case study: managing brands in slow-growth or declining markets
As many consumer markets reach the maturity or decline stage, is product and brand innovation the way to revive growth?
Introduction
Many consumer markets are now labeled“mature”. Take some examples:
• Tea and biscuits
• Cider and beer
• Fast food
• Ice cream
What do we mean by mature?
Mature markets are generally classified as those that experience sales growth of about two per cent a year – somewhere near the rate of price inflation. The implication of this growth rate is that there is unlikely to be significant volume growth in the market. And if there is, it implies that average selling prices are falling.
What are the implications for brands in mature markets?
Firstly – and most importantly – the market may offer very few new or promising opportunities for rapid growth. Brands in such markets may be nearing the end of their life cycles.
It is generally believed that rapid improvements in technology and the push towards globalisation mean that the life-cycles of brands are getting shorter.
It took the motor car market almost a century to reach the current level of maturity. Yet customers who wanted a mobile phone got one within two years of the market taking off.
Part of the problem is that brands can be communicated much more effectively and wider than ever before. The growth stage of a new product or brand can be much steeper – but shorter.
Sales of many successful brands soar immediately after they launch, but often flatten out as they attract all the potential customers they can and face competition from copycats (otherwise known as “me-too” brands!. After the initial growth spurt, brands are forced into taking a range of measures, such as price cuts, introducing sales promotions and special offers, and diverging into sub-branded products and off-shoots to keep interest and sales momentum up.
Re-launch or reposition
One strategy is the re-launch and re-position mature brands. Lucozade and Ribena are excellent examples of mature brands which have been successfully re-packaged and re-targeted – in both cases at the youth market.
Product innovation
Product innovation is another strategy.
A good example is New Covent Garden Soups. This business focused on providing packaged fresh soups for sale by the major grocery supermarkets – who previously had only sold tinned or dried soups. In doing so, New Covent Garden Soups grew rapidly by adding value to what was one of the most mature segments of the food market.
Marketers can also reverse the decline of brands and markets through what is known as "discontinuous innovation" - a development that fundamentally alters the state and perceptions of a sector.
Haagen-Dazs heralded the rebirth of ice cream as a premium product and paved the way for brands such as Ben & Jerry's to cash in on this enlivening of a once very stagnated market.
In a sector where loose tea ruled, tea bags revolutionised the way the drink was perceived - ending the ritual of pouring tea from a pot and reinventing it as a fast turnover convenience drink. Round tea bags brought further innovation to this market.
Cider, which was considered a declining market in the 1980’s, was re-invigorated by Diamond White - a high strength white cider.
Growth in emerging markets
Another area of opportunity for mature brands and products is in emerging markets.
For example, US-based Kentucky Fried Chicken has recently announced that it is considering opening several hundred new restaurants in the UK to sell the products of other brands owned by its US parent company (including Taco bell). UK consumer trends towards more eating out more, the lack of alternative restaurants and an unusual willingness to eat fast food - has made the UK a key market for US-owned fast food chains, which face stagnation at home.
In another example, Dell - the direct sales computer manufacturer – has announced it is responding to lower growth in the personal computer market by launching a range of own-brand printers, rather than re-selling models from the likes of Epson.
The more technologically advanced the product, the shorter it’s period of rapid growth, and the longer its era of flat sales and eventual stagnation. There is little growth in sales of televisions, though innovation during the Eighties kept the market buoyant. There is a replacement cycle, rather than growth in penetration, so people generally buy the latest wide-screen TVs when they are looking for a new set. The experience of the computer market over the past year is a convincing example of how quickly markets rise and fall.
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