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October 25, 2010
Business Standard
Mumbai, October 25, 2010
Raghavendra Kamath
McDonald’s has ambitious plans to become a breakfast destination as well.
After wooing customers with happy meals and extra-value meals, Big Mac has added breakfast to its menu, which it believes will keep the chain "ahead of competition".
After trial runs in a few Mumbai and Delhi restaurants, McDonald’s has taken over two years to formally launch the breakfast category, which both the chain and analysts call a challenging segment to be in, given the Indian habit of having breakfast at home.
"Most Indians prefer to have their breakfast at home and it is a challenging job to change that habit. But we clearly see an opportunity in this segment. We feel breakfast will see the kind of success we have seen in burgers," says Amit Jatia, managing director, McDonald’s India, west and south.
And that opportunity is big. Globally, breakfast contributes 25 per cent to McDonald’s revenues, and in south east Asia, it accounts for 12-15 per cent.
So, the chain is gearing up for the launch of its breakfast menu "patch by patch" in all metros and then Tier-II cities. For starters, the 14-year old McDonald’s India runs 192 restaurants in the country. In the next three years, the chain plans to sell its breakfast menu in nearly 70 per cent of its restaurants.
It has introduced a dozen items such as chicken Mexican wrap, egg muffin, paneer salsa wrap and salad sandwich, priced between Rs 20 and Rs 72.
Retail consultants say McDonald’s bet may pay off given the changing food habits. "The shift from Indian breakfast to western has been happening for a while as people are getting used to western snacks and the number of those who are eating out is increasing," says Devangshu Dutta, chief executive, Third Eyesight, a business consultancy. The acceptability of western breakfast is enough to give McDonald’s a critical mass in this segment, says Dutta.
Adds Debashish Mukherjee, principal at retail consultancy AT Kearney: "Though the breakfast concept is ahead of its times, I think it is a step in the right direction."
But isn’t two years a long time for experimenting in a market which is very dynamic? Jatia does not think so. "We wanted to make sure the pricing, menu and offering is right and match the taste of our customers," Jatia says.
Further, the chain has been making its restaurants "breakfast-ready" over the last six months, investing around Rs 10-15 lakh on new equipment per restaurant and changing the layouts of the kitchens, and Rs 1 crore on the supply chain.
Other than supply chain, Jatia says the chain is investing Rs 40 crore in the next one or two years to be able to offer breakfast across all its restaurants.
Though consultants endorse the success of McDonald’s as a value for money restaurant with right pricing, location, branding and delivery strategies, they also point out the growth of other quick service restaurants (QSR) such as KFC, Pizza Hut, Dominos which can pose a tough competition.
"Though McDonalds had a head start, how the competition plays out will be a critical factor," says Mukherjee. The QSR market has a lot of unbranded players.
Jatia says the chain has many aces up its sleeve. For example, pricing, which is the chain’s biggest USP. Even when food inflation was at its highest, prices were almost flat at McDonald’s. "We had increased prices in three-four items, but quickly brought them down,” he says.
He recalls how the chain brought down the prices of extra meals – McVeggie and McChicken – to Rs 85 and Rs 96 from Rs 110 and Rs 120 respectively in September last year.
Apart from breakfast, Jatia says Big Mac has big plans on expanding the chain and introducing new items in the menu over the next three years. The chain plans to open 250 new restaurants in the next three to four years with an investment of Rs 750 crore on the front end, excluding the real estate charges, and Rs 250 crore on the back end.
Around 20 per cent of the new restaurants will be drive-through. The current num ber is 40.
But unlike other chains, McDonald’s is focusing on a cluster strategy. For instance, in 2006, Bangalore had two stores; today it has 29. "I don’t want to enter a new region until we have serviced the current territories fully. It helps us in getting better economies, better branding, consumer connect and so on," he adds.
Analysts believe the new stores will help the chain in achieving its stated target of doubling turnover every three years. The chain is also working on bringing McCafe, its chain of coffee shops, to India in the next couple of years.
On the menu front, plans are to add new categories such as desserts, beverages and products at premium price points. McDonald’s is also launching its MFY (made for you) system across all stores. In MFY, whenever a customer orders at the counter, it goes live to the kitchen, and it has to be delivered within a minute.
Jatia says the chain is running a profitable business and delivering
a high double digit same store growth consistently for the last
six years. It broke even two years ago at the store level.
