Background of this post:
Idea for this post came from our group blog discussions. We chose a company named firebox with an online business model through which it sells unique products. The biggest challenge came when we wanted to suggest ways to increase profits and wider customer reach. Diversifying product portfolio seemed like a possible solution. We had a dilemma when we discussed their product portfolio outside the quirky and unique products. If we go with a wider range of normal products then company will be in direct competition with countless online retailers. This strategy would also alienate existing customers as they come to firefox because of the uniqueness of its products.
Some time impulsive changes to the strategy or product positioning could backfire at a company on a massive scale from public relations & marketing point of view.
One of the most challenging question every company faces is how to improve current products and introduce better products. But this sometimes turns out to be a disastrous choice at the end. Some practical examples are below.
Case 1: New Coke, Coca-Cola
Existing Strategy - “The Real Thing”
New Strategy - “The best got better” Change existing product to make an impact
Result - PR Disaster
One of the biggest tag line and selling point of Coke was its selling the real thing and not substitute of its original formula for last 100 years. “The Real Thing” became the most recognizable coca cola tagline and a trademark phrase.
During 80’s cola war was at its prime and Pepsi slowly started gaining market share around the world. To tackle this issue coke adopted couple of strategies. First one was introduction of Diet Coke with a sweet taste with claimed health benefits and proved to be a relative success. This encouraged Coca Cola to take the second strategic decision and the most important one, emulate arch rival Pepsi’s product and its own diet coke taste by introducing a new sweet drink as its flagship product.
Later based on two years of research in which 88% of the tasters said they would buy the drink if it was a Coca Cola product but that they would need to get used to it. Remaining 12% of the tasters didn’t like the changed taste and they preferred old Coke. Based on this result Coca Cola decided to introduce reformulated sweeter version of its flagship brand Coke and named it New Coke. Unfortunately during the decision making process company failed measure or reveal the deep emotional attachment between its core group of customers and the Original version of its flagship product. Its original formula was considered as a cultural icon than a normal soft drink. Company also failed to consider its main selling strategy of its flagship product “The Real Thing” .This resulted in an immediate public outcry and massive boycotts against the company. As a result of these setbacks company was forced to announce a return of its old formula within mere 79 days.
Instead of standing on the quality of its product and trying to market it with its proven tag line and taste, Coca Cola chose the easy path of changing product altogether. By doing this they failed to show commitment to their customers, product, brand and themselves. End of the day this looked like they decided to change the most recognizable product in the world just because they were not sure about the ability of that product to withstand competition.
Lesson learned - Do not risk your most successful strategy or product especially if it’s a long standing brand. Bring change through diversification or carefully updating existing brand not by drastically changing your most successful bread winner.
Case 2: P&G – Tide & Tide Basic
New Strategy – Use existing brand name for a new cheaper product to reduce marketing expenses.
Result – Lower overall profit and recall of new product
Ongoing (?) recession forced many companies to look for different product and pricing strategies to increase market share and growth. Many companies decided to introduce cheaper products and positioned it in a way that it doesn’t directly compete with its most profitable brands.
One of them was world’s biggest FMCG conglomerate P&G. But P&G strategy was a bit different from its competitors. It chose to use one of its most recognizable brand names and introduced a basic version of its existing product. In a way it made sense to use existing brand as this would result in significant gains in marketing and easier product positioning. But at the same time P&G failed to see the other side of this branding strategy. Tide is a well known brand with a loyal following. Introduction of cheaper Tide basic tempted most of Tide’s loyal customers. They trusted Tide and because of that trust and the cheaper price of Tide basic most of them decided to try Tide basic.
P&G was forced to withdraw Tide basic as it was too popular and resulted in a huge customer shift from P&G original Tide to a cheaper Tide basic. End result was narrower bottom line for P&G.
Lesson learned: Think twice and study the implications before introducing a new product under an existing brand umbrella.
Case3: Hindustan Unilever - Le Sansy (India)
New Strategy: Undercut rival product and enhance market share by introducing new cheaper product.
Result- Wrong product placement, reduced profit, product recalled and resulted in massive loss.
