Building Brands in Turbulent Times

©XPotential 2010 3

Listening in…….

What Excites Me? What Concerns Me?

What I want to understand more about?

Ideas for my business…..

©XPotential 2010 4

The Crisis – Global Economic Downturn

• We are facing unprecedented times

• Most economies are in recession or with significantly reduced growth

• Unemployment rate in the UK at 7.8% in March 2010, highest in 12 years

• US government implemented a $700bn bailout package to help businesses

• UK government implemented a £500bn bailout package to help the banks

• Export-led economic recover will take until 2011 (Growth <1% predicted in 2010) (Ernst & Young)

• Asian Markets are forced to revise their economic models from export to domestic consumption

©XPotential 2010 5

The Consumer in the Economic Crisis:

• Most people have lost value (homes, jobs, savings)

• Dramatically reducing spending

• Huge uncertainty and less confident of the future

• Trading down in many categories (food, personal care, fashion)

• Stopping spending in others (housing, cars, white goods)

• Putting put more of their salary into savings or repaying debt

©XPotential 2010 6

The Consumer in the Economic Crisis:

• Has higher affinity to Brands they trust and have bought over a period of time

• Is not open to ‘risk’ in new innovations (products or services)

• Is not open to make expensive commitments for the long term

• Is open to low risk ‘promotions’ or added value offers but mainly with Brands they trust

©XPotential 2010 7

The Retailers in the Economic Crisis:

• Prioritising cash and working capital

• De-stocking to free up cash and reduce risk

• Asking for longer credit terms and more flexible supply

• Asking for added value and lower prices from suppliers

• Running more promotions and offers (av. +9.6% since last year)

• Average saving offered to shoppers • Branded products 29.0% - 35.4%• Own label 23.3% - 30.4%

Source: Compiled for The Grocer 10 April 2010 issue by Assosia.

Note: Typical £ saving are calculated on a per-item basis c

©XPotential 2010 8

The Company in the Economic Crisis:

• Seeing a dramatic reduction on Top Line Sales

Consequent impact on the bottom line results

• Unrelenting and consistent pressure to drastically reduce costs and minimise risk:

Typically brand/media communication, innovation and training will suffer first

More dramatic cost cutting will then follow

Many suppliers are under risk

©XPotential 2010 9

• The Global Economic Crisis threatens all companies. No matter what country, no matter what sector they operate in.

• Brands are a Company’s most important asset

• In turbulent times, customers and consumers will prioritise their business with Brands that they trust to deliver value

• Companies that focus on building brands will have the best opportunity to emerge as winners

Implication

©XPotential 2010 10

What can Brands do to weather the storm?


9 Key Success Factors


Key Success Factors

1. The importance of a Clear Vision and Strategy


1. The importance of a Clear Vision and Strategy –review and align to the year ahead

• Crises will come and go

• Successful companies will always have a clear long term Vision and Strategy (3-5 years)

• Their Vision and Strategy will always be built around Building Brand Value not just the financial measures of Sales and Profit

• Successful companies live their Vision, Strategy and Brands through their people, process and products to deliver performance


Example: Reckitt Benckiser

• Global company with 17 “Powerbrands” (62% total business), all either top or number 2 in their market

• Constant Innovation to provide better products for consumers

Maverick innovations are given a chance to trial (e.g. AirWick FreshMatic – most successful launch in RB history)An RB product formulation is revised every 8 hoursProducts launched in the past 3 years account for 35% to 40% net revenue

• Net revenue has more than doubled in the past 10 years

• RB Sells 15 million consumer units a day across 180 countries

• “Global citizen” attitude of managers is essential in open-minded and competitive globalization

Importance of a clear Vision and Strategy

Sources: Harvard Business Review, April 2010

The Grocer February 6th 2010


1. The importance of a Clear Vision and Strategy review and align to the year ahead

• Review the Vision and Strategy with the team. Understand the latest trends / data on the economic forecast and align the activities and measures for the coming year

• Do not lose sight of the long term – review activities and objectives of your long term strategy to take into account the crisis but ensure that you are still building towards your Vision


1. The importance of a Clear Vision and Strategy review and align to the year ahead

• Communicate: Make sure that your teams are fully aware of the Vision and Strategy, any changes and understand the consequences within the crisis

• Individuals need to Know and Understand before they will Believeand Act


Key Success Factors

2. Put the Brand at the heart of the organisation



• The Brand is the most important asset of your company

• Your Brand is the sum of your ‘emotional’relationship with your customers or consumers