(This article originally appeared in Business
Standard on October 25, 2010)
admin
October 20, 2010
Indian market is flooded with brands while consumers are finding it difficult to stay afloat. Competition, demands and innovation are the key aspects to sustain in the battle. But what are the aspects to be avoided? Shweta Iyer talks about the pros and cons of launching a new brand and tries to find a success mantra to survive in the industry through thick and thin
In the last few months India has witnessed a galore of newly launched brands and brand extensions leading to a surge in the marketplace. A recent report states 1,500 brand launches happened in the past 18 months, thus leading to three launches per day. Out of this only five percent make the cut. With the aim to make it big, they prefer to jump rather than take baby steps, resulting in failure of their brand identity. Every sector including FMCG, telecom, retail, lifestyle, electronics and automotive has one new launch to its credit, every single month.
Big retailers to small time investors and international brands foresee India as the biggest retail hub. Many brands feel that Indian audience welcome every new product in sundry. With exhaustive thesis, c o n s u m e r s t u d y a n d o t h e r researches, new brands have their retail theory in place but yet fail to make the mark. “One of the enduring marketing myths is that a new brand that will eventually become a big brand has to take off in a hurry. And that a marketer should devote enormous resources to assure a rocket-ship launch. Taking it slow by understanding the pulse of the audience should be the prime objective,” says Johnny John, coo- World Player from SKNL. Each category is different from the other. For instance: FMCG is faster than apparel while hi-tech machines win over automobiles. Dedicating time and being patient as the brand grows is crucial for any retailer. And for c r e a t i n g a b r a n d i d e n t i t y,promotions, campaigns, offers and discounts, and other advertising gimmicks are equally important.
Take Microsoft, for example. It might be hard to believe, but the brand took quite a long time to get off the runway. Microsoft took ten years to exceed $100 million in annual sales. Wal-Mart took 14 years to break $100 million in annual sales. Today the brand has become the world’s largest retailer. The turning point for a new brand comes when slow initial sales suddenly accelerate towards the mass market. The largest, most powerful brands, the brands that have stood the test of time, are the brands that have taken off slowly. The brands that take off rapidly like a rocket ship usually turn out to be fads. Big Bazaar opened its first store in 2001. Being the first departmental store that offered everything under one roof, Big Bazaar is the most successful retail venture in India. According to a report, “starting 2008 with six million square feet of retail space and stores in 51 cities pan India, they ended the year with over 11 million square feet of retail space and over 1,000 operational stores across 63 cities and towns and 65 rural locations in India. They opened 25 Big Bazaar stores in 2008 and carried the total store count to 104. The company saw a 52 per cent increase in its total income from ` 33.29 billion in FY 2006-07 to ` 50.53 billion in FY 2007- 08.” Today, Big Bazaar has 133 outlets across the country.
Missed the bus
Where there are success stories, there are also brands that missed the bus. The FMCG brand Marico had to withdraw the debut of its healthy snack – Saffola Zest – due to poor market response received. Marico has been trying to rework the flavor and taste for some time, following consumer feedback and is planning to re-launch the brand in next couple of coming months. The withdrawal from the market implies the company has not been successful in reworking the taste easily. Saffola Zest faced fierce competition from Parle Agro’s Hippo,Pepsi Frito-Lays Aliva and Parle Products Monaco Smart Chips. It is also planning to launch Saffola Oats in the breakfast cereal market in India,which the company is positive about.Reports stated, “The total market worth of the breakfast cereal is Rs 500 crore while the oats market is small with ` 120 cr and is rolling at 25 per cent yearly.” The other major players in this category include PepsiCo’s Quaker Oats and Bagrry’s. Kellogg’s is also a strong and dominant player in corn flakes, with an over 70 per cent share.
Maggi instant noodles, foods major Nestle’s flagship brand which has dominated instant noodles for nearly three decades, is losing market share on a monthly basis to newer entrants such as GlaxoSmithKline’s (GSK) Horlicks Foodles, Hindustan Unilever’s (HUL) Knorr Soupy noodles, Big Bazaar’s Tasty Treat, Top Ramen and several other smaller players, according to data by market research firm Nielsen. The data shows that Maggi’s share of instant noodles, on an all-India basis, across urban markets, has slipped consistently in the period between December’09 to July’10. While Maggi instant noodles (minus vermicelli) had a 90.7 per cent share in December’09, the share dropped to 86.5 per cent in July’10 on an all-India basis. A regional split of the data shows that Maggi’s instant noodles’ value market share has fallen across the east, south, north and west zones for the same period. Analysts say with new competition, Maggi’s market share is certain to get impacted.
New Brand Launches
Brand launches and extensions have been an integral part of any company’s expansion plans. Budgets are allotted taking care of brand p ro m o t i o n s a n d ca m p a i g n s . Innovation has been the watch word for any new brand for recognition and retail presence. Let’s have a look at few of the newly launched brands or products and their survival strategies.
