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��the entrepreneur & the academic By Tony Chapman & Ken Wong Renegade CMO: Brother, can you spare a dime? In this Forum series, Queen’s prof Ken Wong and Capital C CEO Tony Chapman tackle marketing challenges and offer up Renegade CMO solutions. This month they weigh in on how to market your way through recession. 62 STRATEGY April 2008 Tony’s take: Last year the American consumer was armed with cheap credit, the ability to leverage up a minimum-wage job into the purchase of a no-money-down house, stocked with don’t-pay-for-a-year furniture and appliances. Today there is no credit and trillions in subprime and derivative debt, and the U.S. economy is in a tailspin of such force that all of us will be sucked into it. Add to that rising commodity prices and we could be heading for a recession of epic proportions. Everything slows down and with it comes job losses, budget cuts and survival of the fi ttest. My advice to marketers is to understand your consumer. Their shopping behaviour will change as media continuously reminds them how bad it is, and their lack of spending power reinforces it. They will shift their mindset from wanton and insatiable to conserve and hoard. How will this mindset affect your marketing plan? Let’s go to the four Ps. With your product strategy, I would simplify features as consumers look to satisfy needs versus wants. Positioning I would base on long-term values – whether that was functional and you focused on product durability, or emotional and you talked about experiences. Pricing: we know consumers will look for deals and spend more time trading down to price, so you’d better be creative in your offer. In terms of place, you need to fi ght for the corners, the last three feet of your marketing plan. This is where the battle will be fought. The winners in this recession will add the fi fth P: people. They will invest in creating a culture that embraces this downturn as an opportunity to steal share and to permanently knock out weaker opponents. What a wonderful time to be in the business of building brands. There is a story about human behavior behind those numbers, and whoever can read that story will fi nd that this is a classic case of opportunity rising from change Ken’s advice: I don’t think everyone will feel it to the same degree. So marketers had better start eating their own dog food. Forget selling to everyone in the same way and start doing a better job of knowing who you’re selling to (segmentation), the reason you want to sell to them (customer valuation) and how a slowdown will affect them, specifi cally. The distribution of wealth across geographic regions has shifted over the past decade. The most populous regions of Canada, where much of the slowdown in manufacturing is already being felt, will feel www.strategymag.com the effects long before the less populated, commodity-rich regions. Alberta? A nobrainer. But don’t forget that Saskatoon has the highest growth in real estate prices today. So maybe it isn’t a case of have and have-not but more a case of “no” (recession), “whoa” (slowdown) and “go” (slower but still prosperous) regions. The same will apply to age groups. Older consumers will be concerned and adjust spending accordingly. But when was the last time you heard a tween or teen talk about economic conditions? Anyone who reduces brand building with those consumers will spend a lifetime trying to win them back when the recession ends and they enter their highest spending years. Finally, go beyond the macro indicators like GDP to the micro-economic indicators that show how people are living and spending. For example, the defi nition of a staple may change depending upon whether we see a reduction in two-income families due to unemployment or less job creation or an increase in two-income families as people feel less secure. The bottom line? Don’t market the same way everywhere. Rather than assume recession, ask how much it’s going to affect your customer. And watch the economic indicators related to employment, income, expenditure and housing. There is a story about human behavior behind those numbers, and whoever can read that story will fi nd that this is a classic case of opportunity rising from change. Ken Wong is a career academic at Queen’s School of Business who, in a feat of time management and airport endurance, wedges consulting gigs between lecturing and speaking engagements. Tony Chapman is an entrepreneur/career brand guru and founder of Toronto-based indie agency Capital C.
