From asking to anticipating
Brand building has been an incredibly powerful lever for creating value for businesses. Led by pioneers including P&G and Coca-Cola, everyday products such as washing powder and carbonated water were given meaning, enabling marketers to sell products way above their commodity values.
Creating meaning was simple; ask consumers about their values and then play this back to them in brands’ advertising campaigns. You weren’t selling washing powder but home pride. You weren’t selling sugary drinks but fun, connection or pleasure.
Leaders in a category didn’t necessarily have the best products or services but were most successful at creating meaningful, emotional relationships with consumers.
Kantar’s Brandz study has tracked the impact of brand on value creation over the past 16 years.
But it’s all changed. Brand building has become more sophisticated in the last 20 years. It’s no longer enough to simply ask consumers what they want.
Led by brands including Nike and Apple, marketers now anticipate what consumers will need. This includes developing products and services, creating and entering new categories and designing end-to-end brand experiences. It’s created huge value; Nike’s share price has increased from $6 to $127 and Apple’s shares grew from an astonishing $1 to $131.
Nike has continually anticipated and delivered consumer value with products and services in adjacent categories.
The road ahead
The next few years will see our jobs as marketers and brand builders become increasingly demanding.
We face new challenges. Our trading environment is tougher with Covid and the Ukraine war leading to rising prices for energy and raw materials. And let’s not overlook the incoming climate emergency.
The competitive context is more difficult too. Category lines are blurred, technology is reducing barriers to entry, and globalisation is creating direct competition with low-cost new entrants.
Customers are more discerning and demanding than ever. They have almost limitless access to products, services, ratings and reviews. Achieving cut-through with them has never been harder; attention spans are shorter, and the media landscape is crowded.
And finally, businesses and brands face new pressures to address a wide range of social and environmental issues. Questioning capitalism has become mainstream – including by a growing cohort of consumers who are concerned about their impact on the world.
Facing this growing list of challenges on the horizon, we believe that the brands and businesses that will succeed in the next 20 years will be those that anticipate what consumers want and successfully deliver future consumer value.
We believe that FCV is the only dependable and sustainable way for a business or brand to grow.
The importance of Future Consumer Value
At Forge, we call this anticipation of consumer needs creating Future Consumer Value (FCV). Helping our clients to realise FCV is our North Star. On every client engagement we use it to determine our activities, focus our attention, and prioritise the recommendations we make.
We believe that FCV is the only dependable and sustainable way for a business or brand to grow. By combining a focus on the future, with clarity on what consumers will want and need, brands will unlock commercial value.
As marketers, it’s not difficult for us to agree with this. But we frequently come across client organisations who despite talking a good consumer-centric game, undermine it when it comes to their organisational behaviours. In many cases, the behaviours demonstrated are the antithesis of FCV. They are Short-Term, Manufacturer-led, and Sales-driven ‘STMS’.
Often, they are high-quality, well-intentioned, (ostensibly) consumer-led businesses, that seemed to have suffered a kind of collective amnesia. Deep down somewhere in their subconscious, they know they should be focusing on what their consumers want or will want, but for a variety of reasons they’ve stopped behaving like a consumer-orientated business.
So how do you know if your business has lapsed into STMS?
It’s usually identifiable via several specific symptoms. Let’s see if any of these are familiar.
1. You’ve gravitated toward lots of different ways of meeting the same consumer need
Is your business constantly developing new propositions, but also perplexed at why it isn’t growing very fast? If so, you’re likely stuck in a classic manufacturer-centric cycle. Instead of spending time thinking about what consumers want or need, you’re thinking more about what you can easily make or deliver, which often means more of the same. These launches lack incrementality and will ultimately cannibalise your existing portfolio.
There are lots of categories where we can see this playing out right now. Take bottled water for instance; many of the manufacturers in this category are focused on innovation, but much of that innovation is simply directed at finding new ways of meeting the same need i.e., the need to stay hydrated. The category is obsessed with facilitating hydration whilst forgetting there are other things that the category could do for consumers e.g., relaxation, socialising, and pleasure.
In categories as diverse as household cleaning and retail banking, you can see brands trying to bring genuinely fresh innovation, but much of it is targeted at the same set of well-established category needs, efficacy, control etc. Only a few brands like Method and Monzo feel like they are really trying to address genuinely new sets of needs and thinking hard about how their respective categories are evolving.