S. Kumars Nationwide Limited (SKNL) – India’s leading Textile and Apparel Company with expertise in multi- fiber manufacturing launched its new apparel brand World Player in Andhra Pradesh. True to SKNL’s mission of catering to the entire spectrum of the socio-economic segments of the Indian market, World Player offers fashion solutions for today’s young achievers at the bottom of the economic pyramid. World Player by S.Kumars’ is the first brand devised and created for the lower-mid segment of the market who strives for excellence and quality of life. Talking about the brand strategy and promotions, World Player has followed aayaram gayaram culture while launching the brand. Launched in April 2010, the brand is already present in 650 MBOs across 300 different towns. The brand likes to take it slow and avoid doing too much too soon. For campaigning, World
Player sent a mobile van in various areas in South with small display of products, and to give touch and feel experience to the consumers, with contest inside. It got tremendous response as it allowed the customers to connect with the brand. According to Johnny, “Strong brand proposition is required, advertising and other things just amplifies it.
Innovation is something which Kurl- on has always looked upon, keeping this in mind they are coming up with new innovative folded spring mattress both in bonnel and pocket spring which will be introduced for the first time in the country and will be called “Athiti”. This can be folded and packed properly while being used as an extra mattress for the guest (atithi). Kurl-on, also introduces three new types of pillows being released in the market during this month including Stomach sleeper Pillow, Side sleeper Pillow and Pillow for pregnant women. The brand has recently entered furniture retailing. The range includes furniture for living, dining and bed rooms. A dealer network of 5500 across India, Kurl-on now has its wings spanning across 47 offices and 50 godowns strategically located all over the country.
D’décor, a premium home furnishings brand was started in 1998-99 and is recently re-launched in a complete new avatar. The brand flaunts Bollywood superstar Shahrukh Khan and his wife Gauri Khan as its brand ambassadors. “Having made our mark on international grounds in manufacturing, we launched an innovative business model in distribution in India which created paradigm shift in the distribution model in the home furnishings industry in our country. We wish to make even this step an equal success a s o u r m a n u f a c t u r i n g a n d distribution. We shall think of further vertical integration by means of shop- in-shops, franchisee or own stores,” shares Nikita Desai, lead-business excellence, D’décor.
W i t h a s t r o n g p r e s e n c e internationally, Valia Retail-the leaders in manufacturing and export of exquisite and high end textiles and accessories has forayed into the retail of high end home furnishing and lifestyle products, with the unveiling of its flagship store- Veaura- a home décor destination in Mumbai. The store presents a contemporary western and modern approach to home furnishings is spearheaded by Varun Valia. The brand also plans to open its store in Delhi and other metros in the coming months.
Provogue India plans to foray into the fashion watch segment by next month and is eyeing around ` 20-25 crore revenue from this business over the next 18 months, said a top company official. “We are entering the watch segment next month and plan to launch 20 models initially. The watch category in India is growing fast. We will initially start with the top five metros and then move into other cities. We have a manufacturing contract with Fossil and the products would be manufactured at its Himachal unit,” said Akhil Chaturvedi, director, Provogue India. Currently, there are 120 Provogue stores and the company plans to add about 75 more in the current fiscal.
Tata International, the overseas trading company of the Tata Group has decided to enter footwear retailing. Tata International, a manufacturer and trader of leather products, makes shoes for several known global brands including Escada and Hush Puppies. Tata International will sell the formal and fashion leather shoes under its own brand, the sources said. Big retailers such as Reliance Retail, through Reliance Footprint, and Future Group, which has tied up with UK- shoe retailer Clarks, too have ambitious plans for its footwear segment.
Catwalk plans to extend the EBO from purely company owned to the franchisee system to reach out farther and across the length and breadth of the country. To achieve this goal of exponential growth
\Importance of brand building and expectations from the new brand
Context, Consistency and Constancy are three critical components of brand building. First of all, a brand must be relevant to the customer’s context – it may be very well to use phrases such as “selling ice to Eskimos” as examples of salesmanship, but for a brand to take hold and grow, its relevance is the most important factor. For instance, cold breakfasts, energy drinks, and snack bars were irrelevant to most Indian consumers’ context only a few years ago, even though they were very popular elsewhere in the world. As the relevance and
acceptability has increased (especially to globally connected young consumers) the context has become more favourable to brands selling these products. Secondly, a brand must stay consistent to its values, the message and the benefits it offers. If there is lack of consistency across the media, or across sub-markets, or over a period of time, the brand is typically weaker, and it takes much longer and much more funding to build. Thirdly, it is important to keep the brand visible at regular intervals, rather than investing in very high visibility at one point of time, and then virtually disappearing until the next burst.
