I am wondering if you could support us with a question we have on distinctive assets…

Context: For one of our brands we are looking to extend the brand portfolio into a new sub-category. At the moment we are learning a lot about this new sub-category which is different to our heartland of the closely related sub-category where we have competed (and in many instances are market leader) for decades. Ultimately, what we are trying to understand is what are the must have “assets” to win in the new sub-category. We hypothesise several related to functional qualities, imagery, on-pack etc are possibly some of the “must haves” to be a credible player but we wondered if a study into Distinctive Assets could help with this question and expansion of the brand portfolio.

Normally we would conduct Distinctive Assets studies through the lens of brands but this time we are curious to understand if it makes sense to run a Distinctive Assets study through the lens of sub-categories i.e. treating the sub-categories like brands. Would this approach make sense? What are the pros/cons or watch outs??

That sounds like a very sensible expansion of the brand [portfolio]. We do have research that shows that sub-categories generally do perform like competing ‘brands’, with repertoire buying across them, and relative differences in [Brand] Performance Metrics, like penetration and purchase frequency, for instance, behaving much like we see for individual brands. So, in other settings, treating sub-categories as brands in analysis is a perfectly valid approach.

However, to this point in our Distinctive Assets analyses we have typically focused only on the brand, so this new approach would necessitate additional testing of clear, specific designs or ideas of what your team has in the context of the new brand or brand extension.

What you describe in terms of “assets” to win might not actually all be assets, so some will be hard to test this way, but they could just be needed for membership of the category like you said.

Personally, I would recommend beginning by conducting an audit of brands on the market to see what they are using, then come up with brand identities and then test these. Then we can add a meaning part to the research, to determine what are branding devices you can use when in the market that are needed to communicate membership of the new sub-category, along with what elements are ‘available’ in terms of being ‘free’ (relatively and to what degree) from mental competition from competitors (i.e. what is the level of uniqueness of each element).

Likewise, we can test these attributes to see which of the tested sub-categories they link to, and with what strength.

Finally, we would also recommend a study into the Category Entry Points of the new sub-category, to understand the unique elements that trigger the thoughts that category buyers have as they transition into making a purchase from the sub-category, and how they differ between sub-categories.

W.C.
3 May, 2022

Do you have any examples of brands who have failed/succeeded in trying to use a colour that is different to the master brand’s DA palette to launch a sub variant?

When using colour to indicate variety the key is to ensure that it does not overwhelm or jeopardise the master brand branding. As a loose rule of thumb, the different colour should take up less than 25% of the pack face. Use colour in a minimal, but consistent way to facilitate line navigation without compromising brand identification on shelf.

Here are some good examples of using colour to demonstrate variant while still letting the brand itself dominate…

I hope that helps.

E.W.
29 April 2022

We have started a growth project to investigate how to fuel further growth on our biggest brands in high market share countries. Do you have any insights / data / best practice case studies on how to further grow brands with a high market share (30%+) that are within a highly developed category?

Thank you for your enquiry.We do have some learnings about this, but we don’t have specific examples or executions, one reason being our sponsors don’t necessarily share with us the details of their strategies. But we can share with you some general take-aways from brands in this sort of context.

First, it’s important to note that even market leaders are bought by far fewer buyers than there are in the market. Even the revered example of Coke, in developed markets like UK or other Western Europe, over half of cola buyers didn’t even buy it in a year so there is almost always scope to get more penetration even for a very big brand.

Second, an under-recognised aspect of brand growth for market leaders is that growth can happen by stopping doing some things. We have observed many sponsor brand teams that manage big brands but ceaselessly tinker with trivial NPD efforts, launching new variants that have a market life of less than a year — while taking attention and resources away from the core SKUs that make up the bulk of brand sales (the ‘hero SKUs’). So, we’d say to grow a market leader, re-focus on the core, blockbuster SKUs. Another commonly-seen aspect of NPD / new variant distraction is that new items inadequately reinforce the brand’s distinctive assets — too much effort to signal why the variant is different, not enough attention to signal the variant is part of a big master brand. Therefore, ensure a renewed discipline on all brand variants strongly reinforcing the master brand identity.

Third, we know that a larger proportion of growth for high-share brands comes from category expansion compared to what is the case for small-share brands. Therefore, consider if it is possible to innovate to reduce purchase or consumption barriers that could slightly expand the category.

Fourth, there is quite a lot of evidence that (a) while bigger brands can have a somewhat lower ‘share of voice’ for their level of market share, that (b) there is also strong evidence that investing in extra share of voice, in other words, sustained extra media spend on mass-reach media does underpin market share growth. It seems difficult to grow a large share brand without some additional spend on mass advertising. We also have noted, somewhat surprisingly that increasing share of promotions from one year to another does not usually correlate with increased market share.

J.D.
20 April 2022

What advice you have for brands operating in a declining category? Specifically, we have some evidence that the one category we operate in is on a major decline due to the new entrants creating a new category that target very specific areas.