It is a common conceit today among advertisers and marketers that the challenges currently being faced are unique. Nothing could be further from the truth. Today’s long-lived brands have weathered far worse storms, and much can be learned from examining the challenges they faced. In becoming Britain’s largest cocoa manufacturer in the latter part of the 19th century, Cadbury demonstrates the value that can flow from turning one’s own particular brand benefit into the unit of currency of the entire category. The superior product quality of the Cadbury Cocoa Essence brand, forcefully expressed for over 40 years via the advertising punchline of “Absolutely Pure, Therefore Best,” lay at the heart of their success. Even though both Fry and Rowntree were to follow Cadbury in launching high-quality cocoas, it did not give either of them a stake in owning the benefit of purity. Cadbury could not be trumped. While the expansion of the market meant both Cadbury’s key competitors were still growing in volume, they were in fact becoming progressively weaker as brands in relation to Cadbury. The more Cadbury stood for product purity and made it important in people’s minds, the more Fry and Rowntree seemed insipid. With a single-minded focus, brands can parlay their particular USP into significance across the industry, as Volvo demonstrated with the concept of safety. Nothing lasts forever. It took 40 years, but a new category-leading benefit emerged, that of superior taste and texture. Sales of Cocoa Essence began to lose out to the superior-tasting Van Houten brand in the early 20th century. While two years of 5% declines had hardly been calamitous, Cadbury saw a turning point when many would have seen just a blip. It is to Cadbury’s credit and benefit that they responded so quickly to this new turn By John Bradley Kill or be killed of events by sidelining their biggest brand with the launch of Bournville Cocoa. Van Houten was not matching its success in sales terms by its grasping ownership of the taste benefit. They hardly advertised and retailers resented having to stock them. So the opportunity was there for Cadbury to follow Van Houten in product terms but to take the lead in claiming ownership of taste, which it did. Five years later, Bournville was Cadbury’s biggest brand and sales of Cocoa Essence had declined by half. But it had seemed a hugely risky move. Van Houten’s secret was the addition of an alkali to the cocoa. This went against everything Cadbury had stood for with product purity – Bournville Cocoa could not claim to be 100% pure. But the market definition of quality had changed from purity to taste, so to keep the Cadbury name anchored to Cocoa Essence would have almost certainly seen the company slip into obscurity. The current demise of the American car industry shows what can happen when companies stay wedded to market drivers that have been overtaken in the consumers’ minds. This shift of a category’s key benefit is arguably more common today, but how many marketing VPs would be bold enough to jettison their biggest brand, on which rested not just the profits but the entire reputation of the company? Cadbury triumphed during this seismic category change through the convergence of several key management attributes: • strong external radar • willingness to change direction, even at the expense of existing products • speed of decision-making • commitment to produce better products, backed by appropriate resources • strong promotional and advertising skills With these, Cadbury had the flexibility to keep abreast of the changing trends. It is also significant that Cadbury’s triumph did not rest on a highly productive innovation pipeline. For the first 80 years of its existence, Cadbury contributed little to the innovations driving the industry, demonstrating that product innovation is not a necessary component for success. Microsoft invented very little of its product range, yet became the dominant force in the industry. The product that made the company, the operating system MS-DOS, was acquired for the princely sum of $50,000 from its original author, Tim Paterson, who understood that invention and exploitation are two distinct skill sets. Today, as many business plans rely on unspecified “breakthrough” innovations to achieve growth targets, it can be argued that having the right management attributes is far more important. John Bradley is a career marketer (much of it spent at Cadbury) turned consultant and author whose tome Cadbury’s Purple Reign will be out next month. Reach him at johnbradley@Yknotsolutions.com. forum. straighttalk In a business obsessed with looking ahead, sometimes it pays to look back. Way back. In the final part of this brand-history-mining mini-series, marketing vet John Bradley sheds light on how the industry got to where it is now, and how things are changing in ways you may not yet realize. The following cautionary tale is adapted from Bradley’s new book, Cadbury’s Purple Reign. www.strategymag.com STRATEGY April 2008 63
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DEMO BOTOX Brands join the quest fo
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inside the April 2008 issue YOUTH S
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STYLE AT HOME is the magazine that
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