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Managing Brand
Equity
Over Time
hould you change your brand
strategy? Maybe. That depends onSwhats happening in your market
today and
what you think will happen next year. Well
give you the framework to answer the
question.
Competitive conditions in your industry
change every moment. Customers become
more knowledgeable. Competitors become
more aggressive. New technology emerges.
These and other changes may require you
to change your brand strategy.
If you have ever taken a course in
marketing, you know about the product life
cycle.
The product life cycle shows how unit
sales may change over time. It describes
how competitive conditions change over
time and that is why we prefer to call it the
competitive life cycle. It is a descriptive
model it is not intended to predict salesunless bolstered by
statistical analyses. In
this article, we are using it to describe how
competitive conditions change and the
implications for brand strategies.
We will take you through a tour of the
stages of the competitive life cycle and
discuss what your brand strategy must do
at each stage.
Introduction Stage
The introduction stage is when a new
product or service is being introduced.
What the brand strategy must do now is
explain to the target customers the value of
the new technology versus the old
technology. This is basic marketing -
Marketing 101, yet nearly all the biggest
disasters in the history of marketing (Edsel,RCA Video Disc
,
Premier cigarettes) are
characterized by not
talking to customers
about their needs and
then not educating
them about how the
new product would
meet those needs
better than existing
products or services.
In the year 2000,m a n y d o t - c o m
companies spent huge
amounts of money on
advertising, yet most
of them failed because
they were not able or
did not try to build
value in the customers
mind. For example, pets.com was an internet
service where people could order food and
other supplies for their pets. Pets.com raised
over US$130 million and spent much of it on
television ads on the United States
professional football championship game
The Super Bowl. As a result they persuaded
many to visit their site but relatively few
made a purchase and their losses in the last
quarter of 1999 and the first two quarters of2000 totaled
US$125
million on sales of less
than US$23million. Their
share price began at
US$11 and fell to US$1.38
in just six months. When
they went bankrupt
probably their most
valuable asset was a dog
s o c k p u p p e t t h e
spokesperson in their ads
What happened?They never convinced
target customers that
buying pet supplies from
them was attractive. Their
tag line was because
pet s can t dr ive
unf o r t una t e l y t he i r
owners could drive to the
Summ er 2004 | 9Canada China Business Council
Customers
become more
knowledgeable.
Competitors
become more
aggressive. New
technologyemerges. These
and other changes
may require you to
change your brand
strategy.
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8/3/2019 Managing Brand Equity Over Time
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associate that benefit with your brand you
want to own that benefit.
In the late 1960s, a company today
known as Kraft researched the United
States market for coffee. They found that
the only coffees available were brewed
coffees, which were perceived to be rich-
tasting but messy to prepare, and instant
coffees, which were perceived to be watery-
tasting but easy to prepare. What people
really wanted was a rich-tasting, easy-to-
prepare coffee.
Kraft used processes from the US spaceprogram and introduced a
freeze-dried
coffee, Maxim, that was richer tasting than
10 | Summer 2004 Qua rte rly Review
the current instant coffees and was also
easy to prepare.
Maxim quickly achieved a 10 % share of
the instant coffee market. Meanwhile,
Nestle was developing their own freeze-dried
coffee. They introduced it with the tagline,
You know what freeze-dried coffee is, now
taste the best, Tasters Choice. Within two
years Tasters Choice overtook Maxim and
Maxim never regained their lead. Over those
two years Tasters Choice charged the same
price and spent less money on advertising!
When Kraft finally removed Maxim from the
market in the late 1990s, Tasters Choice
had a market share more than thirty times
larger than that of Maxim.
What happened? Kraft educated
consumers about freeze-dried coffee and
that was necessary to build the market.
Krafts mistake was failing to put distance
between Maxim and Tasters Choice by
seizing the taste benefit for their brand when
they had the first-mover opportunity. Once
Nestle associated Tasters Choice with taste,
it was too late for Maxim. The case history
illustrates the power of a well-chosen, well-
com m uni ca t ed b r and pos i t i on
implemented at exactly the right time.
