In today’s competitive market, a brand can only achieve success if it can connect with consumers and effectively communicate its unique qualities in a way in which they create a positive impression in the minds of consumers. The brand builder who attempts to develop a strong brand is like a golfer playing on a course with heavy roughs, deep sand traps, sharp doglegs, and vast water barriers. It is difficult to score well in such conditions. Substantial pressures and barriers, both internal and external, can inhibit the brand builder. To be able to develop effective brand strategies, it is useful to understand these pressures and barriers.
1. Pressure To Compete On Price
There are enormous pressures on nearly all firms to engage in price competition. In all industries from computers to cars to frozen dinners to airlines to soft drinks, price competition is at center stage, driven by the power of strong retailers, value-sensitive customers, reduced category growth, and overcapacity (often caused by new entrants and by old competitors hanging on, sometimes via bankruptcy).
Retailers have become stronger year by year, and they have used that strength to put pressure on prices. Whereas a decade ago, the manufacturer largely controlled information, retailers are now collecting vast amounts of information and developing models to use it. As a result, there is an increasing focus on margins and efficient use of space. Suppliers, particularly those in the third or fourth market-share position with only modest loyalty levels, are exposed to harsh pressure to provide price concessions.
A decade ago, private-label brands were largely limited to low-quality, low-price products unsupported by effective packaging or marketing. Given these characteristics, they enjoyed only temporary sales spurts during recessionary times. No more. While still offering so-called price brands, retailers are also increasingly offering private label brands at the high end of the business. Such brands are competitive with national brands in quality and marketing support but have substantial cost advantages – in part because the cost of the brand management team, sales force, and advertising is lower and can be spread over hundreds of product classes and in part because of logistical advantages. The result is more price pressure.
Sales promotion is both a driver and an indicator of the price focus. In the 1950s, about 10 percent of the communication mix was devoted to price promotions. Those were the days when distribution was simple, retailers were concerned with building new stores rather than squeezing margins, and markets were growing. Today, more than 75 percent of the advertising / promotion spends are going to promotion.
These market realities imply that the key success factor is low cost. Organizations must reduce overhead, trim staff, downsize, and cut all unnecessary expenditures. What, then, happens to the people who support the brand with market research or other brand-building activities? They are vulnerable to the organizations new cost culture.
2. Proliferation Of Competitors
New, vigorous competitors come from a variety of sources. A host of food categories have watched Weight Watchers and Healthy Choice enter their markets through brand extension strategies. In the snack category, Frito-Lay has seen regional brands expand and Budweiser’s Eagle brand break out of its niche to become a major competitor. New product forms that provide real alternatives for the customer have encroached the soft drink market, bottled water, carbonated water, fruit-based drinks, and “new age” drinks, among others.
Additional competitors not only contribute to price pressure and brand complexity, but also make it much harder to gain and hold a position. They leave fewer holes in the market to exploit and fewer implementation vehicles to own. Each brand tends to be positioned more narrowly, the target markets become smaller, and the non-target market becomes larger. Efforts to market to a broad segment thus become more difficult in the face of the complex ‘brandscape’ Further, some new or desperate competitors may be motivated to take risks or attempt unusual approaches. The result can be destabilization of the competitive dynamics. There is also an enhanced motivation to copy anything that is successful, in part because the risks of copying are offset by the difficulty of coming up with brilliant new alternatives.
3. Fragmenting Markets And Media
At one time, being consistent across media and markets was easy. There were a limited number of media options and only a few national media vehicles. Mass markets were the norm, and micro segmentation did not exist. Brand managers now face a very different environment, one in which it is difficult to achieve the consistency that is needed to build and maintain strong brands.
The bewildering array of media options today includes interactive television, advertising on the Internet, direct marketing, and event sponsorship, and more are being invented daily. Coordinating messages across these media without weakening the brand is a real challenge, especially when promotional vehicles are included in the mix. A promotion involving a giveaway or a price reduction that results in a noticeable sales spike, for example, may be inconsistent with a brand identity based upon quality because it signals that the brand needs to lower price to gain sales. Pressure to include promotions (such as the couponing used by packaged-goods brands or the cash rebates used by automobile firms) makes it difficult to keep the brand-building effort on track.
In addition, companies are dividing the population into smaller and more refined target markets, often reaching them with specialized media and distribution channels. It is tempting to develop different brand identities for some or all of these new target segments. Developing and managing multiple identities for the same brand, however, presents problems for both the brand and the customer. Since media audiences invariably overlap, customers are likely to be exposed to more than one identity relating to the same brand.
Consider the problem of female consumers, accustomed to the Lux advertising, who encounter the firm’s advertisements geared for the males. Or think of the potential confusion of a prestige-oriented shopper, accustomed to seeing Shopper’s Stop advertisements in fine fashion magazines, who one day sees a newspaper advertisement for a Shopper’s Stop discount outlet. The more numerous and diverse a brand’s images are, the more difficult it is to coordinate them in support of a strong brand.