• Brands that are invested in in a constant way will deliver value to the company over many years



• Every individual in the company has the power to add value to the brand or to take value away

• It is critical for everyone in the organisation to understand their role in building brands


Example: Tesco Lotus• The mission of Tesco is to earn a lifetime

of loyalty from its customers

• Challenge is to align the individuals in the company to understand and believe in the Tesco Lotus Brand

• Clarified the Brand and what it means for Thailand and began to cascade it through all of the 36,000 employees

• Includes People, Processes, Design, Advertising, Products

Ensure the Brand is at the Heart of the Organization



• The crisis is the most important time to ensure that everyone understands the Brand

• Ensure that you can explain your Brand clearly to everyone in the company

• Help them to understand the brand and to understand how they and their department contribute to the value of the Brand

• Align the departmental objectives with strategic objectives for the Brands


Key Success Factors

3. Focus on your Core offerings but continue to invest in innovation



• Every successful company has a core set of products or services that will deliver 80% of the value to the company

• In time of growth the major investment is focussed on growth drivers while core products will attract less investment



• In times of crisis – investments will be reduced so the core becomes more important in sustaining the critical mass of the company


• During the economic slowdown, less people are dining out. To keep attracting their loyal customers – families, young urbanites who enjoy going out and having a good time, Pizza Express launched a series of promotions.

• The most successful is the Classic Favourite Menu – 10 favourite mains + a drink for £10.

Example: Pizza Express



Focus on the core offering and invest in innovation

• Hyundai has been selling more cars when everyone is selling less.

• In January of 2009, while nearly every other car manufacturer reported double-digit sales declines, Hyundai sales were up 14.3% compared to the same period last year. How did they do it?*

• Hyundai Assurance program, allows consumers to return their new Hyundai without hurting their credit if they lose their jobs.

Example: Hyundai Assurance Program

* Source: Automotive News, www.allcarsreview.com, “Hyundai says Assurance program is effective”, Feb 2009

http://www.allcarsreview.com/



• In these times of crisis – review your portfolio strategy.

• Continuing high levels of investment in new products may not be a good short term decision

• Look for opportunities for incremental innovation on your core ranges

• Look for ways of keeping new news but at little or no incremental cost to the customer or consumer

• Look for ways of increasing the confidence level of consumers


Key Success Factors

4. Focus on your loyal and high potential customers



• No company will ever have enough resources to meet the needs of every customer or consumer

• Every Brand has it’s loyal consumers / customers. These are also called the heavy users

• Always ensure that your loyal customers will appreciate and benefit from your activities

• High potential customers are your loyal customers of the future. Successful companies identify them and understand their needs


• In March 2009, Waitrose launched Essential Waitrose -- its first value range to counter perceptions that it was more expensive than its rivals on everyday items with the pledge: 'Quality you'd expect at prices you wouldn't'.

• Due to the economic downturn, Waitrose was losing a lot of its core customers to other supermarkets. Essential Waitrose is part of the work Waitrose is doing to on improve customers' value perception.

Example: Essential Waitrose

“In the week to June 12, sales of the re-priced and repackaged lines were up between 20 and 60 per cent. The range has also lifted the grocer’s overall sales, with sales increasing 10 per cent year on year each week in the last month.“*

* Source: Retail Week,”Waitrose value range lifts sales” , 22 June 2009

Focus on loyal and high potential customers



• Ensure that you have a clear segmentation of your customers (that you know the core and loyal users, the high potentials and the low priority)

• Ensure that the attention of your sales force, commercial teams, marketing teams are focussed mainly on those loyal and high potential customers

• Ensure that your teams understand their needs (from the perspectives of your customers) and build these into their plans

• Use this understanding as a way of adding value to your customer or consumer

VIP


Key Success Factors

5. Ensure that your business processes and teams are efficient and effective



• The Brand of your business is your most important asset

• Your people are the most important way that you will invest in the brands

• For many organisations efficiency is a major issue – people resources are being wasted



• Great organisations ensure that they are able to focus their resources efficiently and effectively through:

fewer priority business processes that drive the organisationclear and simply described steps / frameworks for actiontraining and coaching staff in making process part of their everyday work


Ensure your business processes and teams are efficient and effective

• As one of the largest FMCG companies in the world, business process efficiencies are needed to maintain their place amongst global leaders

• In 2008, €1.1 b savings from supply chain and operational efficiencies 1

• Improved transportation network and carriers to save money and improve services

• Rationalization of manufacturing base to meet target of streamlining 50-60 sites by 2010

• Brought logistic and supply chain operation in Europe together in one regional structure based in Switzerland.