Competing in a declining category can be challenging situation. There aren’t necessarily any easy solutions, but we can provide some top level thoughts and considerations.

There are two key elements to consider when competing in a declining category.

• Understanding why is the category declining (and if it can be slowed/reversed)?
• The potential to grow (or maintain) share.

To the first point, it can be important to quantify and understand the nature of the category decline. If we don’t understand how much the category has been declining and why the category is declining, it is easy to be misled by a ‘good story’.

Category decline can occur for different reasons. For instance, declining investments in mental and physical availability across the entire category. The decline may not be due to any strong rejection, but simply buyers being slightly less likely to think of it for key category entry points. This can also be an issue for any new potential buyers who would have entered the category.

Alternatively, category decline can be the result of competition from other/new categories. This appears to be your leading hypothesis regarding the new entrant in your category. It is rare for breakthrough innovation to lead to an entirely new category, but when it does it may do so though providing improved quality, convenience or category entry points. Other examples include pod coffee (vs instant coffee), craft beer (vs traditional lagers) and microwavable rice (vs cooking rice). In these cases, it is far more difficult to simply win back sales by just investing in the availability of existing portfolios. If the new entrant category is substantially growing at the expense of the your category business, you need to seriously consider expanding to the new entrant category. What are the key barriers to launching here and what will be needed to overcome these in the medium to long term?

Even when new categories have been created and grown, they have not entirely displaced the older categories. For instance, instant coffee, traditional beer brands and cooking rice still exist, albeit with category sales levels lower than historically observed. There are still sales to be had in these categories. However, there can be new challenges when competing with brands in a category that has declined. In particular, retailers may start to reduce distribution and shelf-space allocated for the category. This can be bad for the category overall, but if you have a plan for maintain your distribution, it can mean reduced competition at these points of sale and help improve share.

When brands or categories experience decline, a common response can be to increase price promotions. This can give a short-term boost to sales, but this is only temporary and is usually run at a cost to the business. Price promotions will not help the category grow, but may result in it being devaluing the category over time. Avoiding decline requires more fundamental and sustainable investments for the brand (e.g., advertising investment, portfolio expanding to growing parts of the market).

S.D.
6 December 2021

What is the most successful price increase you have seen of a brand and what can we learn from that?

It’s actually fairly rare for brands to push through large price increases because price elasticity is fairly strong, volume is seen as very precious. Sometimes getting prices up is more via dropping promotion depth. It appears the best way to obtain portfolio price increases is to invest in premium products that offer extra appeal, and wide appeal.

J.D. & S.D.
25 November 2021

I wonder if you have any evidence/ analysis about the relative importance, over the long term, of brands adding new products to grow vs growing core products.

There are recent studies at the Institute on new product launches and developments, so please watch this space in the new year. In a nutshell, protecting the core products is really important even over the longer term. In many brand portfolios, we can see that the top-selling SKUs are the stock standard products that were launched many years ago. Our research shows that this single SKU on average contributes half of the buyers and over 40% of sales. So, in effect, if the core product is sacrificed for a new launch – and that the new launch, say, contributes 0.5% of the total brand buyers, it would need to be bought by 80X more people just to replace the potential loss of buyers of the core product. This is due to the fact that light category buyers are more likely to know / notice the core products rather than the minor variants. This does not mean that you shouldn’t develop your portfolio and adopt it to current market trends. As an example, Coca Cola classic remained the top-selling product within the portfolio but it is only in recent times that the sales of Sugar-free Coca Cola have surpassed the full-sugar variants.

Some other links / Corporate Reports that may be helpful for this particular area are:
How often do new products fail?
Can’t new product introductions be bigger than the core
How should we prioritise our NPD? 
Does size matter? 

A.T.
17 September 2021

Do you have any white papers or interesting insights focused on range reduction or portfolio simplification. We used to have great stats on keeping the shelf simple actually helps people purchase more because they find one thing and if they find it quickly may grab another!

We published a corporate report on portfolio management that you can find here. If you’d like to read the full peer-reviewed journal paper, you can do so by accessing the paper here. This research is an active area of research at the Institute.

In essence, we find that big brands are more likely to have bigger number of SKUs compared to smaller brands, but this relationship is not causal: big brands are more likely to have managed product distribution well across the market. This enables the distribution of SKUs widely compared to smaller brands. However, this does not mean that there aren’t any cases where brands need to prune their product offering (even for smaller brands). One of the key criteria to simplify a product portfolio or to rationalise offering is to see whether each SKU has a clear strategic role, e.g., bringing unique buyers, bringing more revenue to the brand, and/or aiding to secure distribution or shelf space with the retailer. There may be cases when SKUs are considered good candidates to be rationalised, only to discover that they are poorly distributed across the market, or that they are poorly supported new launches. Furthermore, there may be SKUs that also unduly cannibalise their siblings within the same brand.

