Branding in the flat world of commodities

"They copied all they could follow, but they couldn't copy my mind,

And I left 'em sweating and stealing a year and a half behind.

Rudyard Kipling,  The "Mary Gloster"

Commoditization can take several forms.  

In the first instance, your product may be one of dozens in the marketplace, all of which appear to be identical. The differentiator then has to be price, or service, or the added value of expertise, which can be sold along with the product.  Since you presumably know more about your own product than the end user does, you are in a position to advise him on how to use it most efficiently, how to use it in other applications, how to substitute it for similar products (simplifying inventory), how to use it creatively, and how to purchase the optimum form of the product for the intended use.

This, of course, involves understanding the customer's business and his specific needs, and gaining trust based on the value of your expertise, which acts as a profit multiplier – for you and the customer.  But once you gain this trust, having demonstrated the value of your input, your product has ceased to be a commodity.  You've become part of the customer's valued team, and price is no longer the key criterion in purchase – and re-purchase – decisions.  You've leveraged customer service to a new, more powerful level. This approach, aptly named "Consultative Selling" by Mack Hanan, (in his seminal book of the same title, published by the American Management Association) works especially well with industrial and commercial customers, where such expertise can be a make-or-break factor.

The challenge then becomes communicating this critical added value to potential customers around Tom Friedman's newly flattened globe.  This requires an understanding and expanding of the consultative selling process, as well as a high degree of strategic, tactical, and communications creativity.

Another kind of commoditization takes place when someone deliberately clones your product, and sells it in direct competition with you.  Your product's uniqueness suddenly evaporates.  Patent law was designed to protect against this, but there are ways around patents. In any case, many of the things that make a product unique are not patentable.

When Tic-Tacs were introduced by the Ferraro Candy Company of Italy, they owned just such a non-patentable uniqueness.  A breath mint the size of a pignoli nut delivered a mouth-filling blast of refreshment that was startling.  The TV campaign urged the consumer to "Put a Tic-Tac in your mouth, and get a blast out of life."   The graphics were explosive, and the accompanying music was loud to the point of raucous. The communication was complete.  Trial went through the roof, and the television budget soared above ten million dollars.  (You can make a nice buck selling an ounce of sugar at Tic Tac prices.) Then, inexplicably, sales hit a wall, and experienced a steep slide, despite the fact that hordes of new customers were coming aboard daily.

At first, it appeared that the company had identified the culprit.  Warner Lambert, which sits astride the breath market like a colossus, with a wide range of products from mouthwash to chewing gum, had introduced a Tic-Tac clone, right down to the size and shape of the pill, and the handy purse-or-pocket-sized plastic dispenser.  The only difference was that Dynamints (note how the name cleverly captured the unique feature of the product) came in an extremely hot cinnamon burst, reminiscent of the old Red Hots candy. Otherwise, the mouth feel and experience were identical.  Dynamints were cannibalizing Ferrero's mints.

Then, a strange thing happened. SAMI reports showed that Dynamints were experiencing a delayed, but parallel plummeting sales curve.  The problem, whatever it was, was common to both brands.  Ferrero hastened to run some focus groups.  They found that the brand delivered on its initial promise – in spades.   The tablets turned out to be too hot for consumer taste, so initial trial did not translate into repurchase.  At the price point of candy mints, that was the kiss of death. The bucket was leaking faster than it could possibly be refilled.

No problem.  Ferraro reformulated its Tic-Tacs, reducing the minty blast.  Back to focus groups, where they were informed that the product now failed to deliver on its promise.  Its ballyhooed explosive mouth feel was gone, and the product had become the boring equivalent of a quarter of a Life Saver.  Intent to purchase was zip.

The company faced a conundrum.  They couldn't spice the product up, and couldn't spice it down. They certainly couldn't leave it as it was. The product's very reason for being had vanished.  That's when they came to us.  In the middle of our initial meeting, after they had related all of the foregoing, one of my partners had launched into the credentials part of our presentation. Having heard it all before, I began to (apparently) absentmindedly pour some Tic Tacs into my coffee spoon.  One of the Italian marketing people interrupted the flow of the presentation, exclaiming, "Mr. Jackson, that's not how we use the product."

