” it mentioned the “I love my Mum (and you love yours)” phenomenon. Is this not opposite to the theory that every customer is the same in one category?

How do we attract a client of the competing brand if he “loves his Mum” more than ours?

This phenomenon is – in my opinion – typical for people who use a specific brand and have a positive opinion about this brand. They don’t know any other brands in the category and don’t want to use anything else except “their own mum”. Is it possible to attract these customers and convince them to buy our brand? Customers of each brand are the same in one category so what can change their love to their favourite used brand and switch them to our brand? Is it even possible? Maybe we shouldn’t think about them and focus only on light- and non-buyers?

The law is due to the strong influence that buying has on brand attitude scores. When surveyed people tend to mention the brands they use and say little or nothing about those that they don’t. So brand’s with more buyers get higher scores.

Once we adjust for a brand’s level of market share (how many buyers it has), we see that all the brand’s get rather similar attitude scores, i.e. one brand’s buyers like it just as much as any rival brand’s buyers like it.

You ask “Is this not opposite to the theory that every customer is the same in one category?”  I think you mean that each brand has a similar sort of buyer base, i.e. same demographics. There is no clash/conflict between these laws.

Is it possible to attract category buyers who don’t currently buy your brand (and hence express positive attitudes about competitor brands)?

YES you can!

The behaviour drives attitude phenomenon shows how weak these attitudes are. The attitudes change immediately when behaviour changes.

How do you change behaviour… improve your mental and physical availability. These people who buy other brands don’t reject your brand, you don’t have to convince them that they should be buying your brand. You do, however, need to be seen (outside and inside stores) by them, and instantly recognised.

A clear understanding of what your Distinctive Assets are, and then using them in a disciplined way, will help you build overlapping mental & physical availability.

B.S.
28 April 2021

How do we measure SOV/SOM in a world where SOV metrics are so highly unreliable?

This is certainly a big challenge when looking at the relationship between a brand’s Share of Market (SoM*) and Share of Voice (SoV). In particular, ensuring there is accurate media spend data for all brands in the category. It’s not difficult to know your own media budget, but to understand all your competitors media spend above and below the line is, and for digital spend it can almost be impossible! And unfortunately we don’t have any recommendations for how you can find better data on digital spends.

One way to overcome the limitations of SoV data is to not use the approach in isolation to determine budgets. Rather, it be one of several budgeting approaches and an average across them used.

However, that being said. Calculating the SoV/SoM relationship using available spend and sales data for your specific category and market, will provide better insight than relying on an aggregate relationship across many different brands, categories and markets, such as Jones’ Advertising Intensity Relationship or Binet and Field’s SoV=SoM approach. It is imperative you understand what is going on in your own marketplace, rather than assuming it fits these aggregate patterns. It may, but it also may not. It will also likely change as your spend or your competitor spend changes, so monitoring it over time (i.e. annually) is important as these changes will impact the relationship you find between SoV/SoM.

* Important to note the distinction between SoM and Market Share. SoM refers to the share of sales ($ or vol) amongst advertised brands only. Whereas Market Share refers to the share of sales ($ or vol) for all brands in the category.

K.V. & C.D.
17 March 2021

In China auto OEM’s typical B2B customers, there is a defined process of annual RFQ ( Request for Quote). Each OEM operates with multiple lube oil vendors. Brand offer is genuine oil. No branded offer is acceptable to OEM’s. This process ensures that every year lube oil suppliers need to drop prices to maintain share. Pricing competitive advantage if any to gain entry into business gets eroded within a couple of years. Volume without margins make little business sense. So future growth faces a margin challenge.
Question : How do we manage this challenge? Any insights from other markets, categories will be welcome.

This scenario sounds like a typical divide-and-conquer strategy on the part of the auto manufacturers. Ensure there is little possibility of suppliers being able to create points-of-difference to enable a slightly higher price, and encourage steadily decreasing prices over time by playing off one versus another.

The classic riposte would be an innovation that enables one player to charge a higher price than the others but this is probably not going to happen in your markets.

The only real strategy, which I’m sure you’re already aware of and endeavour to implement is along the lines of revenue management principles: price strategically so that when projected future volume looks more promising, prices on tenders/quotes go a little higher, or go down in the face of shortfalls. Strive to be a ‘smart’ player who doesn’t encourage value-destroying behaviour in the industry. And hope your rivals are intelligent enough to note your behaviour and adopt it for their own margin preservation.

Is it possible to learn over time the extent to which you are over-or under quoting, so as to help figure out when you’re leaving money on the table?

Have you seen such a behaviour in any other industry?

