Marketing strategists must rethink how best to satisfy the customer.
Can you identify what the following monosyllables have in common? Zest, Sure, Bounce, Pert, Luvs, Cheer, Bold, Dawn, Coast, Puffs and Joy? All come from the world's greatest storehouse of brand names, Procter and Gamble, the folks who also brought you Dreft, Crest, Jif, Tide and Prell - but who no longer bring you Puritan cooking oil or Citrus Hill juices.
The supreme commander of the brand battalions, in a move deeply significant for marketing management, is starting to disband some regiments. The latest in the list of casualties is White Cloud, a 'bathroom tissue' with 5% of the market - which in America means loads of money. Why? An advertising executive explained to the New York Times that 'This is about deciding which are the mega-brands and which are the also-rans.'
The future lies with the mega-brands, which, like science fiction monsters, are steadily sucking the also-rans into their swollen bodies. So White Cloud now becomes Charmin Ultra - Charmin being US leader, with 20%. The adman quoted above wished to be anonymous; understandably, since the implications for agencies are profound. The total spend may not sink, but the agency with the also-ran brand becomes an also-ran agency, at least in that segment: the withdrawal is a $7.7 million black cloud for Leo Burnett.
As the mega-brands swell, Procter and Gamble's world-leading ad-spend ($2 billion-plus) will be spread among fewer agencies. But that is not the most baleful implication of the bathroom surrender. Banner, a tissue smaller in share than White Cloud, lives on. This brand, selling on low price, is barely advertised. The snag with advertised also-rans is that marketing costs do not decline with market share; White Cloud's budget was below Charmin's by a mere $400,000.
Spend-to-sales ratios are plainly critical for profitability: in an era where minimum marketing spends are so high, that dooms minor brands to extinction. Robin Wight, chairman of WCRS, points out that since 1985 even Britain's greatest brands have suffered huge cuts in TV exposure: by 75% for Persil, 70% for Guinness, 62% for Kelloggs. The average length of commercials has shrunk as costs have risen and brands proliferated (there are 67% more lagers, for example, compared with six years ago); TV brand exposure is typically a measly 3.5 minutes a year.
But was brand over-breeding wise? There is plenty of evidence to back up the assertion in the New York Times that the 'endless proliferation of brands in competitive categories such as paper products, soft drinks, cigarettes and beer has in many cases started to overwhelm consumers, who respond to the overload by choosing among brands based on value rather than image'. Hence another shift in P and G policy to 'everyday low pricing': cutting prices to levels that can be sustained all year, rather than indulging in seasonal ups and promotional downs.
Again, there is much evidence to show that massive money-off blitzes raise share only briefly, to be offset by declines as the price rebounds. But if you deprive marketing men of brand proliferation, ad-spends and promotions (up from half 1980's US budgets to 75%), then you have a sadly disarmed band of brothers and sisters. The mega-brand (or 'power brand') managers will still have the budgets, the power and the glory; but what will also-ran managers do while they await the inevitable withdrawal of their brands and their jobs?
Marketing management can save itself if practitioners return to its origins: discovering how best to satisfy the customers by offering what they truly want. What they do not crave is the marketing spend. If a fast-food chain devotes 8% of revenue to marketing (an annual $billion in one famous example), that is money spent on the offering rather than the offer. Against that, you can only argue that the billion stimulates demand, which spreads fixed costs over greater turnover, which lowers prices, which benefits the customer.
But does blunderbuss marketing become a substitute for thought, a barrier to finding new ways of creating the loyal customers who are so hard to win, so easy to lose? That could be the underlying reason why, to quote Business Week, 'makers of branded products from Marlboros to Pampers have had to cut prices to compete with no-name competitors'. (In fact, the celebrated Marlboro cuts occurred when a strategy of over-pricing and over-stocking the market exploded in management's face).
America's breakfast cereal kings (formerly as keen on price rises as Marlboro) seem to be enduring this fate, with year-on-year declines for all brand-leaders, compared with a 7.4% rise for private labels. American studies show that brand loyalty is much lower than commonly supposed. Did it fall, or was it pushed? Has the huge rise in promotional spending, aimed at the supermarket shelves, damaged the mega-brands, which have been discouraged from mass advertising partly by the huge rise in its costs?
The research shows that even brand buyers often act on impulse: Charmin or Frosties fans do not march into markets determined to buy the brand, the whole brand and nothing but the brand. Power brands are simply not using enough advertising muscle to trigger strong enough buying impulses. So it makes apparent sense to buy more Charmin impulses by sacrificing White Cloud - and yet the questions persist.
Why was White Cloud's share 75% less despite equal spending? What errors lay behind the discrepancy?
And suppose that the brand had not belonged to Procter and Gamble.
Would Chief White Cloud, of an owning Red Indian family, have discarded its proud and only possession? More likely, the Clouds would have fought ferociously for their inheritance - as when real-life Dutch family brewers found that their non-alcoholic beer had flopped.
They did not lie down and die. They chanced a last, unprecedented throw of the dice, delivering samples to every outlet over a single weekend. The recipients enjoyed a fat discount whether they sold the case or not - and on Monday over 80% reordered: the brand gained half the market, without advertising.
The march of the mega-brands reflects stagnation in marketing thought, imagination and initiative. Having created meaningless brand proliferation, mental stagnation is now achieving equally pointless brand destruction. A new marketing revolution is seriously overdue.