The first source of growth is to be found among the existing customers of the brand. There are growth opportunities to be searched, evaluated and exploited. This is too often overlooked by managers who wish to move quickly to some hot brand extension.
Building volume per capita
Brand management over time is the permanent pursuit of growth. One way of achieving this is to move from a pattern of low-volume use to a pattern of potentially higher-volume use. For example, Bailey’s Irish Cream – a worldwide spirits brand created in 1974 – suffered from a serious restriction to its growth.
Its consumption was highly seasonalised, and sales mostly took the form of Christmas and New Year presents. It was consumed mainly by little old ladies, partaking on their own as a sort of sugary treat. It was taken neat in small measures, on account of its sweet taste. If it was to grow in volume, things had to change.
The brand’s future also depended on its ability to compete outside its category (narrowly defined as Irish cream liqueur). A major campaign was thus launched around the concept of Bailey’s on ice. The creative idea was to communicate how the sensuousness of Bailey’s allowed you to connect to your friends and family.
The intention was to encourage groups of people to drink Bailey’s on the rocks (which in fact increases the desire for another glass). A creative media campaign backed this new positioning, exploring how to link the brand to the key sensual moments in the media. For example, Bailey’s sponsored Sex and the City.
But most important were the on-premise implications of the campaign. Drinking Bailey’s on ice required a normal-sized glass, not a liqueur glass as before. The marketers had to persuade the trade to take the campaign seriously.
They designed a new Bailey’s glass for bar chains, 6,000 ice consumer kits, 4,000 large-measure POS kits, and 16,000 optics to deliver a suitable measure of Bailey’s for drinking over ice. As a result on-trade sales grew from a low 46,000 cases in December/January 1989 to 107,000 in December/January 1996. It had become more hype, young and trendy to drink Bailey’s on ice.
In the United States Jack Daniel’s – suffering from its stereotypically ‘macho’ image – attempted to increase its per capita volume. To do this, the brand needed to create an association with parties (a consumption situation which has a galvanising effect on volume).
The brand created a micro-marketing plan specifically for this purpose, ‘The Jack Daniel’s occasion’. The exemplar for this was the barbecue people enjoy around the back of their car after arriving at a sports event a few hours early. The brand developed specific paraphernalia and specific advertising designed to promote use in this context, which was placed in sports magazines.
Coca-Cola is a best practice exemplar in terms of increasing consumption per capita. Its goal is to bring consumers around the world closer to the consumption rate of American consumers, who drink 118 litres per person per year. Its first key strategic lever is not to use a cost-plus price fixing method, but to target the price of the most popular drink in each country: the price of tea in China, for instance.
Because this put a strain on the profitability of local bottlers, the aim is to achieve a quick hike in sales. Profitability is guaranteed to the Coca-Cola Company itself, because it receives the difference between the cost of production of the cola syrup and its resale price (five times as high) to the bottler.
The second key lever is to gain local monopolies. ‘Local’ in this context means as close as possible to a thirsty person’s impulse to drink. Ideally the product should be at an arm’s reach, via automatic machines or small refrigerators, everywhere: in hotels, universities, hospitals, and also in bars and cafeterias, for on-premise consumption.
The third lever is to adapt pricing to the consumption situations, so that an identical litre of Coke is sold at very different prices according to when and where it is bought.
Last but not least, specific marketing plans are devoted to specific situations such as lunch and dinner, breakfast and evenings. In many countries consumers drink tap water, bottled water or mineral water. They do this by habit and also for health reasons: consuming too many sugary drinks leads to obesity and other health problems, which are being faced by many Americans at present.
Coca-Cola’s plan is to modify local customs, starting with children and young people whose habits are yet to be formed. Hence the global alliance with McDonald’s, a key social change agent and a chain of which young people are heavy users. Similarly, Coke has another alliance with Bacardi, the world’s leading spirit drink. It is significant that advertisements for Bacardi Carta Blanca show a ‘Cuba Libre’ cocktail, which is made up of rum and Coke.
Building volume by addressing the barriers to consumption
Branding is too obsessed by image, and not obsessed enough by usage. Even though Coca- Cola is held up as the paragon of good brand management, if we are honest we have to acknowledge that it took almost a century for its managers to address perhaps the most important reason for its non-consumption: it is perceived as an unhealthy drink containing too much sugar.
Certainly the Coca-Cola Company has realised the growth of fitness and health as purchase motivations, in a country where baby boomers were ageing. It launched Tab in 1963, just after Diet Royal Crown Cola and just before Diet Pepsi. However, Diet Coke was launched as late as 1983.
It soon became the leader in its category, and what the company calls ‘the world’s second soft drink’. Later would come caffeine-free Coke, caffeine-free Diet Coke, Cherry Coke, Vanilla Coke, Coke and Lemon. Each of these products was an answer to a consumer problem. Some consumers wanted to drink as much Coke as possible but were prevented from doing so by Coke itself. Some could not have any more sugar, while others could not take caffeine.