What is also vital for the brand is to protect your core offering, i.e., your top-selling SKU, as this most likely brings the biggest number of buyers to the brand, and is crucial for the brand. In some cases, brands ‘abandon’ the top-selling SKUs only to support or give more attention to new products to the detriment of the brand sales and revenue.

We have also provided this service to our Ehrenberg-Bass Sponsors in the past – in terms of portfolio evaluation and highlight any weak points in the portfolio and candidates for simplification. Please reach out to us if you’d like further information for the research.

A.T.
01 September 2021

Historically, I’ve been told that if you are not the leader in a category, then invent a new one (e.g. Energy Drinks) and be the first-mover (Red Bull) and you can win (60% share). Do you have any insights on this at all?

There’s two elements to this that might be useful for your question/situation – 1) sources of growth for firms of different sizes, and 2) the first mover advantage.

On the first first point, for established brands in mature markets, we (and others) generally observe that market stationarity the norm (i.e., market share remain fairly stable year to year). In a study by one of our colleagues, they identified that only 1 in 10 brands increase their share by more than 3pp over six years. This is not to say brands don’t grow and decline, but it just occurs less often than we might expect.

Given the stability of shares, category growth can be needed as source of firm growth (or as you point out, expanding to new categories). We’ve been doing a bit of work comparing share gains and category as sources of growth, which is in the drafting stages of a new report for our website.For now, I can share the top-line results summarised in image attached.  For market leading firms/brands, we see that the majority of their growth comes from the category, as their shares stay relatively stable. On other side, for smaller competitors, market share changes can still play a greater role. Small share firms/brands experience greater relative variability from year to year, both in terms of gains and losses.

With regards to the first mover advantage, this is not a topic we have investigated at the Institute, but it has been investigated in the broader academic literature. Despite considerable investigation, there is no clear consensus about the strength/direction of any relationship between order of entry into a category and firm performance. If there is a relationship, it is more complex that originally conceptualised. While we have first mover examples like Red Bull, there are also follower firms, such as Apple, that are rarely the first in a category, but still end up in dominant positions.

Regardless of order of entry, the leading brands are still likely to be those with the greatest mental and physical availability. Early entry into a category can give the firm a head start on building these assets, but their position is not guaranteed. In the early stages of a category, there is likely to be limited category shelf space allocated in stores, which may benefit the first mover as they can almost monopolise this space. However, if the category successfully expands, greater distribution is then likely to be allocated which can be taken up by the followers.

S.D.
17 August 2021

Our main international brand is a barrier and healing cream with 90 years of heritage. The main application is the nappy rash treatment, but it is also being used as a “multi purpose” cream for scratches, wounds, pimples etc.

With our marketing promotion we focus on TG – “young mums” – treating this group as a point of market entry, for the further use in different areas. Depending on the market, products are being sold in pharmacies, but sometimes also in mass market.
Our portfolio is dominated by a basic product offering in 4 diff sizes. Few innovations – on the go pack, nappy rash prevention product, general skin care product – have not proven to be successful, reaching max 5% of sales.

As we have very high awareness and really good perception in terms of efficacy and trust we are wondering if we should look into brand extension into different categories around babys’ and mums’ skin care. For example, wet wipes, bath shampoos for babies, moisturising cream for babies, sunscreens, mums’ nipple healing cream etc.

How and where to stretch? What are the learnings of FMCG brands? How to judge on the categories fit?  Why have previous line extensions not been successful – is there a learning on expanding a very old brand?

It would be good to assess the buyer profile of the brand, to assess the breadth of the buyer profile relative to the market generally. The brand might over-index to young mums but it would be desirable to see what percentage of total brand sales comes from outside that group.

How and where to stretch? Good question. Overall the scenario you describe sounds like the company has enough brand equity to be a credible player in adjacent categories. The best ones to extend into depends on your capabilities (which seem like would readily transfer from skin care to slightly broader skin care); competitive environment (are there some parts of the market that are less competitively intense?) including size, growth, and margins. And of course ‘fit’ – to what specific sorts of skin care does your brand best fit into.

That assessment of fit could be accomplished fairly readily with consumer surveys whereby respondents are presented with various possible brand extensions and asked their perception of how well the brand ‘fits’ into the new category. This could perhaps be done in tandem with an examination of Category Entry Points(CEPs) and how well your brand performs on CEPs that might be more specific to particular sub-categories (ie perhaps great on sunscreen, not on wipes).

Another potential method would be a conjoint study where consumers are asked to select (‘purchase’) a brand or rate a brand’s appeal in various categories; one might find their brand is far more appealing as a member of category B than C or D, for example.

One thing with old brands is to check if they are tending to skew a bit too much to older buyers, who might be very familiar with the brand but newer / younger buyers are far less familiar with it and therefore harder to get it into their repertoire. Marketers sometimes think a brand’s heritage is enough to leverage into a new category, but it could be past efforts simply weren’t supported well enough with advertising.

J.D.& S.D.
17 June 2021

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