We have seen the sort of behaviour I described in other markets; but more in packaged goods contexts. For example makers of biscuits or soft drinks, selling through powerful retailer chains (many suppliers, 2-3 retailers so the bargaining power is well with the retailers!). And obviously huge downward pressure on prices and a classic prisoner’s dilemma situation for the suppliers (and mostly lose-lose for them too, if all prices go down everyone loses). One thing is that all the players, with the investments in data gathering, quickly get a close read on their competitors pricing and promotion efforts. So they react to each other; and in some cases a big player will realise, OK if we start playing a little smarter with more of an eye towards margins our competitors will notice and hopefully will de-escalate price pressure. Sometimes it has worked – for a while at least.

J.D.
09 March 2021

I loved your comment on my post, framing the Netflix proposition entirely through the lens of physical availability. That got me thinking: do you or the Institute have anything on how to think about physical availability for digital products? And does it consider B2B, where a salesforce is particularly important? For example, would a salesforce be physical availability (I would think yes).

Regarding your question – the Institute is undertaking research on measuring physical availability online, which we will be able to share more with our sponsors when we have results. However, taking the concept of Physical Availability to its essence, it’s how easy and ready the product or service to the category buyers when they are ready to make a purchase.

So, for digital products, arguably it would be the number of members or subscribers that belong to the particular platform – which may seem to be an overlap with mental availability. For the case of Netflix vs. Disney+, the number of Netflix subscribers currently outweighs Disney+ which again make it easier to gain penetration (= reach) for the products (and new product launches) across the population. For Disney+, they will have to build mental availability to get people to consider the platform in the first place. I made the comment that consumers are known to be cognitive misers and satisficers, which help Netflix if they can produce products that meet the category needs. So, although Netflix subscribers may not be able to see ’Soul’ or ’The Mandalorian’, when consumers want to be entertained, they can ‘make do’ with ’The Queen’s Gambit’ or something else instead. Restricting access for those products (i.e., films or series) is actually likely to dampen their growth – if the channel is still considerably smaller.

I would agree with your assessment that this also applies with B2B. The salesforce is important to maintain the mental availability for those in the market for the category to consider the platform, e.g. for those looking to recruit staff to think of LinkedIn (nudged through ads or contacts), and to actually consider the platform for the actual act of purchase (e.g. active recruitment through the platform (in parallel to physical availability)), e.g. if Company A is actively recruiting through LinkedIn (being a larger platform) than the competitors.

More is still needed to research this – but when we return to the definition / essence of physical and mental availability, they do provide interpretation / guidance to provide explanation of different conditions.

A.T.
28 January 2021

Do you have any insights showing that line pricing of SKUs helps with shopper navigation? Or on the contrary that shoppers are a bit lost when there are a lot of different prices on shelf?

We have an initiative for this year aiming at line pricing our brand offer across small, medium and large dog packs (adjusting pack count according) and are looking for insights to feed the retailer’s story. The primary motivation for us is to unlock feature but we were wondering if there are more benefit we could sell.

Unfortunately we have not done any research on this type of line pricing, or are aware of any other relevant research.

My understanding is that the small, medium and large dog packs have previously been at different prices to account for the differences in product sizes. As an example, a 7 pack might have been $1 for small dogs, $1.25 for medium dogs, and $1.50 for large dogs. Then, the plan is to a consistent line price across all SKUs by adjusting number of sticks in the pack (e.g., 6 for large dogs, 8 for small dogs, etc.). This sounds like a good strategy for making the price communication clearer and possibly for gainings feature (e.g., ‘Brand A‘ $1).

In general, we don’t notice a lot of price confusion at shelf. As a lot of decisions are quick and habitual, with focus on the price of the relevant SKU (or SKUs) rather than considering all prices available. So I don’t see any obvious additional advantages here. Another aspect to keep in mind is that the line pricing might end up with a trade-off between price and convenience for the consumer, if pack sizes are substantially changed. If the older, more convenient pack size is taken off the shelf, could it lead to switching brands?

S.D.
22 January 2021

We are considering launching a premium brand extension. This premium brand extension has clear product advantages that are valued by consumers, so I believe that consumers would be willing to pay more for these benefits. I’ve been asked about likelihood of success, pricing recommendations (which are linked, of course), etc. My concern is that the parent brand, which is high quality but mainstream, is a limiting factor due to current brand perceptions (it will be clear from the name that the new line is “by” the parent brand). An example that comes to mind where this was the case was Nabisco, where it was attempted on several occasions to launch premium cookie and cracker brands but under the Nabisco trademark. These launches always failed, and in retrospect the executive team  hypothesized that the familiar Nabisco triangle on the package indicated that the product inside was mainstream. There’s nothing wrong with that, it just wasn’t premium.
Has anyone at the institute looked at this question? If so, are there examples of successful premium brand extensions that we could look at as case studies? And what learning do you have from successful and failed attempts at premiumization?