A brand’s performance needs to be judged on internal benchmarks as well, not just external (industry) comparisons. Success for one brand may be market penetration, for another it may be the aspiration value and the premium it can charge over competing brands. Good brands are seldom built in a short period of time. So it is really a personal call of the brand owner/manager to say what defines “success”, what time frame to allow a brand to succeed, and whether and when to pull the plug on a brand. Finally, success (or failure) is very dynamic: established brands can die, and sometimes dying brands can be revived or transformed. One example of this dynamism is Burberry, that went from fuddy-duddy to highly fashionable, to then being associated with juvenile delinquents, and then to being upmarket again.
By Devangshu Dutta, chief executive-Third Eyesight
advertising and local promotional activities will play a key role. Catwalk plans to have store launch activities, outdoor activities, brand building activities and is also looking to utilize the viral marketing tool (social networking websites, etc) for effective brand communication strategies. “Along with quantity we believe quality should not take a hit and hence we would continue investing time and money into our IT systems, so as to ensure smooth and efficient growth,” shares Rahul Doshi, business planner-Corporate Strategy, Catwalk Worldwide Private Limited. Talking about the competition and sustaining in the market, Doshi adds, “The major competition for Catwalk comes from the unorganized market. Influx of international players is also being keenly watched here at Catwalk. The brand knew that sooner rather than later, the organized sector would generate interest from the international market and hence has a l ready employed customer engagement activities.
Understanding the market dynamics When launching a new product, it is not enough to understand how the product is performing. It is equally important to know who is buying, where the volume is being sourced, and whether the product is attracting new or existing category buyers. India being the emerging hub for new brands and extension lines is comparatively better than markets in the West. The growing market for organized products is on a high. And, as the modern trade evolves, the need for organized products segment is likely to grow.
According to a report prepared by milk powder (WMP), ice cream mix retail and management consultancy powder (ICMP), butter and ghee, Technopak, organised retail in India is both in bulk as well as in consumer likely to touch 25 per cent in the next packs. Future Group has launched 10 years from the current 5 per cent. “Ektaa” brand that offers a range of In the FMCG sector, Kwality Dairy food products from diverse India Ltd (KDIL), manufacturer of a communities of India. With the wide range of dairy products has launch of Ektaa, customers can opt launched Dairy Best Ghee. KDIL’s for authentic native Indian foods product range also includes all SKU’s procured from the best growing of pure ghee, skimmed milk powder areas.The first product to be (SMP), dairy whitener (DW), whole launched in this series is popular variants of rice from different states of the country. At the beginning – the new branded rice would be available in five variants – Red Matta, Sona Masoori, Govind Bhog, Ambe Mohar and Basmati. The five variants of Ektaa rice will be available in packs of 1 kg and 5 kg, across all the Big Bazaar/Food Bazaar stores in the country. The brand plans to launch a series of product launches like wheat, regional spices, pickles, papads in phases, giving customers a large basket of community foods to choose from across the formats.
Being ready with the new product is not the only criteria as mentioned before. Promotions and constant innovative retail strategies allow the consumers to touch and feel the product. For instance: Big Bazaar’s ‘Shubh Mahurat’ programme was started with an aim to launch new device named BlackPad. The new importantly, they must deliver on tablet PC will feature a seven-inch those promises/value propositions. touch screen and one or two built-in Leading brands have a highly cameras, apart from Bluetooth and compelling brand promise and broadband connections. However, it ensure that the promise is delivered will only be able to connect to cellular at each point of customer contact.
products for its consumers every month. After ‘Tasty Treat Cereals’ and ‘Milestone Strolley Bags’, the retail giant recently launched Minute Maid Nimbu Fresh. Such unique offerings allow the customers to indulge and have a refreshing experience. Also, add the promotional initiatives like “Juna do naya lo”, “sabse sasta din” and “maha bachat sale” that allured customers to splurge. Developing new products requires effective ways to minimize risk and maximise gain. New ideas need to be thoroughly tested and evaluated to reduce risks and helps fine-tune the marketing mix before launch. The key issues range from idea generation to proper marketing. In the electronic segment, BlackBerry manufacturer RIM unveils a tablet
networks through a BlackBerry smartphone, said the report. Apart from Blackberry, Motorola also plans to launch a tablet PC, as is the case of Samsung, which is entering the tablet PC market with Galaxy Tab. Dell has already debuted its Streak tablet computer, while Asustek, Acer, Lenovo and Cisco are also planning to enter the race.
Expert take
All the leading and established brands feel that the customer is a very important entity. It is mandatory to fulfill the needs, wants, desires and aspirations of discerning audience. Brands must make promises to their customers. They must promise relevant, differentiated benefits. They must offer unique value propositions. And, even more
According to Johnny, few of the factors to be kept in mind while launching a brand includes: “ Calibrated approach, target consumer and brand positioning, be extremely reactive by adapting to the market demands. Along with the stated tips ensure that retail infrastructure in place, this will help in launching a new brand with ease.