• Embarking on similar move to centralize supply chain in Asia by moving regional hub to Singapore

Example: Unilever

* Source: Unilever annual repor 2008



• Review your Business processes and prioritise those that deliver the most value to your Brands

• Review the priority processes in teams to ensure that all the key steps are clear

• Develop training of the teams that ensures that they know and understand the process and believe and act in the best way

• Ensure that you have clear measures (KPI’s) designed to measure efficiency and effectiveness


Key Success Factors

6. Maximise your communication investment



• Communication in many organisations is one of the most expensive investments of brand building

• With the huge fragmentation of media channels communicating with customers and consumers has never been more difficult

• Communication is also one of the most difficult investments to measure in terms of a ROI

• Communication can take many forms from the ‘traditional media’ (radio, TV, Press) through to ‘new media’ (sms, internet) through to ‘in-store communication’ (Point of Sale, Promotions).



• Successful organisations have a clear focus of communication on their target audience, a Single Minded Message and a deep understanding of the ‘touch points’ with their consumer / customer

• Great communication ensures that the consistent message is received through a variety of different and relevant media



• Understand the target audience and the relevant ‘touch points’

• Review media channels relevant to your touch points and each one’s role in delivering the message

• Prioritise budget spending in media channels where your message will be heard.

• Address at least 2 objectives: creating awareness and driving purchase

• Create a communication strategy thatensures that you align the media channels to deliver a synergistic impact on the consumer


Key Success Factors

7. Manage your costs and cash in the best interests of your Brands


7. Manage your costs and cash in the best interests of your Brands

• The Day to Day management of costs and cash is a core skill which is well controlled by all organisations

• Successful Brand focussed organisations will continually be challenging themselves to review and reduce costs across their entire value chain

• The economic crisis is forcing companies to dramatically reduce costs

• Successful organisations will reduce cost effectively but without harming their brand


7. Manage your costs and cash in the best interests of your Brands – review your entire cost structure

• Review your entire cost structure in a transparent way (include all relevant stakeholders / department heads) Understand all the main cost drivers of your Brands and Business

• Ensure that the real / medium – long term implications on the Brand for reductions or eradication is clear

• Set your self a stretching target for reduction of costs and ensure that you continue to deliver cost reduction as part of the long term plan

• Communicate the importance of cost reduction across the entire organisation


Manage your costs and cash in the best interest of your brand

• Sainsbury’s like-for-like sales were up 5.5% in 2009. Accomplished by cost-cutting, price-cutting and Jamie Oliver’s appeal1

• >75% total cost inflation offset by cost efficiency programs.2

• Significant savings made on improved distribution network

• Cost savings made without touching the customer experience and without major changes to communication budget for the brand

• Improved trade cash flow management, supported by the growth of Sainsbury’s supply chain financing platform has achieved a working capital improvement of £167 million on last year in cash generated from operations

Example: Sainsbury’s

1 Source: www.guardian.co.uk, 17 June 2009, “Has Justin King rescued Sainsbury’s by design – or is he just lucky?”2 Source: Sainsbury’s annual report 20093 Source: www.j-sainsbury.co.uk, press release 17 June, 2009

"The fund-raising will provide us with the financial flexibility to take advantage of current opportunities to grow our business further

and faster."

Justin King, Sainsbury’s Chief Executive

http://www.guardian.co.uk/

http://www.j-sainsbury.co.uk/


Key Success Factors

8. Focus on market share and profit


8. Focus on market share, working capital and profit

• The Crisis is putting pressure on organisations especially their growth

• Successful organisations use a portfolio of measures of Brand Value including the traditional measures of financial accounting

• Market Share is a key measure for a financial crisis where markets are falling

• Brands that focus on Market Share growth in a financial crisis will be in a much stronger position to benefit

• Profit and Working Capital measures are essential to ensure that the fundamentals of the business are healthy


Example: Virgin Atlantic

• Virgin Atlantic reported doubling of profit in year ended Feb 2009 compared to British Airways which reported a record £401m pre-tax loss

• Virgin Atlantic trades in the same markets as British Airways but has less exposure to the financial services sector and is stronger in long haul leisure1

• Premium air travel is a vital revenue source for airlines

Virgin Atlantic prides itself on listening to its customers to provide fun, class and comfort