Monzo has created a highly consumer-centric proposition including social payments, fee-free international withdrawals, virtual accounts (pots) and AI verification.
2. Your innovations are not innovative.
Innovation can be seen as risky and expensive and when the stakes are high, we often try to manage the risk by sticking to what we know, or what we’ve seen work previously. This includes doubling down on features that consumers ascribe little or no further value to. At some point in time, having more than one blade in your razor may have seemed like a good thing, but by the time we had reached the addition of a fifth blade, it felt very much like innovation for the sake of it and consumers struggled to see what they were paying extra for.
Another reason your innovations don’t unlock growth is because you are avoiding potential future value opportunities for fear of disrupting your existing business – or you decide to go after them too late. Pursuing genuine future value sometimes requires betting against the very business model that has sustained your success to this point e.g. non-alcoholic drinking occasions have been growing for over a decade, but it took Heineken launching Heineken 0.0 to convince the rest of the industry that there was a viable opportunity, leaving the rest of the beer category scrambling to catch up.
We frequently ignore the big bets that put us in the frame for what consumers will truly value in the future, and instead focus on more iterative initiatives that require just as much effort for far less upside.
The non-alcoholic beer category has exploded in recent years with many major brands looking to create their version of the product.
3. You have an inefficient or confusing brand architecture
If you haven’t ascribed clear roles to each of your brands, or you’re struggling to commercially support all of them, then it’s likely that you are running an inefficient or confusing portfolio. Why support brands that aren’t needed and why persist with an architecture that makes it harder to navigate your offer and ascribe value to different parts of your range? You can see this happening right now in pet food. In this category, many of the manufacturers are simply supporting too many brands. We suspect that a lot of the brands we see today were manufacturer-centric, created as a shortcut to support the launch of a specific innovation or format. It’s easy to see why it happens. Nothing galvanises attention like the launch of a new ‘brand’ but do this too often and you finish up branding what effectively amounts to a ‘pouch’ or a ’pate’. Such a portfolio is not only potentially confusing for consumers it’s also expensive to support.
The benefits of each brand in the architecture should also be abundantly visible to the consumer, on pack, on shelf or online. Too often architectures are used to make sense of things internally instead of being oriented to reflect the way consumers make decisions.
Brands like Colgate and Sensodyne operate in a category where consumers make quick decisions and yet both brands seem to be supporting unnecessarily complex and unhelpful architectures on shelf.
Whilst brand ‘blocking’ on shelf can be beneficial in a retail context, it often diminishes the opportunity to demonstrate additional value to consumers.
In a recessionary context brand architecture always tends to fall under the spotlight. As things get tough you don’t want to be caught out trying to support too many brands. You want all your brands to be ascribed clear roles which are clearly visible to and understood by consumers, and where relevant, the ability to support a clear pricing strategy.
4. You are struggling to stretch your core strengths into relevant consumer spaces
The antidote to a complex brand architecture is to better utilise your existing brands. But almost as common as an overpopulated architecture, is an underleveraged brand.
We frequently see brand owners that have identified growing and incremental consumer spaces – whether new needs, occasions or behaviours – but lack the plan to stretch the brand into them. They have often invested a lot of time and money in understanding the full range of opportunities that exist within their category, but instead of this bringing the hoped-for level of clarity, they struggle to prioritise and target them.
The potential upside when brand stretch is focused on future consumer value is a force to behold. With no additional brand equity investment, targeting new needs and occasions can acquire new customers, provide more buying opportunities for existing consumers, and support price rises.
If you’re looking for a brand that understands how to do this well, then look no further than Maltesers. It demonstrates a solid understanding of the needs of its consumers, combined with a formidable range of formats and structures designed to unlock each opportunity, e.g., treat, grazing, share, party, cinema, gifting, seasonal etc. Maltesers demonstrates what can be achieved when a brand executes a brand stretch strategy in a focused and systematic way.
Mars uses product and format innovation to spread its brands across multiple consumption contexts and occasions.
5. You are addicted to short-term price promotion which erodes value
This is a classic symptom of STMS and is usually present in those businesses that failed to realise that while price promotion can be an effective short-term tactic, it works by drawing upon and eroding your existing brand equity.