Brands are personifications of organizations, products, services and experiences and they are the source of relationships. It is important to implement the strategies shared by the successful leaders to make your brand story a success! Go ahead and follow the guidelines and make the cut!
Source: Storai
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October 16, 2010
Business
Standard, New Delhi, October 18, 2010
Amit
Ranjan Rai
Five years ago, Woodland, the maker of outdoor shoes and apparel, with a flourishing business in the country’s metros, decided to test waters in Tier 2 and Tier 3 cities. It opened a store each in the retail high streets of Jaipur and Udaipur, both well-known, well-to-do cities. Woodland had much expectation. But the stores flopped — there just weren’t enough buyers — and had to shut. Woodland then decided to stay away from smaller cities for a couple of years. No more experiments, no more testing waters was the message from the head office in Delhi.
year-and-a-half ago, amidst the buzz about the potential of Tier 2 and Tier 3 cities, Woodland decided to venture into these cities once again. This time it tweaked its strategy a bit. Instead of opening the regular 300 square feet stores, it decided to go full throttle taking up entire buildings or up to 30-40 per cent of all the space in a mall, and converting them into spacious, almost large-format stores. “We decided to make the Woodland store a landmark in such cities. Nothing works like word of mouth in small cities and towns. If people see a big store which stands out, it becomes a talking point and they make sure they visit it,” says Woodland Managing Director Harkirat Singh.
For the time being, the strategy seems to be working. The response from such stores has been encouraging. But Singh admits what’s also working in his favour is a sea change in the retail landscape and consumer attitude in the past two or three years. Smaller cities are buzzing with retail activity. Branded stores are coming up left, right and centre, and the consumer is no longer shy of opening his wallet. “The consumer in these cities is now ready. The youth is becoming brand conscious, and we see them much more open to spending,” says Singh.
No doubt, Woodland has been on an expansion spree in Tier 2 and Tier 3 cities. While currently 60 per cent of its 300-plus stores are located in metros and 40 per cent in smaller cities, Woodland wants this to change to 50-50 in the next one or two years, and then gradually to 40 per cent in metros and 60 per cent in smaller cities. “In the past two or three months alone we’ve opened stores in Varanasi, Allahabad, Vapi, Sangli, Thrissur and so on. Unlike five years ago, many of these stores have been doing well from day one. Our plans for the next two to three years will be concentrated on Tier 2 and Tier 3 cities,” says Singh.
“Certainly there is a big difference in real estate costs when it comes to Tier 2 and Tier 3 cities versus the metros. But what companies like Woodland will have to be careful about is that not every such city is going to work. Not every location drives enough demand for such products for the business to sustain. Yes, latent demand is there in many cities and locations, but Woodland will have to carefully evaluate the sites before selecting them,” says Devangshu Dutta, chief executive, Third Eyesight, a retail consulting firm which has been tracking the sector in Tier 2 and Tier 3 cities.
But that’s a significant shift for a brand which has primarily been catering to the urban middle class in big cities for almost two decades. Woodland is a sub-brand of Aero Group which started as a winter boot manufacturer in Quebec, Canada in the 1950s. Called Aero America then, it manufactured outdoor winter boots for Canada, Russia and Europe. The company entered the Indian market with Woodland in 1992. With a factory in Sonepat, it catered primarily to Delhi and some other large cities in North India.
(Article continues below…)
admin
October 15, 2010
MINT (A partner of the Wall Street Journal)
Mumbai, 15 October 2010
Sapna Agarwal
Indian beauty salon chains are looking to expand operations, offer cheaper services and increase the share of product sales in their earnings.
Chains such as VLCC Healthcare Ltd and Kaya Skin Clinic are opening new outlets to meet growing demand for their services.
Kaya, a chain of premium skin clinics owned by Marico Ltd, runs 81 outlets in India and nearly 20 overseas. At the beginning of 2010, it had announced a freeze on domestic expansion.
International operations contribute 45-50% of its revenue. In the current fiscal year, it has opened three stores in West Asia and one in Bangladesh. It plans to open three-five more stores in West Asia this year, chief executive Ajay Pahwa said.
In India, he said, Kaya has reworked its business model and made its services more affordable to compete with the cheaper neighbourhood salons.
"We have made the brand more relevant to more people because you have, one, services which are positioned to meet your everyday needs, also they are very affordable. Two, you have products–products are so important because at the end of the day, great skin, I believe, is a result of composition or the holistic approach," said Pahwa.
The company has identified four growth areas: everyday skincare, skin beauty, skin concerns such as pigmentation and acne, and anti-aging.