"I'm well aware of that," I responded.  "But it appears to me that you need a new place to stand. Your flavor story is shot. The equity you had it that claim is down the drain.  However, I just got a dozen of these Tic Tacs to fit in my teaspoon.  I think I remember that sugar has about sixteen calories per teaspoon.  The product is mostly sugar, right?"  

"Yes, sugar, peppermint flavor, and a carnauba wax coating."

"Well, I realize that this is not a regulation teaspoon, but it appears that these Tic Tacs have roughly two calories each."

"Why does that matter?"

"Mints are about breath.  Breath is part of appearance.  So is weight.  Your heavy-user category has to be concerned about the consequences of consuming all that sugar. I believe we've found our place to stand."

They phoned Italy from our office.  Within two days, the factory responded.  A single Tic Tac, it turned out, contained a bit less that one-and-a-half calories.  We rounded the decimal up, and a slogan was born:  The 1 1/2 calorie mint.  (See my website, dickjackson.com.)

Warner Lambert, which doubtless had analyzed their sales plunge with equal alacrity, discontinued Dynamints, leaving the field to Ferraro.  Tic Tac's new positioning worked a miracle.  The sales curve reversed, and soon surpassed its previous highs.  The company introduced flanker flavors, including spearmint, citrus flavors, and yes, cinnamon.  The hot spiciness of all of these was drastically reduced, but it no longer mattered.  The customer had a better reason to purchase the product than simple novelty.  This claim had staying power. More important, it had frequency-of-use power, and all-important repurchase power.

The phoenix had risen from the ashes, stronger than before.

What would have happened if Dynamints hadn't forfeited?  Difficult to predict, but we can venture a guess.  Tic Tac would likely have maintained its loyal base.  Its flankers would have protected its position.  The 1 1/2 calorie claim, once made, belonged to them.  Though not unique, it was uniquely claimed, and had become what Rosser Reeves, in his Reality in Advertising, (Alfred Knopf, New York, 1968) revealed as a U.S.P.: unique selling proposition  "If the product cannot be changed, and remains identical, it is possible to tell the public something about that product which has never been revealed before.  This is not a uniqueness of the product, but it assumes uniqueness, and cloaks itself in uniqueness, as a claim."

No one has said it better, before or since.

 

Branding & positioning the commodity product in a flat world

How can you rescue a brand that's being hammered by look-alikes, or sliding into commodity status?

The twin forces of globalization and rapidly accelerating technology are driving what has been called a global imitation cycle.  The consequence is the increasing commoditization of a wide range of products.  Where price, and price alone, becomes the differentiator.

What follows is the inevitable erosion of margins, further exacerbated by cheap labor in many parts of the used-t0-be undeveloped world. 

To some extent, outsourcing and offshore production have temporarily leveled the playing field, slowing the process. But almost everyone has caught on; we've entered the phase of rapidly diminishing returns.  The playing field - the world - to quote Tom Friedman, has become flat. Producers anywhere can now take advantage of cheap labor, while none can avoid the growing scarcity of energy and raw materials.

Further accelerating commoditization.

For some manufacturers, this has led to the lowering of standards, laxity in quality-control inspections, and an alarming decline in product safety -- with devastating consequences in the marketplace.  Even China, the world's production powerhouse, has seen its national reputation plummet in exports from toys to frozen seafood.  Suddenly, "Made in China" has rendered entire categories of products suspect, becoming a marketing liability not easily overcome, even by below-cost goods.  (It's also clear that China's remarkable growth is unsustainable in the face of air, water, and soil pollution, the cascading degradation of the environment, and the inexorable price pressure on energy and raw materials.  The price advantage will diminish with time, but not enough to resolve the commoditization problem.

So, how is a marketer to cope?

Fortunately, there are options.  In an age of differentiation, the product defines the company.  A brand with a demonstrable or perceived uniqueness can lift its company's reputation, and with it, the perceived value of its other products.  

In an age of commoditization, the company defines its products.  This used to be called "reputation."  In the old days, people used to say, "No one ever got fired for buying IBM."  The company's name and logo were a built-in uniqueness, which could not be copied or imitated, except by guys who sell Ronex watches on street corners. 

Today, when virtually everything can be reverse engineered, imitated, designed along different lines, or flat-out copied, uniqueness is difficult to maintain for very long.  But the uniqueness imparted by a company name, or that is inherent in the brand itself, can't be copied. Barring catastrophe, or willful malfeasance, that kind of uniqueness, once established, takes a very long time to erode.