Competitive Turbulence Stage
Market segmentation begins early in the
competitive life cycle but is in full bloomduring the
competitive turbulence stage,
because customers get smarter and more
demanding as to what they want and
competitors give it to them. There are many
direct competitors in this stage and all their
product or service offerings tend to be the
same, leading to price wars and shakeout.
The key to winning through this stage
is targeting brand strategies must target
your most attractive segments.
In the United States in the late 1980s,
the advertising of Pepsi Colas Mountain
Dew soft drink often featured young, clean-
cut teenage boys and girls enjoying water
sports at a lake situated in a beautiful green
countryside. Not bad perhaps but those
ads did not really speak to all the potential
Mountain Dew customers who lived in
urban areas.
Mountain Dew set out to change that
They gave the Mountain Dew manager
seven years to reposition the beverage for
a hipper and more urban segment. That was
accomplished with a carefully designed
communications campaign that continually
moved the position of Mountain Dew
toward a much edgier position but never
tried to move it so far in one year that people
would not find their ads credible.
What happened? By focusing efforts
on specific segments and by taking
sufficient time, Mountain Dew was
repositioned for the urban market the water
sports became extreme sports and the tone
of the ads became much more hip. MountainDew became the number
three soft drink
among their target segment.
Maturity Stage
Competitors often consolidate during
the mature stage. Now customers are very
knowledgeable about the product or service
and may view their purchase decision as
routine. Organizations must retain their
current customers by reinforcing their brand
values but must attract new customers byfinding what may be
subtle differences
versus their competitors.
A large part of the auto insurance
industry in the United States is very much
like a commodity business where lowest
price wins. Both GEICO and Progressive
insurance companies have followed
strategies that still utilize price but couple it
with superior service. For example
supermarket or pet store. Branding efforts
have gone beserk when a spokesperson
sockpuppet becomes a companys most
valuable asset.
Rapid Growth Stage
The main characteristic of this stage is
that you now have direct competitors. These
are the fast followers who have entered the
market soon after your launch. At the same
time, customers are starting to become very
knowledgeable - and demanding regarding
their expectations.
It is essential during this stage to put
distance between yourself and your
competitors. Now is when it is most likely
you will have a major functional or, better,
emotional - benefit that is superior to that of
your competitors. Now is the time to
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Progressive will send a van to where an
accident occurs and settle the claim then.
GEICO will review the cost of your current
policy and advise you of cheaper rates.
What happened? Rather than accept a
commodity position, both companies found
ways to differentiate themselves in terms of
service. Both these companies have
approximately doubled their shares over the
last ten years.
Decline Stage
The reason the competitive life cycle
declines is that a new product or service
emerges that is more effective than the
existing technology at meeting customers
needs. At this point, the brand must be
sufficiently stretchable so that the company
can move to the new technology.
There have been a number of brands that
are dominant in a technology but have faced
difficulties moving to a new technology in
the minds of customers. For example, Xerox
has been associated with photocopiers,
Polaroid with instant photography, and
Hewlett-Packard with printers. Each is faced
with the challenge of broadening the
associations of their brand.
In many countr ies Kodak is
synonymous with film. That is a powerful
position while film is being sold less helpful
when digital cameras are becoming popular.
Of course, Kodak does make digital cameras.
The issue is not whether Kodak can make a
digital camera but whether or not people
think of Kodak when they want to buy a
digital camera.
What happened? In the 1990s, Kodak
advertisements showed digital technology
and included the tag line, Take pictures
further. However, poor financial results in
the mid-1990s killed that campaign. More
recent Kodak ads have the tag line, Share
moments, share life. Either of these
campaigns might be effective in broadening
the associations of the Kodak brand to
include digital forms of imaging. However
these communications may be too little effort
too late. Broadening the associations of a
corporate brand usually requires several
years of effort and Kodak may no longer
have that time. In the past five years, some
brand equity estimates show the value of
the Kodak brand falling US$7 billion a loss
of about half the brands value.
Summary
As shown in Exhibit 2, competitive
conditions change over time and that means
brand strategies may need to change over
time. Companies that are savvy in managing
their brands understand this; other
companies lose.
What is happening in your markets?
What is your brand strategy doing?
For comments or questions, please
contact: [email protected]
www.thearrowgroup.com