While the focus will be on everyday care, even specialized services will cost less. For instance, Kaya has brought down the average price of the so-called aqua radiance ser- vice, which it has been offering for a year in partnership with UK-based TavTech, to `1,500 from `2,000 per session, Pahwa said.
Kaya acquired Singapore- based DermaRx this year and plans to begin offering its products in India soon.
While DermaRx has a business model similar to Kaya, half its revenue comes from products–compared with 15% for Kaya, said Pahwa. Kaya will try to double this contribution to 30% in the next 12-18 months.
For the three months ended 30 June, Kaya reported revenue of Rs. 50.6 crore–including Rs. 5.1 crore from DermaRx–a growth of 14%. It incurred a decline of Rs. 4.7 crore in profits before tax.
Pahwa added that Kaya is resolute about consolidating volumes and improving sales at its existing stores in India before expanding. "Once you are able to achieve that, then it just gives you the desire to expand also."
But VLCC Healthcare, which has 150 outlets in 90 cities, has opened 11 stores in India and will add 16 more this year, said Sandeep Ahuja, managing director. The firm will also launch eight outlets in West Asia, Sri Lanka and Bangladesh.
Ahuja said VLCC Healthcare may allow franchisees to open new outlets and launch relaxation services, such as a day spa, at more outlets. "People are looking at holistic wellness solutions rather than specific individual solutions," said Ahuja, explaining customers are increasingly opting for "body shaping" rather than just weight loss service.
In July, Channel [V], the music channel, had announced a partnership with premium hair salon Juice to open [V] Juice Lite salons that would offer cheaper services than Juice. "The market for health and beauty services is estimated to be a $2.5 billion and is expected to reach $4.3 billion by 2013 on account of increasing health and beauty consciousness," said Raghav Gupta, president at retail consultancy Technopak Advisors Pvt Ltd.
Currently, organized retail accounts for just 2% of this market. But with chains expanding, this could become 8-9% in four years, he added.
"This is a fragmented, price-sensitive, thin-margins, high-attrition, manpower-dependent business," said Devangshu Dutta, chief executive at Third Eyesight, a New Delhi-based retail and consumer products consultancy, He said smaller chains with three outlets are also aiming to expand to five or 10 outlets in the next year-and-a-half. However, despite their growth plans, none of the larger companies is aggressively seeking market dominance.
(This article originally appeared in Mint on October 15, 2010)
admin
September 20, 2010
Written By Devangshu Dutta
It is quite clear that retro is ‘in’. The movie business worldwide is full of sequels, prequels, re-releases and remakes. The music business is ringing up the cash registers with remixes and jukebox compilations. Star Wars and Sholay still have a fan following. Abba has leaped across three decades; Hindi film songs from 30-60 years ago have been given a skin-uplift by American hip-hop artists; while Pink Floyd is hot with Indian teens, along with Akon and Rihanna.
As copyright restrictions are removed from the works of authors long gone, the market gets flooded with several reprints of their most popular writings. Of course, we know that classic literature survives not just a few years, but even thousands of years. Examples include the still widely-read, nearly 2,500-year- old Indian epic Ramayana by Valmiki, the Greek philosophers’ works that continue to be popular after two millennia, and the Norse legends that have been told and re-told for over a thousand years. Spiritual and religious leaders’ writings are also recycled into the guaranteed market of their followers and possible converts for a long time after their passing away.
On the other hand, the basic premise of today’s fashion and lifestyle businesses is that silhouettes, colours and design cues will become (or be made) obsolete within a few weeks or a few months, and will be replaced with new ones. This principle is true not just of clothing and footwear, but is applied to home furnishings, furniture, white goods, electronics, mobile phones, and even cars. In fact, the fashion business (as it exists) would find it impossible to survive if customers around the world chose only classics that could be used for as long as the product lasted in usable form.
What Fashionability Means For brands
Other than individual styles or products falling out of favour, as fashions move and as the market changes, it is evident that some brands also become less acceptable, are seen as ‘outdated’, and may also die out as they lose their customer base.
Of course, that some brands become classics is quite apparent, especially in the luxury segment, where brands such as Bulgari have survived several generations of consumers, and continue to thrive.
However, the past is of relevance to the fashion sector because, other than planned or forced obsolescence, the fashion business has also long worked on another principle – that trends are cyclical.
Skirts go up and down, ties change their width, and the colour palette moves through evolution across the years. A style formula that was popular in the summer of a year in the 1970s, might be just right in another summer in the first decade of the 21st century.
So, the question that comes up is whether the same logic that is applicable to individual products, styles and trends, could also be applied to brands.