There are uniquenesses that inhere in the product itself, which can't be imitated or reverse-engineered.  They can be created, or they can be discovered where they have long remained dormant, or unrecognized.

Some years ago, a small soda company in New York was threatened with having to discontinue an 108-year old brand because its natural consumers had become geographically dispersed, devastating its "on premise," or deli-restaurant, business. The brand was also sold in mom and pop grocery stores, but these, too, were an endangered species.  The result was that sales were down to 100,000 cases, which is about what Pepsi sells in the time it takes to read this sentence.  Worse, the brand's flagship flavor was Dr. Brown's Cel-Ray, a celery-flavored beverage which is a decidedly acquired taste.  Price pressure from store "brands" of commodity soda put an even greater strain on the parent company's other lines, so it lacked the resources for aggressive promotion.

The brand managers, who'd been with the company for several decades, had tried to distribute the brand in supermarkets, but were unceremoniously shut out.  What to do?

It was evident to me that nothing would help the on-premise situation.  The deli restaurants, in decline, were already selling all they could, to fiercely loyal customers, one bottle at a time.  Ditto for the mom & pops. The only possible solution was to crack the supermarket barrier.  

"Forget it," said the sales manager, "You don't understand the soda water business, kid.  We can't even break into Waldbaum's, and we've been pounding on their doors for thirty years."

New York City is a notoriously difficult market to crack.  Even cash under the table doesn't work any more.

So we tried a unique approach.  Many of Dr. Brown's former customers had relocated to Westchester County, which all by itself is a respectable market.  In addition, it's an inexpensive media market, if you exclude TV, which serves the entire megalopolis.  (Our annual budget was $1 a case, or a meager $100,000, which is about what Pepsi spends in the time it takes to read this sentence. )  So we prepared a test market introduction, using the Ganett chain of newspapers, and local radio.  We built this ad campaign into a distribution program which, in this case, was the ball game.

Yes, we offered standard stocking fees to the supermarkets.  But that had never worked in the past.  What did persuade them was an argument that went as follows: "At present, your supermarket competes on price, and since you all sell the same goods, your margins suck.  In addition, because prices inevitably converge, your customers follow the specials around town.  If you stock our brand, it won't account for much all by itself.  But this brand has loyal customers who miss it, and who will go out of their way to find it.  Once in your store, they'll buy a six pack of soda, and a hundred bucks worth of meat.  How will they know you carry Dr. Brown's?  We'll give you big, four-color posters to hang on your windows, announcing the availability.  The posters will not mention price."

That sales pitch got us 86% penetration into Westchester County supermarkets.  Which sold several flavors, in six packs, and 827 ml bottles.

The initial poster featured a mouthwatering photo of an overstuffed pastrami sandwich on seeded rye, with a dewy soda-fountain glass of sparkling Cel-Ray, and a pot of mustard and dill pickles framing the soda bottle with its newly-designed label.  The legend proclaimed: For prompt, temporary relief of the minor pain of nostalgia.  That was the magic, unique, un-copy-able ingredient: the nostalgia of loyal customers who loved the brand, missed it terribly, and were willing to go to great lengths to get their hands on some.  (The poster can be found on my website,  dickjackson.com.  

Sales skyrocketed. For starters, we had automatically upgraded single-serving sales to six pack sales. Second, New York City supermarkets regularly talk to their Westchester County counterparts, and so on.  Within eleven months, the brand was selling 750,000 cases in the New York metro area.  Now we could afford some modest TV in the tri-state arena.  (See two ten-second TV spots on my website.) Today, Dr. Brown's is available in supermarkets around the country, from Maine to Los Angeles to Miami, and across the Midwest.

Dr. Brown's, a consumer brand, is an example of a single product that lifted the product lines of an entire company, and the fortunes of that company.  (The phenomenal success attracted the attention of a much larger competitor, who, after making an offer the company couldn't resist, purchased the whole shebang, in order to get its hands on the brand that had been about to be terminated by its owners.)

The principle of positioning a brand, repositioning a brand, or fashioning a brand out of a commodity, holds true as well for high-tech products, where uniqueness can have the half-life of a ripe banana.  And for industrial products which have long ago lost their uniqueness, if indeed they ever had any.

Commoditization is a challenge.  Just not an insurmountable one.

Dick Jackson

See my website http://www.dickjackson.com