A serious threat facing most brands in dynamic markets is the loss of relevance because the category or subcategory they are serving is declining. Customers are no longer buying what the brand is perceived to make. New categories or subcategories emerge as competitors’ innovations create “must haves.” This dynamic can happen even if the brand is strong; customers are loyal; and the offering has never been better, thanks to incremental innovations.
Brand relevance dominates. If a group of customers wants a battery powered car it does not matter how much they love your hybrid brand. It will not be relevant. A newspaper can have the best new coverage and editorial staff, but if readers are diverted to cable news or blogs, relevance will decline. The ultimate tragedy is to achieve brilliant differentiation, winning the preference battle, only to have that effort wasted as its relevance declines.
How does a brand stay relevant? How can a brand avoid the disinvest or milking decision?
There are four strategies that can work:
1. Gain parity.
The goal is to create a close-enough option to a competitor’s “must have.” Several of the fast-food brands introduced menus items like salads and fruit smoothies designed to be “good enough” for the the healthy-eating segment. McDonald’s, facing a threat from Starbucks to their breakfast and other off-hours business, introduced the McCafe line, close enough with respect to coffee quality to escape exclusion by many customers.
One challenge facing the parity options is that the brand may be perceived to lack credibility in the new area. Another is that that it might be difficult to actually deliver on the promise, given that the culture, assets, and skills of the operation were not designed to support the parity initiative.
2. Leapfrog the innovation.
Instead of being satisfied with being relegated to having a parity product, a firm could attempt to take over the new category or subcategory or at least to become a significant player with a substantial or transformational innovation that leapfrogs the competitor. Nike with its Nike + shoes and iPod Sensor allows a runner to hear music plus keep track of each workout. The Adidas miCoach also provides a way to monitor and link each workout to a computer but it has an active forum, the ability to create a program design to fit a sport and goals, and even a contact to trainers who can design customized programs. Cisco has frequently filled gaps in its product line with an acquisition. They then added Cisco-driven synergy and systems benefits creating a leapfrog result.
The leapfrog strategy represents a formidable challenge because substantial or transformational innovation is needed and because getting established in a marketplace where a competitor likely has scale and momentum will be difficult.
Modify and reposition the brand so that its value proposition becomes more relevant given the market dynamics. Madonna has had several transformations through the years to maintain her relevance. L.L. Bean, built on a heritage of hunting, fishing, and camping, repositioned itself as a broader outdoor firm relevant to the interests of outdoor enthusiasts such as hikers, mountain bikers, cross-country skiers, and water-sports enthusiasts. The outdoors was still treated with the same sense of awe, respect, and adventure but from a different perspective.
The challenge is to have enough substance to earn credibility in the new position and to implement the rebranding strategy as well. Madonna and L.L. Bean had to live the new position and provide benefits that were relevant.
4. Stick to your knitting.
Rather than adapting, keep pursuing the same strategy with the same value proposition but just do it better, keep improving, and create brand energy. The safety razor, for example, was threatened in the 1930s with the introduction of the electric shaver and its compelling benefits. However, an incredible stream of innovations from Gillette allowed it to beat back the new category and enjoy robust growth. In-N-Out Burger, a chain in the western United States that has developed intense loyalty with a menu of burgers, fries, and shakes, has made no effort to adjust to the healthy trend. It simply continues to deliver the same menu with uncompromising quality, consistency, and service under the assumption that a worthwhile segment has ignored the healthy tread and another will indulge periodically.
The risk of the stick-to-your-knitting strategy is that the new category or subcategory might be based on such a strong trend or such a compelling set of benefits that avoiding it might prove futile and even disastrous.
The selection of the optimal response will be context specific, but it will involve two questions. What is size of the relevance threat and its supporting trend? And what is a realistic judgment about the firm’s ability to innovate, add needed capabilities, and be successful in the marketplace? Complexities, interactions, and future uncertainties make them tough questions to answer but a loss of relevance is tougher still.