It’s a good question.
Some of my earliest work was on brand extension, where I came across the excellent work by Peckham at Nielsen. He showed that extensions generally gained less market share than launches with new names, but it appeared that this was due to marketers giving less support to brand extensions, falsely thinking that the existing brand name would do much of the heavy lifting.
The Institute is about to release a report that shows that there is cross-category brand loyalty, ie buying a brand in one category does mean that if you buy from another category where that brand has extended then you are more likely to buy that same brand name. But, I stress, this is for successful (ie still in market) brand extensions… and we’ve also shown that most brands on shelves aren’t which suggests a lot fail.

So… what does this mean for your question ? I think it means you are right to be concerned. Questions need to be asked…why the brand extension strategy…
… is the belief that this will make the launch cheaper, safer ? This appears to be a dangerous assumption.
… is it hoped that it will benefit the original brand ? how, why?

The idea that the extension will get more attention on shelf might be true, but this is probably countered by the confusion… people just think it’s a crazy high price for something they already know.
There are plenty of examples of premium brand extensions in categories like spirits, wine, shoes… but these are cluttered categories where the premium extension can expect to get a fair bit of attention/publicity. Also the premium extension is often in restricted production. Apple’s new AirPods Max are a similar example. There are also plenty of examples of failed premium extensions in these categories.

B.S.
14 December 2020

I am looking at how to launch, and grow cheese brands in international markets. We have a line of thinking in the business that suggests the way to be successful is to link the cheese brand with one single occasion i.e. either sandwich (which is cheese used on bread or crackers as a topping) or snacking or cooking or entertainment (on a cheese platter). This thinking is founded on OBPPC work and brands like Coke and Philadelphia which say that you need to be known for ONE thing in order to gain space in a consumers mind. When, however, I look at the Top 10 cheese brands in the world (based on RSP in USD), I see that they are mostly (7/10) portfolio brands, e.g. President or Kraft, in that they offer a cheese type and format for all occasions.

Yes that is typically for big brands, they are known by more category buyers for more category buying contexts/category entry points. We just don’t see big brands who just cover one CEP.

The main Category Entry Point (CEP) for cheese is always taste and then varies a little bit across occasion (e.g. in sandwich and cooking it is for the whole family but then number 3 is healthy for sandwich and meltability for cooking).

Taste is something that is usually an evaluation rather than a CEP. In the food and drink products research I have conducted, rarely is taste a CEP. Its not that taste is unimportant its just not the CEP – perhaps the language is a bit confused and people are referring to CEPs but they really mean product attributes? Tasting good is usually a hygiene factor, rather than a common thought that shapes options to buy.

I would like to know if there is a way of looking at portfolio v single occasion (cheese) brands to determine how to most effectively deliver scale, assuming of course, that there is sufficient investment and focus available to deliver both physical and mental availability.

Is a way to frame the question – across all CEPs relevant in the category, how many brands do you need to get as much cost effective coverage of as many buyers and buying contexts. Start with the premise that one brand could do it all through its variant portfolio, and what CEPs might require a different brand or might be big enough where more than one brand would be profitable.

If you have CEP incidence and brand performance against the CEP – this information can be then be used to map brands in the portfolio across the CEPs (in the case of multiple brands in the same category) and identify where a particularly brand might be less credible and another brand (new or existing) might be better served. In my experience it is a rare occasion when a brand can’t cover most of the CEPs in the category (and typically that is special occasion/gifting CEPs in a category with everyday/common consumption). The question then is more, what is the benefit of a second brand (versus a larger budget for a single brand) – which can then lead into discussions on risk mitigation etc.

Thank you so much, I really appreciate you taking the time to answer.

What I take from your reply is that big brands cover more than one CEP/ category buying context, and this makes total sense. What I am struggling with is where to start with a new brand. Should I start with the category entry point “I need something healthy to put on my sandwich” and then let that become established before adding in “I need something that I know my family will love for dinner” and “I need something healthy to snack on” or can I do them all at the same time (i.e. have all three SKU’s, slices, grates and snack bars). All of these are CEP’s for cheese and all can be covered by one cheese brand.

We have a brand that stands for “natural goodness” (100% healthy natural cheese) and we would like to launch and scale it as quickly as possible, and the vision is to have it in all consumption occasions where healthy natural cheese is relevant. We have all SKU’s available but the thinking is we should only launch slices and formats that can go on a sandwich and communicate on that before adding in grates etc. This is to ensure that we can gain a “position” in consumers minds and have something clear and concrete on which to build our mental availability. The question is, do we need to be this “conservative” or can we be broader in our approach.

