To grow your brand, play to win, not for stalemate

By Nigel Hollis

I have never understood why marketers who get paid to create growth are so eager to accept recommendations based on a descriptive model that assumes a static marketplace. You cannot learn about growth from static markets, you must examine how things change over time.

Growth demands change

Yes, I am referring to the basic principles championed by the Ehrenberg Bass Institute. At best, these principles offer a recipe to extract incremental value from the existing market equilibrium, not a recipe to create significant future value. Why? Because growth demands change, and, by definition, static markets do not change. When markets remain static, big brands stay big, because they have the advantage of stronger physical and mental availability.

Let me be clear, the Ehrenberg Bass principles are not wrong, as far as they go, but I am saying they are insufficient to achieve substantial growth, particularly when taken at face value. If you want to achieve significant growth you must disrupt your product category and that implies doing something different. And the real problem is that many marketers are too busy playing by the wrong rules to even look for a gamechanger that will generate significant growth.

The research says you should invest in established brands

Let me give you an example of how the principles espoused by Ehrenberg-Bass might limit growth ambition. Here is part of an abstract of a paper from our friends at The Ehrenberg Bass Institute.

“The study utilizes UK and US data on 90,000+ SKUs across 15 packaged goods categories. The results show that while the optimal number of SKUs in a portfolio is category specific, the top-selling SKU contributes around 50% of the brand penetration and 40% of sales. This establishes a benchmark for monitoring brand performance. These results emphasize the importance of having top-selling SKUs readily available to consumers, rather than sacrificing them over new product launches.”

Well, that sounds like a compelling analysis, and if you assume a static market, no differentiation, and that The Duplication of Purchase Law prevails, then this is a logical recommendation. Big brands rule. The returns to launching a new product into an existing category will rarely justify the cost of doing so compared to investing the same amount in an existing brand.

However, it is exactly this sort of in the box thinking that results in established brands being sidelined by new competition. All too often, big, well-established brands get taken by surprise when an upstart brand, playing by different rules, takes a chunk of their market share.

Market share growth demands a compelling advantage

In The Granularity of Growth, Viguerie, Smit, and Baghai conclude their chapter on market share growth by stating,

“If you’re hoping to drive growth through substantial and sustained share gain, you’d better back that expansive thinking with some source of advantage that sets your company apart from the pack, whether it derives from truly superior insight or truly distinctive capabilities.”

When we think about disruptive brands our minds automatically think about brands that have leveraged the power of technology. The advent of the internet facilitated e-commerce and allowed Amazon to disrupt the traditional retail model (just as the Sears catalog had done a century earlier). Sears and Amazon served the same basic consumer need, a convenient way to buy stuff at a reasonable price, and their growth came from satisfying that need better than the existing standard.

But what about packaged goods? After all, much of Ehrenberg Bass thinking is based on cross-sectional analysis of packaged goods data (in the box analysis). Disruption also happens in packaged goods markets, and when it does the impact can be significant.

Chobani disrupted the US yogurt market

Chobani’s market share in the United States grew from less than 1% in 2007 to over 20% in 2021. Prior to its appearance on the stage Dannon and Yoplait ruled, and the market had been static for years. Chobani not only stole share from the incumbents, but it also changed the nature of the US yogurt category. Today, about half of the category sales are Greek yogurt when it used to account for a few percentage points.

Why was Chobani so successful? I think there were three fundamental reasons.

1) A different product experience

Greek yogurt is strained, giving Chobani a thicker texture and more protein than the mass market brands, and founder Hamdi Ulukaya insisted on using good quality, natural ingredients, to give his yogurt a better taste.

2) Distinctive packaging

The cup shape and distinctive design signaled a different product inside and helped the brand stand out on shelf. Once you knew the brand existed it was easy to recognize it in store.

3) A different value proposition

Importantly, Ulukaya decided that the initial price per cup should be less than $1.50. Admittedly, that meant initial sales were loss-making, but combined with a better product, the price point gave Chobani more pricing power than the competition.

When Dannon and Yoplait tried to take on the upstart brand, Chobani held its ground by highlighting its advantages and innovating to create new ones. Ongoing investment in research and development is not limited to technology companies. If you want to stay ahead, you need to be creating the next big thing in your category, not letting someone else do it. And you need to be prepared to defend your newly won territory.

Of course, one case study does not prove the Ehrenberg Bass analysis wrong (because it is not technically wrong). But Chobani is not an isolated case. I would add Oatly, Beyond Meat, Halo Top, Dollar Shave Club, La Croix, Method, Innocent Smoothies in the UK, Paper Boat and Dabur in India, and Corações in Brazil to the list of brands that disrupted established packaged good categories by offering something different.

Product differentiation is difficult to sustain

In How Brands Grow, Professor Byron Sharp states,

“Branding lasts, differentiation doesn’t.”

This sort of assertion is typical of the Professor’s dogmatic approach. No room for doubt, differentiation does not last. And again, as a generality, it is true. But it does not mean differentiation is worthless. It means product differentiation is the starting point, the thin end of the wedge that allows a brand to change consumer expectations of a product category.