HUL is the biggest FMCG Company in India. HUL markets several products competing with each other in same categories. Company often introduces its successful overseas brands in to India in order to increase its market share.
Introduction of the Le Sansy made perfect sense to HUL as it was well positioned to challenge health motto focused product line J&J and P&G. Product was introduced in Indian market in 1990’s with the backing of massive media coverage and other public relation activities. Company splashed millions of dollars for their PR activities and still considered as one of the biggest product launch in India.
One of the main selling point was its unique shape similar to a ‘boat’ , longer life and better ability to kill germs. Product immediately attracted huge following of price conscious customers and was considered a big success by HUL. But one of its unnoticed but proven to be the biggest selling point started to back fire at HUL itself than its competitors. Le Sansy was introduced with a cheaper price to undercut expensive established J&J and P&G brands germ killer brands. But HUL failed to consider wider effects of this cheap product placement strategy. Most of the loyal J&J and P&G customers chose to stay with their preferred brand but a huge number of HUL luxury soap followers started to shift to Le sansy. They trusted HUL products and thought of it as a better HUL product considering its longer life and better ability to kill so called germs you encounter in your day to day life. They were also impressed with the cheaper price they had to pay for a better product.
HUL was already facing difficulties with its Le sansy bottom line due to massive public relation spending and less margins brand bought in due to its cheaper positioning it adopted to undercut rivals. New trend of customer shift from its higher margin products to Le sansy created additional headaches and losses to company. Within a short time company was forced to withdraw entire Le sansy product line to save its margins in other more profitable product lines.
Lesson Learned: Thoroughly investigate possible impacts a new product line could make on your own bottom line before getting excited about capturing more market share and undercutting rivals
Case 4: Louis Philippe (Aditya Birla Nuvo), India
Strategy: Create a super premium segment in formal and semi formal apparel. Status: Achieved an iconic status in India with its upper crest logo and created a loyal customer base.
New Strategy: Move from executive and formal apparels brand image to new younger image. Diversify product range and change Logo and color pattern to attract younger generation.
Louis Philippe - The Upper Crest, is an apparel brand launched by Madura Garments in 1989. It successfully created a super premium segment in formal and semi formal ready made category. Brand and its upper crest logo achieved and iconic status in India and created a dedicated following in the country. Brand was very successful in positioning, segmentation and marketing of its products. High quality products, top of the range pricing, and exclusive showrooms in Tier 1 & Tier 2 cities cemented the premium image of Louis Philippe.
During the second half of this decade, Louis Philippe decided to diversify its products range to include designer wear and other clothing range it considered more appealing to the growing Indian youth. For achieving this goal, company decided to make major changes to their product offerings, advertisements, showroom color patterns and logo.
They introduced new LP logo and products targeting at youth was given priority. This angered many loyal customers; to tackle this issue company opened dedicated showrooms for formal and executive ready made wear and retained its Upper Crest logo for this range.
Result: Angry loyal customers, diversified product range with lower margins. They missed to differentiate the new offering correctly and ended up confusing the traditional customers.
Summary:
While it’s important to innovate and experiment, Company should research more before messing around with their flagship products. It may backfire and create more problems than the actual innovation itself.
I don’t believe in "Why fix it, if aint broken". I think constant innovation and repositioning of brands image is necessary to overcome throat cutting competition in today’s market place. But always consider customer perspective and financial implications before taking any decision.
References:
2. The Economist – (Accessed, 27Oct2010, Available: http://www.economist.com, Basket Cases)
3.Le Sansy post is based on my past discussions with some marketing professionals and may include opinions of marketing insiders. All opinions are personal and not reflective of HUL's or Unilever's view.
4.Louis Philippe post is based on my experience as a long time LP customer and discussions with numerous LP customers and store managers across India.
Images:
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| Coke Classic & New Coke | |
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| Tide & Tide Basic |
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| Louise Philippe Classic & New Logo | |
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| Le Sansy Products - India |
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NB: All views expressed in this post are purely personal. Please conduct further research before reaching any conclusions.