Focus on market share and profit

1 Source: Telegraph.co.uk, 26 May 2009 “Virgin Atlantic boss warns no airlines will make money this year”

NewYorkTimes 5 Feb 2010 “British Airways posts surprise quarterly profit”

http://finance yahoo com “Virg

We have increasing share in the more profitable premium

sector1

Steve Ridgway: Virgin Atlantic chief

http://finance.yahoo.com/


8. Focus on market share, working capital and profit

• Review your key measures especially growth and make realistic adjustments to the objectives

• Focus your teams on building market share

• Look for opportunities in your key customers to collaborate and build share

• Align the finance team / supply chain and commercial teams to come up with activities for working capital improvement to reduce debt

• Make the measures the main topic of every management team agenda


Key Success Factors

9. Manage the short term but prepare for the longer term



• Every company will go through periods of growth and periods of decline

• Successful companies manage short term decline to ensure that they emerge stronger at the end

• Successful companies use the opportunity of the economic crisis to review their plans and business structure

• Successful companies will understand the long term impact of the crisis on their consumers, customers and markets



• Use trend analysis to develop scenarios of the long term impact / changes to the markets you operate in

• Ensure that as a management team you understand the long term implications for your business, brands and consumers and customers

• Review the foundations of your Vision and Strategy to ensure that they are still strong and will be sustainable for the long term

• If not then adapt or develop a new Vision and Strategy


• The Global Economic Crisis threatens all companies. No matter what country no matter what sector they operate in

• Brands are a Company’s most important asset and in these turbulent times customers will want to do business only with Brands that they trust

• Those companies that focus on their brands will have the best opportunity to come out of this crisis as winners with even stronger and more trusted brands

Summary


Key Success Factors

1. The importance of a Clear Vision and Strategy

2. Put the Brand (s) at the heart of the organisation





7. Manage your costs and cash in the best interests of you Brands

8. Focus on market share and profit



Example: Honda UK (Swindon Plant)• Due to the economic slowdown, the

Honda Swindon Plant shut down for 4 months.

• Voluntary redundancy was taken by 1300 workers, the remaining 3400 workers agreed to 3% pay cut for 10 months.

• The Honda Jazz – Honda’s best selling small car, previously only built in Japan and China will be built at the Swindon later this year.

• To manage the short term, Honda shut down temporarily while maintaining their skilled and loyal workforce. To prepare for the long term, Honda used the shut down period to update, streamline and modernise the production line in preparation for production of the Jazz.

Manage the short term and preparefor the longer term

http://3.bp.blogspot.com/_FoXyvaPSnVk/SifiWd9M1SI/AAAAAAABzl8/Ayc-W9GjmHo/s1600-h/Honda-Civic-UK-2.jpg


XPotential is a brand focused strategy consultancy that helps to align individuals, functions and organisations throughout the world to create and deliver Brand Value.

We work with some of the world’s biggest brands to deliver outstanding results. We orientate individuals and teams in the organisations to focus their responsibilities to deliver value to their most important asset - their brand. We are proud to have worked with over 30 companies in over 50 countries and touched tens of thousands of individuals, delivering some of their most impressive business results.

We do this through working closely with the leadership of organisations to develop Brand Centric Vision and Strategy through a deep understand of the challenges and opportunities for the Brands and the Company, the Brand Vision and the key audience for change.

We then design and implement a programme of brand centric change including communication, engagement, training and follow up. We have worked both cross functionally and also through specific areas including sales, supply chain, innovation, marketing, R&D, finance and HR.

Our Credentials

XPotential Ltd (UK)4/5 Market Square

MarlowBucks

SL7 3HH

Tel: +44 1628 485847Fax: +44 1628 478065

[email protected]

“We align individuals, functions and organisations, throughout the world, to create and deliver brand equity”


XPotential (Brasil)Av. Divino Salvador, 716

Moema –São Paulo- SP

CEP – 04078-012

Tel: (55) 11 5051 9194Fax: (55) 11 5054 0421

Mobile: (55)11 9939-0203

[email protected]

XPotential (Thailand) Co. LtdQ House Lumpini

Level 27, 1 South Sathorn RdTungmahamek, Bangkok

Thailand, 10120

Tel: +66 (0) 2610 3706Fax: +66(0) 2610 3601

[email protected]

http://www.xpotential.co.uk/

http://www.xpotential.co.uk/


Building Brands in Turbulent Times

Building Brands in Turbulent Times

Business

Transcript of Building Brands in Turbulent Times