Mark Ritson wrote about this at length in his Marketing Week column following Tesla’s first foray into discounting.
He showed how short-term price promotions are:
- Risky (they aggravate customers who paid full price and can start a price war)
- Damaging (they erode brand value making it harder to sell at full price later)
- Ineffective (the vast majority of the sales lift is sales that would have happened anyway, now or in the future)
- Have lasting impact (by training your customers to treat your brand as commodity and buy on offer)
Tesla owners were rightly unhappy when, shortly after purchasing their new cars, they found them devalued by 20%. Some went so far as to create and sign petitions.
Furniture retailers DFS, like so many other retailers, is stuck in the same perpetual cycle. Its constant
discounting works against its need to build desire and increase its margins and instead gamifies the payment process, increases FOMO stress among customers and gnaws away at its already diminishing brand equity.
You’ll also see this in evidence in the supermarket aisle, especially in categories like beer, spirits, and dairy. It even affects premium brands like Evian and Peroni – what often starts as a one-off tactical price promotion quickly turns into a full-blown addiction.
A drift into STMS can occur quickly and evenimpact those businesses that you’d assume would have full immunity
What causes businesses to drift into STMS?
It’s easier than you might think. And usually, it’s a combination of factors.
Human nature plays a role.
It’s natural to focus on problems that are urgent versus those that aren’t immediately pressing. Hitting that short-term sales target or rushing to meet a retailer deadline might tick off a job to be done in the short term but not be in the best interests of creating value in the long term.
This natural bias for the short-term is exacerbated by brand planning timelines and how marketers are incentivised. Often, an organisation might have a number of long-term consumer value creation goals but then measure and reward its employees’ contribution with 12-monthly KPIs and incentives.
Misaligned internal incentives.
Measuring the wrong things causes unintended consequences. For example, when working with a multinational FMCG with a portfolio of brands in the same category, they revealed that the brands were all targeting premium consumers.
This was because the brand leaders were individually incentivised and had each independently taken the decision to own the highest value space.
Organisational structures can create distance.
As businesses grow, teams become more siloed, and the consumer eventually becomes the sole
responsibility of the insight department. Conversations with customers become increasingly limited and abstract to everyone else, especially those in more senior positions.
Siloed teams find it more difficult to join the dots to create value. It never ceases to amaze us, the opportunities that
can be created when you simply bring together two groups of colleagues who don’t usually get the opportunity to work together.
Whatever the factors at play, a drift into STMS can occur quickly and even impact those businesses that you’d assume would have full immunity.
So how do you create Future Consumer Value?
1. Identify who your most important (valuable) consumers are and use that knowledge to improve your targeting and focus
Segmentation is one of the marketers’ most important tools. At its core, effective marketing strategy is about working out how to influence the behaviour of those consumers that matter most to you. To do that you need to i) identify who those valuable consumers are, ii) understand their needs, iii) deliver solutions they will value (and pay for), and iv) use that insight to persuade them to spend more of their money with you. A good segmentation will help you with all of that.
We do occasionally find marketers’ who espouse the view that segmentation isn’t relevant anymore and believe it stems from the ideas contained in Byron Sharp’s ‘How Brands Grow 1 & 2’. Many of you will be familiar with Sharp’s thesis so we won’t repeat it here, suffice to say he is averse to targeting. Not everyone agrees with him, including Mark Ritson who wrote this about it: “it is fashionable to believe marketers today should aim for mass market penetration and that segmenting, targeting and positioning are things of the past. For most brands that is a fallacy.”
We’re on Ritson’s side of this one. We’ve just spent 18 months helping a personal care business completely overhaul its business via a fresh segmentation. We’ve used this work to identify new cohorts, new needs, and hence new sources of value. It has also led to an entirely new marketing and communication strategy. Personal care may be a category with Sharpian characteristics, but that certainly doesn’t mean segmentation is surplus to requirements. Indeed, it’s proved central to unlocking future consumer value.
2. Understand what drives choice in your category and use that to underpin and drive an effective and efficient portfolio
If you want to build an effective portfolio, including an architecture that helps consumers easily navigate the totality of your offer, then you need to understand the basis on which choices are made in your category. This is a key point because architectures vary according to the category and the context in which choices are being made. How can you build an effective architecture if you don’t know how consumers ‘shop’ your category?