I think the issue might be is you are thinking there is a ‘best’ place to start. I am not sure about that – as long as the starting point is something commonly experienced by category buyers, and you execute it well with clearly branded, clearly messaged, wide reaching (cumulative) advertising, then you will be on the right track. The biggest mistake new launches make is to pick something obscure, or uncommon, to message on, to have poorly branded advertising, to fail to clearly communicate the category (as a new brand you need to establish category links), or are too narrow in targeting (on the website are several resources about new launches and who buys them).

We suggest brands have a ‘long short list’ of 6-8 CEPs they are looking to build over the coming years, and move between those as great creative emerges, category opportunities emerges, and other factors affecting demand (e.g., COVID often meant fewer school lunches packed, but more ‘have to make lunch at home’ and ‘have to find a healthy snack’ for kids. Smart brands could have capitalised on that change.  I wrote a piece about CEPs in COVID if you are interested in reading it). The order of roll out might also be linked to the creative ideas your agency have for the different CEPs – are there any really good ideas that link to specific CEPs?

There may be seasonal factors that can be used to time messages. For example sandwiches might be more common during the school term, but a healthy snack in spring and summer when people are looking more to get fit and/or January for all those New Years resolutions! Each category is different. I don’t know of any hard and fast rules here, other than monitor performance, once you have succeeded in building mental advantage for that CEP, then you should definitely expand your messaging.

I don’t have enough information to advise on product form decisions (as part of that is a profitability issue as some product forms might be easier to manufacture etc). But again as long as they cover the CEPs you are promoting not just now, but in the likely future too you are covered. People just need to be able to find something buyable.

Sometimes there is no one right answer, just lots of bad options to avoid and then a decision to be made of the useful options left.

But don’t forget you also need to be building the brand’s Distinctive assets at the same time so set the branding foundations. The brand is the real anchor of your mental availability, it is what you want to attach to as many CEPs as possible.

J.R.
11 December 2020

The impact of sub-brand for eg. Toyota Corolla, when and why should we use it? A marketing practice is to utilise sub-brand to attach new associations to stretch the Masterbrand into a new category.  For eg. McDonald’s is strongly associated to burgers and fast food, so McCafe is an efficient way to stretch and link McDonald’s to coffee and cakes, in the absence of which would be uphill task for McDonald’s to own on its own. Has the Institute investigated this? How do we use it well? In private label, our teams are working on the assumption that sub-branding will stretch our supermarket brand (or give it more credibility) into many categories we sell, some of these are very ‘close’ to supermarkets for eg. chocolate chip biscuits, whereas some of these such as nappies are typically perceived as ‘high risk’ for a supermarket brand to own. We’re hoping to set up some ‘branding’ rules to guide the team, and am wondering if the Institute can share any learnings.

Yes, sub brands can be used to attach new associations, particularly where the new offering is at a different price/quality level. McCafe signals not only coffee and cakes but a bit more ‘café’ experience compared to the usual McDonalds. We have not specifically investigated how to best use sub-brands or how to structure a portfolio or what some people call a brand architecture. We have found that sub-brands appeal way, way more to existing brand users – the levels of cross-purchasing between two brands within a parent is 2 or 3 times higher than expected.

Yes, using sub-branding will help stretch your supermarket brand. I perceive that a crucial attribute that your brand has is “inexpensive” or “value” – which means it will work well in categories where there is a big enough demand for lower price options. But of course this core attribute will make it difficult to pitch higher end products or in categories where perhaps as you say there could be a risk perception in buying less expensive options. Tesco has done well with quite a simple price/quality laddering – Tesco value, Tesco, Tesco premium … UK consumers seem to understand this structure but it’s taken decades of work by the retailer. Your supermarket brand doesn’t necessarily have to be so explicit, but a hierarchy of strongly signalled different price and quality levels should help, but will take time for consumes to learn there are actually differences between them. Then the higher-quality one can be used in the categories where there is more perceived risk.

23 September 2020
J.D.

How much of the attribute performance, high repeat rate, high penetration of bigger brands is a result of simply having more money to spend on driving mental and physical availability? (i.e. are they big because they’re just big or because they do a good job at building MA/PA)

Looking at big brands can be both misleading and disheartening – they have big budgets for advertising, promotions, distribution and instore, so it looks rather like there is no competing with them. This forgets that these brands at some point were tiny, and have developed through long term and consistent excellence in building MA and PA, while competing with the big brands of their day. They now benefit from that history and the millions of brains that have at least some (and often slightly larger) memory networks linking the brand to Category Entry Points (CEPs) and other relevant information (great MA) along with wide distribution networks, good portfolios (eg PA) and strong Distinctive Assets. And of course big budgets focused on building and maintaining those advantages.

C.D. and K.V.
06 July 2020