The answer to whether apparently weak, dead, or dying brands could be brought back to life is provided by brands such as Burberry, Lee Cooper and Hush Puppies. Sometimes, innovative consumers create the opportunity – as with Hush Puppies in the 1980s – while in other cases (such as Burberry, Volkswagen Beetle, or Harley Davidson), vision, concerted effort and resources can make the brand attractive again.
The question, then, is not whether brands can be re-launched – they can be. The more important question is: should a brand be re-launched? Using the logic of the fashion business, rather than being left to linger and then dying a painful death, could brands be consciously phased out and later brought back into the market as the trends change?
the brand PortFolio – diversiFying oPPortunities and risks
These questions are particularly important for large companies, or in times when market growth rates are slow, or when the
market is fragmented. Organic growth can be difficult in all these scenarios, and companies begin to look at developing ‘portfolios’ by acquiring other businesses and brands, or by launching multiple brands of their own.
The car industry worldwide has lived with brand portfolio management for long. Even as companies have merged with, or acquired, each other, the various marques have been retained and sometimes even dead ones have been revived. The companies generally focus the brands in their portfolio on distinct customer segments and needs (such as Ford’s ownership of Ford, Volvo and Jaguar, or General Motors with its multiple brands), and then further play with models and product variants within those. When things go right, portfolio strategies can be quite profitable, but the mistakes are especially expensive. Sensible and sensitive management of the portfolio is absolutely critical.
In the fashion and lifestyle sector, the players who already follow a portfolio strategy are as diverse as the luxury group LVMH, mainstream fashion groups like Liz Claiborne (with brands in its portfolio including Liz Claiborne, Mexx, Juicy Couture, and Lucky Brand Jeans) and Limited Brands (Limited, Victoria’s Secret, La Senza, etc.), and retailers such as Marks & Spencer (with its original St. Michael’s brand having given way to Your M&S, and also Per Una) and Chico’s (Chico’s, White House | Black Market, and Soma Intimates), who wish to capture new customer segments or re-capture lost customers.
Some of these companies have launched new brands, some have re-launched their own brands, and some have even acquired competing brands.
The issue is also relevant to the Indian market, whether we consider Reliance’s revival of Vimal, the new brand ambassador for Mayur Suitings, or the PE-funded takeover of Weekender. As the market begins to evolve into significantly large differentiated segments, branding opportunities grow, and so will activity related to existing or old brands being
resurrected and refreshed. An additional twist is provided by Indian corporate groups such as Reliance, Future Group (Pantaloons), and Arvind, which are looking to partner international and Indian brands, or grow private labels to gain additional sales and margin.
The issue also concerns those companies whose management is attached to one or more brands owned by them which may not have been performing well in the recent past, but due to historical or sentimental reasons, the management may not like to close down or sell them.
It is equally critical for potential buyers who would like to take over and turn brands around into sustainable profits. This is a real possibility in this era of private-equity funds and leveraged buyouts, where a company or a financial investor might find it cheaper and more profitable to take over an existing brand and turn it around, rather than building a new brand. This is already happening in the Indian market. More interestingly, Indian companies have also already acquired businesses in the United States and Europe, and the potential revival or re-launch of brands is certainly relevant for these companies as well.
WHEn TO RECyCLE AnD REUsE
Re-launch or acquisition of an existing active or dormant brand can be an attractive option when building a portfolio, or when a company is getting into a new market.
For the company, acquiring an existing brand is often a lower- cost way to reach the customers, and also faster to roll out the business. The company may assess that the brand already has an existing share of positive customer awareness that is active or dormant, and that the effort and resources (including money) needed to build a business from that awareness will be much less than that to create a new brand.
The risk of failure may also be lower for a re-launched brand than for a new brand. This is because the softer aspects, the hidden psychological and emotional hooks, are already pre-designed. This provides a ready platform from which to re- launch and grow the brand.
From the customer’s point of view, there is the confidence from previous experience and usage, and possibly also nostalgia and comfort of the ‘known’. ‘Age’ or ‘vintage’ is respectable and trustworthy. This is especially powerful during volatile times or
in rapidly changing environments, when there is uncertainty about what lies in the future, and makes an existing brand a powerful vehicle for sustaining and growing the business.
On THE DOWnsiDE
However, when handling brands, it is also wise to keep in mind the cautionary note that mutual funds issue: “Past performance is no indicator of the future.”
In re-launching active or dormant brands, there is also a downside risk. While the brand may have been strong and relevant in its last avatar, it may be totally out of place in the current market scenario. The competitive landscape would have shifted, consumers would have changed – new consumers entering the market, old consumers evolving or moving out – and the economic scenario itself may now be
unfriendly to the brand.
