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Chapter 1
Declining Category or Subcategory
A brand can lose relevance because the category (wine) or subcategory (Chardonnay) to which it is attached is in decline. Losing relevance in this way is insidious in part because it can happen even if the brand is strong, the customers are loyal, and the offering, benefiting from incremental innovations, has never been better. Further, the loss of relevance can happen gradually over time, making it hard to detect.
The all-too-frequent problem appears as follows. A brand seems very strong. Tracking studies show that it retains a high level of trust, esteem, perceived quality, and perhaps even perceived innovation. Customers may still be satisfied and loyal. However, its sales are slipping, perhaps dramatically, and fewer customersâparticularly new customersâare considering it. Why? In many cases the brand is in trouble because the product category or subcategory with which it is associated is changing or fading, perhaps being redefined or replaced by another. The brand has become irrelevant to one or more important customer segments who have changed their decision at the category or subcategory level while your brand has not adapted.
If a group of customers wants hybrid sedans instead of SUVs, it simply does not matter how good an SUV brand people think you have. They may still respect your SUV brand, believing it has the best quality and value on the market. They may even love it and recommend it to any friend interested in an SUV. If they ever buy another SUV, they will buy yours. However, if they are interested in a hybrid sedan because of their changing sets of needs, then your brand is irrelevant to them. That may be true even if your brand also makes hybrid sedans, perhaps under a subbrand, because it may lack visibility and credibility in the hybrid arena.
The irony is that a source of brand strength can become a relevance liability when the marketplace changes. Kirin was the king of beers among beer drinkers in Japan for some twenty-five years, enjoying a 60 percent share by making the âbestâ lager beer, consumed loyally by the heavy users. But in 1986 Asahi created a new subcategoryâdry beerâwhich had a crisper taste and reduced aftertaste, in part because of a higher alcohol content and different ingredients. The dry subcategory gained traction, particularly among the younger consumers, and Kirin lost 10 share percentage points in one year and ultimately lost share leadership to Asahi. The Kirin reputation for having a great lager beer was a problem, as they unsuccessfully tried to be relevant to the dry beer segment. Even a new Kirin Dry beer fell flat, because it was not credible coming from the authentic lager beer brand.
The ultimate tragedy is to expend precious resources on a brand in order to win the brand preference battle with âmy-brand-is-better-than-your-brandâ marketing, only to have that effort wasted because of a relevance problem. Analyses of the Young & Rubicam BrandAsset Valuator database, which has monitored thousands of brands for nearly two decades over dozens of countries, have shown that relevance is necessary for successâdifferentiation without relevance is of little value.1 Consider a pay telephone company that has controlled the very best locations. Or a newspaper with the best editorial staff. Or Kodak, which is perceived to have the very best film and film processing. Or a brand aiming for a large prestige market in fashion clothing, only to find that styling has changed. In each case, the offering, superior though it was, faced declining sales because a significant number of customers were no longer buying what the firm was perceived to be making. Making the assumption that brand weakness is a brand preference issue can lead to wasteful off-target initiatives that do not address what is really going on.
There are five response strategies available to a brand that is or might soon be at risk of losing category or subcategory relevance.
Stick to Your Knitting
The default strategy is to âstick to your knitting.â Stop the erosion in sales or even reverse it by making incremental improvements, investing in brand quality, and delivering on the promise. Kirin could have argued to customers that lager was still relevant, perhaps by contemporizing the heritage or finding a way to freshen up the quality story. Perhaps they could have blunted, if not reversed, the surge toward dry beer.
Think of the safety razor. When electric razors were introduced in the thirties, there was a prediction that the safety razor had seen its day; the advantages of an electric shaveâless mess, time, and riskâseemed compelling. However, the exact opposite happened. The safety razor won the battle and enjoyed healthy growth. This was due in large part to an incredible flow of innovations from Gillette that have continued to this dayâfrom the Trac II in the early 1970s to the Fusion Power in 2013. The brand energy and performance of these advances eclipsed the threat of electric shaving. (For more about brand energy and its role in relevance, see Chapter Two.)
Patrick Barwise and Sean Meehan provide a rationale for the stick-to-your-knitting strategy in their book Simply Better.2 They argue that customers, especially those of service firms, want to buy the best optionâthe one that is simply better than the others. The assumption that customers want the new or the unique is overblown, according to Barwise and Meehan. Rather, they argue, it is best to just focus on delivering better and better on the core promise instead of attempting to create or join a new subcategory.
The stick-to-your-knitting strategy is certainly employed by several fast-food chains. In-N-Out Burger, a chain in the western United States, has developed intense customer loyalty with its menu of burgers, fries, shakes, and soft drinks and has made no effort to adjust to the eat healthy trend. They simply continue to deliver the same menu with uncompromising quality, consistency, and service. One assumption behind their strategy is that the healthy eating trend will not take over everything; there is a large, stable segment of the population that is more interested in the familiar tastes and forms of fast food. Another assumption is that even those who subscribe to healthy eating will treat themselves once in a while and buy from a brand firmly positioned in the indulgent world.
The stick-to-your-knitting strategy involves supporting an effort to win by investing in the strategy to maintain and improve the existing offering with incremental innovation. Rather than being blind to market dynamics, the firm recognizes the emergence of new categories and subcategories and chooses to fight those trends.
The risk of the stick-to-your-knitting strategy is that the new category or subcategory may be based on such a strong trend or such a compelling set of benefits that avoiding it may prove futile and even disastrous. Newspapers attempting to resist the massive shift toward online news options ma...
