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Is There A Brand Life Cycle? in Sustaining A Brand Long Term10907

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Is there a brand life cycle?

Curiously, the concept of brand life cycle is absent from most books on branding, as a review of their indexes shows. Does that mean that, unlike products, brands do not have a life cycle? In practice however the question whether brands have a life cycle is pervasive in a number of legal disputes.

For instance, in 2002 LVMH, the world leading group for luxury brands and goods, sued the famous consulting group Morgan Stanley for having expressed the opinion that the Louis Vuitton brand (born in 1854) was now a ‘mature brand’, a judgement that carried implicit and explicit consequences for financial analysts and their clients, stock investors.

Maturity is a typical phase of the product life cycle, the third after launch and growth, and just before decline. To describe a brand as in its maturity does indeed imply it is not far from decline, and so could hurt its reputation and the LVMH stock valuation.

The product life cycle does exist. Historical evidence proves it. All products (by which we mean the bundle of physical attributes) have an end. The problem is that the concept of product life cycle was mostly developed in hindsight. It is easy to reconstruct now the product life cycle of nylon, of transistors, of mainframe computers, of minicomputers, of word processing machines and so on.

These products were replaced by more efficient solutions. Microsoft killed Wang: word processing software was a better solution than dedicated hardware. Looking at aggregate sales figures of the whole nylon industry, one finds the typical pattern: a birth and launch phase, a growth phase, a maturity phase and a decline. Maturity is signalled by a plateau, a levelling of sales.

As an after-the-fact concept, the product life cycle model is always correct. But as Popper showed us in the philosophy of science, concepts and theories that cannot be falsified are not thereby right. In practice, managers are never at their ease as to where they stand in the product life cycle.

Should they interpret any stabilisation of sales as an evidence that the maturity phase has been reached, and make appropriate marketing decisions. Instead, they might argue that the decline was only due to weakened marketing, and that more work to identify and correct the causes of this stabilisation would make sales grow again. The routes to product growth recovery are multiple:

through line extensions to capture the short-term new tendencies of the market and increase brand visibility;through distribution extensions to make the brand more available wherever customers are;through a reduction in the price differential from cheaper potential substitutes;through permanent ‘facelifts’ or innovations to deliver more value to customers and recreate perceived differentiation;through repositioning, and renewed advertising or communication in order to adapt the value proposition to the present competitive conditions.

A brand is not a product. Certainly it is based on a product or service: Nike started as a pair of sneakers, Lacoste as a shirt, l’Oréal as a hair dye. But as these examples imply, brands start from one product then continue to grow from multiple products. Louis Vuitton started as a luggage maker for the aristocracy: since then, it has become a full luxury brand covering many product categories.

Recently the creative designer Mark Jacobs was hired to create the first Louis Vuitton clothing line. There should be perfumes soon. The brand keeps on surfing new products and their intrinsic growth. As such, has this process an end? Do brands managed in this way reach a levelling-off stage much later if ever?

One thing is sure. Brands that are not managed in this way, but remain attached to a single product, or even a single version of a product, are subject to the product life cycle. We all know of brands that in fact designate a very specific product: Marmite (that peculiarly English savoury spread), Xerox (photocopiers), Polaroid (instant cameras), Wonderbra and so on.

Certainly, brands such as Ariel or Skip are not growing any more in the heavy-duty lowsuds detergent market. Their market share hovers around 11 to 12 per cent in Europe. They do try to create disruptions through regular innovations, but these are soon imitated, so this has become a yard-by-yard ‘trench war’.

Their growth will come from two sources. The first is geographical: the Russian market and all the former communist countries remain to be conquered, as does Asia (although this will be done by Tide, the equivalent of Ariel in the United States). The second is brand extensions. Why should Ariel be satisfied by just being the co-leader of the detergent market? Shouldn’t it redefine its scope, its mission, as fabric care as a whole?

Of course, it can be said that once all countries of the world have been conquered and all possible extensions made, then a levelling-off in aggregated sales will unmistakably take place. This long-term prediction is as certain as J M Keynes’s famous comment: in the long run we are all dead. But for practical purposes, in the short and middle term, sources of growth can always be found: it only requires more work.

In any case the emerging overriding rule of accounting for brand value has given a clear answer to the question of the practical existence of a brand life cycle. Brand values should not be amortised for the single simple reason that no sure forecast can be made about their span of life. To amortise over 5, 10 or 40 years one needs such forecasts. The accounting standards and norms that are coming to be accepted worldwide dispel the notion of a brand life cycle as an operating concept (rather than a historical explanation).

 

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