Also, the ‘awareness’ or ‘share of mind’ may only be a perception in the mind of the person who is looking to re- launch the brand, and the consumer may actually not care about the brand at all. There are instances where the management of the company has been so caught up in their own perception of the brand that they have not bothered to carry out first-hand research with the target segment to check whether there is actually an unaided recall, or at worst, aided recall of the brand. They are imagining potential strengths, when the brand has none.
It is also possible that, during its last stint in the market, the brand may have gathered negative connotations – consumers may remember it for poor products or wrong pricing, the trade may remember it for late deliveries, vendors may remember it for delayed payments… the list goes on. In such a scenario, a re-launch may be a disaster.
So, how does one know whether to resurrect a brand, or to reincarnate it in another form, and when to just let it die? The answers to that lie in answering the question: What is a brand? And then, what is this brand?
A CRITICAL QUEsTIOn: WHAT Is A BRAnD?
Even in these enlightened marketing times, many people believe that the brand is the name. They believe that once you advertise a name widely and loudly enough, a brand can be created. Nothing could be further from the truth. High-decibel advertising only informs customers of the name; it cannot create a brand.
If we put ourselves in the customer’s shoes, a brand is an image, comprising a bundle of promises on the company’s part and expectations on the customer’s part, which have been met. When promises are delivered, when expectations are met, the brand develops an attribute that it is defined by.
The promise may be of edgy design (think Apple), and the customer expects that – when the brand delivers on the promise and meets the expectation, the brand image gets re-affirmed and strengthened. However, these attributes are not always necessarily all ‘positive’ in the traditional sense. For instance, a company’s promise may be about being low-cost and low-service (think Ikea, or low-cost airlines), and the customer may expect that, and be happy when the company delivers on that promise. The promise may be products with a conscience (think The Body Shop), which may strike a chord with the consumer.
What that brand actually stands for can only be created experientially. Creating this image, creation of the brand, is a complex and step-by-step process that takes place over time and over many transactions. Repetition of the same kind of experience strengthens the brand.
The brand touches everything that defines the customer’s experience. The product design and packaging, the retail store it is sold in, the service it is sold with, the after-sales interaction, all have a role to play in the creation of the brand.
For instance, to some it may sound silly that market research or supply chain practices can help define a brand, but that is exactly how the state of affairs is for Zara. Changeovers and new fashions being quickly available are what that brand is about, and it would be impossible for Zara to deliver on that promise without leading-edge supply chains, or a wide variety of trend research.
Similarly, it may sound clichéd that your salesperson defines the brand to the consumer, but even with the best products, extensive advertising, and swanky stores, for service-oriented retailers everything would fall apart if the salesperson is not up to the mark. This is, indeed, a reality faced by so many of the premium and luxury brands.
Of course, brand images can be changed or updated, but the new image also needs to be reinforced through repeated action, a process just like the first time the brand was created.
REvIvIng A BRAnD: THE nEW-OLD sEEsAW
Given that a brand is created over multiple interactions and repetitive delivery of certain attributes, it is only natural that the older the brand, the more potential advantage it would have over a new brand. Just the sheer time it would have spent in the market would give an old brand an edge.
An old brand can appear to be proven, experienced and secure, while a new brand could be seen as untested, raw and risky. An old brand may have had a positive relationship with the consumer, but may have been dormant due to strategic or operational reasons. In this case, reviving the brand is clearly a good idea. There is already an existing awareness of an older brand, which can act as a ready platform for launching either the same or a new set of products or services. Often, there may be a connection with the consumer’s past positive experience of the brand.
On the other hand, a new brand may appear to be fresh, more up-to-date and relevant, and vigorous, compared to an old one that may be seen as outdated and tired. Certainly, if nostalgia had been all that brands needed to thrive upon, then old brands would never die and it would be difficult to create new brands.
Clearly, there is no single answer to whether it is a good idea to re-launch an existing or old brand. If you are considering whether it would be a good idea to revive an old brand, or to acquire and turn an existing brand around, ask yourself this:
Is there evidence of enough customer awareness and support for the brand?
Are there positive connotations for the brand that can be built upon in the current market context?
Is there an opportunity to refresh the brand, so that it does not appear outdated, while retaining its core promise and authenticity?
Does the company have the resources and the inclination to be a ‘caretaker’ or ‘steward’ of the relationship that has been created in the past between the brand and its customers?
If the answer is ‘no’ to any of these questions, then one needs to think again. However, if the answers are all ‘yes’, then a resuscitation is just what the doctor might have ordered.
Devangshu Dutta is chief executive of Third Eyesight (website: www.thirdeyesight.in), a management consulting firm focused on consumer products and retail, whose clients include brand leaders and some of the largest companies in their respective markets. This article is written with the fashion sector in focus, but is equally applicable to other products and service sectors.
Source: Images Yearbook
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