Four critical foundations to accelerate brand growth
In February, Kraft Heinz announced a $US15.4 billion ($AUD21.7 billion) write down in value. A triple threat drove the financial decline – declining sales, reducing margins and rising costs. Kraft Heinz is not the first to face this fate, and it won’t be the last. I would go as far as to say that the FMCG industry is facing a crisis. There has been a steady shift away from growing brands to running efficient, low-cost supply chains. I believe this is based on a flawed assumption – that brands are static. Our brand sold X amount last year, so if we do the nothing, it will sell the same next year. Many FMCG businesses are in a state of inertia, which, in a highly dynamic environment, results in decline.
Some FMCG businesses are thriving. The a2 Milk Company is a great example, accelerating to a billion dollars in turnover.
The fundamental difference between growth and decline hinges on how well companies master the four critical brand foundations.
1. Identify customer problems
Customers pay brands to solve their problems. Understanding motivations fuels growth. What are your customers’ most significant needs and motivations, and more importantly what are the problems that stand in their way to achieve them?
The modern business is drowning in big data, which explains what is happening, but often struggles to explain why. The motivating insight – the why – comes from getting out into the customers’ world. In his best-selling book Small Data, Martin Lindstrom refers to this as “the tiny clues that uncover huge trends”.
The insight that fuelled the Pods chocolate brand to triple in size in less than five years was about the social cachet from bringing something interesting to the table to share, but the market-leading incumbent, Cadbury Dairy Milk, was boring, unhygienic and messy to pass around.
2. Design solutions
Once the customer problem is understood, it can now be solved. What are the core features that set your brand apart from the competition, and more importantly what functional and emotional benefits do customers receive? Can you articulate them in a language that is motivating and meaningful?
The biggest temptation marketers face is creating gold-plated products with the lot, products full of every imaginable feature. This fails two stakeholder groups. Customers become confused by the offer, making the brand hard to recall in the critical buying moment. Shareholders face reduced profits, with high costs and low margins.
Bundaberg Rum returned to growth by launching Lazy Bear, a low-alcohol RTD mixed with dry and lime, making the brand sessionable during casual get-togethers.
3. Sell experiences
Sales channels play a fundamental role in building or destroying brands. They get brands in hands and help position brands. First-hand experience is the fastest way to build brand awareness and associations. Marketing science institute Ehrenberg Bass has found that consumers know more about brands they use and little about brands that they don’t. Selling more is critical for revenue as well as brand health.
The grip the major Australian retailers have on FMCG brands is firm. The volume they move is attractive, but at what cost. The retailers’ relentless obsession on discounting has squeezed FMCG margins and the buying experience is uninspiring for customers. Brands sell volume, but not much else.
In contrast to the dealers, curators are focused on product quality and the depth of the backstory, ahead of the margins and price. Every industry has a group of smaller independent retailers that take great pride in what they range. Curators provide amazing experiences, which supports higher prices and builds memories.
We doubled Cool Ridge in two years by partnering with non-grocery retailers including McDonald’s, Dreamworld and Grill’d. Good sales partners create great customer experiences.
4. Embed memories
Adults make approximately 35,000 decisions a day. The reality is that customers are time poor and deciding which brand to buy is just another decision. Brand decisions are made quickly. According to Daniel Kahneman, 97 per cent of decisions are System 1, that is they are unconscious, automatic and effortless.
The key to your brand beating the competition comes down to your ability to build memories and associations to make it easy to recall. Brain scientists have found that the basal ganglia acts like a bouncer, selecting which messages to let in and which to reject. Getting past the brain’s bouncer allows you to stimulate parts of the brain that release adrenaline and support the forming of memories. The key is to stop selling features and to start telling emotionally engaging stories.
Growth companies have found a way to consistently and systematically create memories for their brands. All Four Pillars gin stories have their hand-made Christian Carl stills at the heart of the story because the brand is about elevating the craft of distilling.
Historically, FMCG companies could create OK products, build efficient factories, sell through large retailers and support with advertising. Today though, the environment is too dynamic. Startups are getting closer to customer problems. Big retailers are squeezing margins, and media landscapes are complex.
Brands that deeply understand customer motivations, develop meaningful and motivating solutions, sell experiences and embed memories with more hustle than their competitors are the ones that will enjoy accelerated growth.
Troy McKinna is a brand building specialist, innovation consultant, author and speaker. This article first appeared in the July issue of Inside FMCG. New edition out now, subscribe here.