I was reading an article about how marketing communication drives sustainable long term growth; and how that was much preferable to grubby short term growth. That’s probably lifted from every corporate annual report. The issue of course is that it’s not as simple as that of course.
You might see long term stock price growth. You might see environmental sustainability initiatives. This is not what I’m talking about. This is all linguistic sleight of hand. What I’m interested in is sustainable long term volume growth. Here are some thoughts about how we too often get it wrong.
Sustainable long term volume growth
How often do we see that? Not commonly, as most brands don’t grow. A few do. But most don’t, certainly not sustainably, year after year. Most have to run very hard to stand still.
This always makes me think back to 10 years of hard graft at Kraft Foods in the 2000s. We had a great team there, good products, hard work. A raft of launches, relaunches, you name it. When I left, our share of the instant coffee market was exactly the same 10 years later as it was when I joined. You might think of that as failure. I certainly don’t. I think it was a great achievement in the context of a very competitive market.
Growth is poorly understood.
We worked with a “challenger brand” that was looking to grow within a large retail category. Sales were up and the hypothesis was that this was due to increasing “brand strength”. What we found was that it was growing because it was gaining distribution.
The problem is that this increased distribution effect runs out of road after a while. While “brand strength” appears to be a limitless linear journey, distribution is a diminishing returns curve that doesn’t easily even reach its limit. Getting the last 20% of distribution is much harder than getting the first 20%. You have to crack all the individual independent retailers (which is tough as a challenger brand because they only want to stock the brand leader and a value option) and go into shops that you probably don’t want to be seen in, such as discounters.
Pricing and growth
The same is true of pricing. You can drive growth for a limited time through more reliance on short term promotions (and heaven knows, many have gone down that route). The reality becomes that nobody buys you at full price, because nobody has to. It’s been interesting to see certain categories such as dishwasher tablets move away from huge price cuts, where every week someone was on promotion at 50% off because every year you have to do more or deeper promotions than last year to drive ongoing growth.
The truth is that, especially in a fixed size market your brand is as big as you want it to be. Peroni could be as big as Fosters, it just chooses not to be through its pricing and marketing strategy. But even that would be a one off movement, not a sustainable growth driver.
For a time all the biggest growing brands were beer brands. Was this a seismic change in the category? No, it was the fact that people started selling multipacks of 24 bottles. Someone had the good insight that if you buy 24 bottles of beer a week rather than 4, you drink more beer in a week. Everyone did it and grew. Next year beer brands were not the fastest growing.
Is Product the answer to long term growth?
No. Product is not the solution either. Any meaningful (or trivial) advantage is immediately copied by competitors.
As Dr Seuss put it in his seminal marketing text on New Product Development “Ten Apples up on Top”
I may have stumbled upon a feature of the next generation of Smartphones here, but keep it to yourself.
The concept of “sustainable competitive advantage” is an interesting one in theory, but I struggle to think of any brands that have achieved that.
Even the look, and in some cases the actual functionality, of packaging is copied by the retailers.
Well this is rather bleak isn’t it? Not really.. it’s just that as always it’s as the T shirt (courtesy of Ben Goldacre) says
The actual truth
The point is that brands survive (maintaining share is good) through lots of small incremental improvements. Product tweaks, packaging upgrades, better advertising, better media planning, NPD launches. These are what Team Sky cycling called “marginal gains” and they did alright.
More importantly these are things we CAN measure in the short term though econometrics and other approaches. As one senior manager said to me once, “Without the short term there is no long term”.
The importance of sound short term measurement
What sound short term measurement can do is quantify and validate these improvements; which work, and which don’t, and steer us on a constant path of progress.
The reality of this is that vague statements about long term growth are easy to make without any need to consider how this happens in reality.
Of course nobody is going to say in their annual report “Our ambition is sustainable static volume” but that might just be what happens as a result of lots of hard work by talented people.