Thus, there were huge opportunities for increased consumption per capita among Coke’s own clients. They were probably heard, but never listened to. Identifying the barriers of consumption and relieving them was a service not only to clients but also to profitability: aspartame (the sweetening ingredient in Diet Coke) is less costly than sugar.
In the Coke example, the reasons for consumer’s limited consumption were known, but the company was deaf. It confused the brand with the product. By claiming ‘Coke is it’, it had made Coke symbolise one product and only one, period.
In the task of growing volume through higher consumption per capita, identification of what blocks consumption is not always obvious. Research is needed. One way to do it is to segment the clientele according to the strategic matrix shown in Figure below.
This matrix segments customers according to two dimensions, both related to behaviour. The first is the household’s share of requirements (among 100 occasions to purchase, how many times is the specific brand bought?), and the second is the household’s level of consumption (is it a small, medium or heavy buyer?).
Increasing volume per capita: strategic matrix
This creates eight cells (not nine because one of them is theoretically possible but empirically empty), and each household can be allocated to one of these cells. Of course this matrix can be used for any type of purchase, or purchaser, including companies in B to B markets. Each cell represents a percentage of the total number of households, and a percentage of the total volume sold of the category and of the brand. These figures are important in themselves.
The key segment is the bottom right of the matrix, which represents high-consumption households that allocate the highest part of their requirements to the brand. For instance, in Europe households in this cell consume 70 per cent by volume of Coke Light, but only 48 per cent by volume of Coke. These two figures highlight how a single innovative product can release the barriers that prevent people from consuming more.
The brand manager’s task is to move as many people as possible progressively in the direction of this bottom-right cell. This can be done, starting from other cells and going vertically or horizontally. But it is first necessary to understand the very specific circumstances and motivations of consumers in each cell.
To increase a specific type of behaviour requires behavioural segmentation, then an in-depth understanding of those in each of these behavioural segments. Who are they? Why don’t they consume more? Is it a taste problem, a satiety problem, a price problem, a format problem, a packaging problem, an insufficient variety of line extensions, a distribution problem? It is very rarely an image problem, because those being considered here are already clients.
In modern markets we know from panel data that even for loyal customers, the brand’s share of requirements is never 100 per cent. It is sometimes no more than 40 per cent. However, managers lack information on why these consumers choose other brands 60 per cent of the time.
The result is a new marketing mix, often involving specific product improvement, higher experiential benefits, range extensions (formats, taste and so on), designed to target each behavioral segment.
Growth through new uses and situations
Like it or not, every product is consumed within a particular situation. This is one of the four aspects of the positioning diamond. Customers are looking for solutions to problems related to highly specific situations. For example, different things are expected of a car depending on whether it is intended primarily for town use, town use plus other short trips, or fairly long trips.
The growth of a brand is thus often a matter of tackling new situations of use, knowing that these situations may well include the same customers, as it is possible for one person to consume the same product in several different situations. For many companies, the situation of use is now the one real criterion for segmentation, rather than the characteristics of the users themselves.
A product is always consumed in a particular situation – and it is this situation that defines the brand’s competitive set. The situation is the brand’s true battleground. Each situation is associated not only with a different subset of competitors, but also with expectations, needs, volumes, and growth and profitability rates.
It is understandable that brands should seek to grow by breaking into high-growth-rate consumption situations in which their attributes give them a high degree of relevance. Such a movement often requires the launch of a new product or line extension.
This is why Mars launched the mini-Mars bar, a new product designed for consumers of the brand aged over 35 who were reducing their consumption of chocolate bars. This new product also changes Mars’ positioning: in terms of its physical size, it is a ‘sweet’. The situation into which it now fits is that of ‘indulgence’, rather than a meal substitute or re-energiser.
Segmenting by situation
In the United States, Captain Morgan is a rum brand with a masculine personality: it is the rum of ‘fun and adventure’. To achieve growth, the market was segmented according to the situations of use. Seeking to gain a foothold in the so-called ‘partying’ segment – a large group of friends indulging in noisy partying, dancing and drinking – the company launched Captain Morgan Spice.
It then targeted the so-called ‘lively socialising’ segment – a smaller group of friends getting together for a cocktail – but the first attempt was a failure. Captain Morgan Coconut Rum suffered too much from the Captain Morgan umbrella name and its highly characteristic values. In the latter use situation, the key is to address a more feminine, elegant, romantic set of values, rather than some sort of macho ritual. This is why the second test product to be launched was Parrot Bay, a product merely endorsed by Captain Morgan.
Growth through trading up
A classic growth strategy is trading up. Customers may wish to receive an upgraded service or product from the brand. Gift packs and ‘special series’ capitalise on collectors’ motivations. Larger formats have a built-in attractiveness too.
Extending the range can also be a way to increase profitability. Thus if it costs s3 to produce a litre of three-star cognac (that is, cognac aged for 3 years), s4.5 for a VSOP (4 to 5 years), s15 for an XO (30–35 years) and s21 for a litre of Extra Vieux, the customer trade-up is very profitable, as consumer prices are around the s15, s30, s60 and s150 mark respectively, according to the type of cognac.