In pursuit of this knowledge, it’s rarely sufficient to simply ask consumers what’s important to them, you have to deploy a range of different techniques to elicit an understanding of the different discriminatory factors at play. Otherwise, you risk either ignoring the basis on which decisions are made (see our earlier point on the pet food category), or worse you create something confusing.
Understanding what drives choice, can also involve taking a dispassionate and evidence-based approach to the evaluation of the strengths (or otherwise) of the brands within your portfolio. This is particularly helpful when it comes to understanding where it is credible and viable for you to play, and directional when it comes to rationalising or stretching existing portfolios.
It’s also easy to overlook the fact that sometimes your competition might not be who you think it is. As the recession bites, consumers might be inclined to trade-off across categories, e.g., the merits of their monthly TV package vs their gym membership. Perhaps they’ll trade down for certain products and trade up for specific luxuries? Understanding this can help inform the development of a more effective portfolio strategy. All of these factors were at play when we helped Tesco completely overhaul its own-label strategy, as well as when we created a new portfolio strategy for Pladis that has subsequently unlocked the potential of brands like McVitie’s and Jacobs.
Tesco used a new product architecture to demonstrate value to its consumers in the face of low competition from Lidl and Aldi.
3. Map existing and future category motivations against existing and potential solutions
If you’re struggling to identify addressable occasions or fresh opportunity spaces, then this may be the point at which you consider deploying Demand Spaces. We’re a big fan of Demand Spaces, so much so that we’ve developed a proprietorial approach to their formulation called Dynamic Demand Spaces.
Our approach provides a framework that can be flexed to accommodate your required level of robustness. If you need to move at pace, you can populate the framework with hypothesised understanding, but if you have the time to deploy more detailed inputs, then these can also be easily accommodated.
Dynamic Demand Spaces are designed to include the two major forces that influence the development and direction of a given category or industry. Firstly, the needs, behaviours, and motivations of consumers (demands) and secondly, the provision of products, services, or innovations (solutions) that satisfy those demands.
In broad terms, Dynamic Demand Spaces work by focusing the practitioner on the motivations at play in a category today, as well as how they are evolving, and then invites them to consider the plethora of in- and out-of-category solutions that could be deployed to address those motivations – e.g., gut health was a need exhibited by consumers outside of the dairy category which presented the opportunity for probiotic yoghurt.
We’ve used Dynamic Demand Spaces on multiple occasions, on projects as diverse as helping Unilever develop a new global strategy for male grooming, to helping the snack brand Graze identify new opportunity spaces for future innovation. They place the focus back on the consumer and provide a solid structure for approaching some of the tougher strategic challenges.
Dynamic Demand Spaces show where future consumer value is in a category.
6. Refocus your innovation back on the customer
Innovation need not be overly risky. For successful innovation to occur, three things need to be present, i) insight, ii) focus, and iii) commitment. You need to know what kind of consumer motivations you are seeking to address, a high-quality focused ideation process, and the resources to back the innovations you (and your consumers) believe in.
Foresight is also important in the innovation process. You need to be aware of the broader forces exerting an influence on your category as well as a clear sense of how that will impact future expectations. You also need a good sense of the current innovation pipeline and existing R&D capabilities.
Last year we ran a very successful innovation process for a global healthcare business, helping them achieve some of their highest-ever consumer scores. We did this in a tough category with a poor record of bringing meaningful innovation. The secret to this success was a relentless focus on identifying valuable needs coupled with an ideation platform that helped us explore the full range of new and repurposed solutions.
Final thoughts
As we said right at the beginning, given the upcoming challenges with the trading environment, competitors, consumers and society, anticipating what our consumers will value in the future and creating that for them is the only way to create dependable and sustainable value for our organisations.
We hope that having read this paper you’ll now be better placed to spot if your organisation is beginning to exhibit short-term, manufacturer-led, sales-driven tendencies which ultimately erode value in the long-term and that you will take succour from the range of remedies that exist to help you tackle them.
If you would like to know more about Forge, and our approach to creating Future Consumer Value, please get in touch.
hello@forge-uk.com