If you accept Sharp’s statement at face value then you might give up worrying about trying to differentiate your brand, which likely means you are going to end up with your brand being commoditized, if not disrupted. Marketers should do everything they can to sustain the perception that their brand is different from the competition. It is not easy, but it is important if you want to sustain your advantage as long as possible.

Halo Top lost its differentiation

That differentiation is difficult to sustain is obvious. Take the example of Halo Top, that brand took five years to go from launch to being the bestselling ice cream in the United States because it promised the same enjoyable experience as traditional ice cream brands, but with less calories. The problem was that the existing brands rapidly followed suit and undermined Halo Top’s differentiation, sales plummeted. It turns out that the barriers to entry for food are far lower than for technology, automotive, or durables. Besides, I suspect many of the traditional players had a similar recipe in hand, they were just slow to take advantage of it. Also, Halo Top was sold to a new owner, Wells Enterprises, and seems to have taken a back seat to the company’s own brands, like Blue Bunny.

Reversion to the meanest

Established packaged goods categories are usually dominated by one or two large companies. As the big dogs of the category, they are often lazy and slow to move, until someone threatens their market share. Then they act fast and try to claw back any share lost. Before the advent of Hao Top, Ben & Jerry’s was the ice cream brand leader. After Halo Top relinquished leadership, Ben & Jerry’s regained it.

All the examples I cited above have come under intense pressure from the big incumbent brands following their initial success. Some like Chobani, Oatly, and La Croix seem to have weathered the storm, others like Halo Top, Dollar Shave Club, Innocent Smoothies were bought by bigger, established companies and in the process seem to have lost the momentum that they once had. So, be prepared for the backlash or prepare your sale prospectus.

Beyond product differentiation to brand differentiation

In this post, I have focused on the role of product innovation as a means to disrupt an established product category, particularly packaged goods. However, I would be remiss if I did not point out that while product differentiation can be matched, particularly in categories where there are low barriers to entry, duplicating other forms of differentiation is more difficult.

Positioning is about creating a unique mental space that your brand possesses compared to its competition. Packaging design, distinctive and memorable advertising, on pack tone of voice can all convey a sense that the brand is different. Related to differentiation is distinctiveness, which is an important way to trigger brand recognition for packaged goods. More than that, it can be used to trigger memories of what made the brand different in the first place. Once product differentiation has run its course, brand differentiation becomes your biggest asset because differentiation lasts far longer in people’s memories than it does physically.

Thinking beyond packaged goods, design is obviously an important source of differentiation, functionality not just look and feel, and differentiated customer service is a domain largely ignored by many companies in favor of generic cost saving. There are many ways to differentiate and many ways to sustain that perception long after the real advantage no longer exists.

Takeaways

1) Play to win, don’t play for stalemate

Rule number one in the marketer’s handbook should be not to accept the current state of play (even if it favors your brand right now). Marketers should be striving to differentiate their brand, because it is only by doing something different that you can disrupt the equilibrium of an established category. Yes, achieving significant growth is hard, but when achieved the payoff to the marketer and brand owner can be huge. Remember, a one percent share gain can be incredibly valuable to a big brand.

2) Do not take research findings at face value

An empirical generalization is a replicable pattern that occurs across different product categories or markets. A generalized finding is always going to sound more powerful than a specific one, but make sure that you really understand what that finding is telling you, whether it comes from academic or proprietary research. Patterns exist in data for a reason, but that reason may not be useful other than to define a generality. Growth is specific to a brand, its category, and its context. So, take the general learning, apply it to your situation, and then figure out how to change things by doing something different from the norm.

3) Think outside the box

When it comes to market share growth, there is no substitute for a blockbuster innovation which resets the expectations for an entire category. However, there are many other ways that a brand might gain competitive advantage and grow share, if not to the same degree. I have seen brands gain competitive advantage through finding new distribution channels, targeting new user groups, and investing in new, more effective marketing strategies. The common element is that no one else is doing the same thing (or at least, not effectively).

4) Make sure you have what it takes to make a difference

There are huge forces at work that undermine change in an established category. Particularly in packaged goods, buyers are largely habitual, buying from an established repertoire. Barriers to entry are generally low. Big brands have the advantage of scale and a proven track record with retailers and can get away with launching undifferentiated line extensions that simply reinforce the pattern of diminishing returns to additional SKUs. By contrast, a new brand must prove its worth. Multiple points of differentiation will improve your chances of success, the more tangible they are the better. Highlight your brand’s advantages with effective brand advertising and aim to disrupt people’s habitual purchasing behavior.

5) Fight to keep your gains

A great product experience will sell itself for a while, but if your launch is successful, get ready for the backlash. Big, established brands often underestimate their own clout, but once they deploy it, they can be very effective. Be prepared to invest in ongoing innovation and marketing to brunt the attacks and maintain your share gain.

Before I close, has it ever occurred to you that many of the findings promoted by Ehrenberg Bass are self-fulfilling prophecies? If marketers did a better job of differentiating their brands, would we see the same patterns in the data?