Last week was the perfect occasion to reflect on the strategic advantages of killing brands, and also to highlight the likely trouble for those companies that have the temerity to launch new ones.
It began with Ford’s triumphant third quarter results. According to CEO Alan Mulally: “A few years ago, we were a discount brand in the smaller and medium-sized vehicles sector. We have moved into a new chapter for Ford; building cars and trucks people really want and value, and continuously improving our quality and productivity.”
Ford lost almost $15bn in 2008. So far this year, the company has earned $6.3bn. That’s an astonishing turnaround for any company and can be attributed to Mulally’s decision to sell off most of the other brands in his portfolio, like Land Rover and Aston Martin that once clouded and confused the company’s strategic direction, and return its focus to “One Ford” – as the corporate slogan now proclaims. Earlier this year, I wrote the best article in the world on the rationale behind Ford’s new strategic approach.
That last sentence might sound arrogant, but about a month ago I got a voicemail from Mulally telling me that my Marketing Week column was the best he had seen on the company’s new strategy and to confirm that the approach was indeed working.
There are many different ways to start a working day. Some marketers prefer yoga, others a cigarette and a cappuccino. But until your day begins with a ten-minute voicemail from the man tipped to be global CEO of the year, you really have no idea how energised you can feel at 7.30am.
Not only will i fail, it will leave The Independent in even worse shape
As much as I loved listening (over and over) to one of my marketing heroes telling me how much he enjoyed my article, I wish I could have diverted the call to Alexander Lebedev, the Russian tycoon who now owns The Independent and who last week launched a new newspaper called i.
The new 56-page paper costs 20p and features condensed versions of the day’s news, business and sport. The scaled down format, low price and positioning as “a newspaper for the 21st century” are all designed to attract the younger Gen Y reader who is too busy or too unmotivated to buy a daily paper. “We are creating the first post-modern newspaper,” said Simon Kelner, editor-in-chief of i and The Independent. “Post-modern in the sense that everything has been tried [to stem the decline in circulation] and this is something that comes at the problem from a different direction.”
It is worth pausing at this point to note how similar both Ford and The Independent’s circumstances once were. Both had declining market share in categories that were increasingly driven by promotional spend and falling profitability. At this point, however, we should also observe the very different strategic responses that they have opted to pursue.
Ford realised that the company had to change itself to better compete in a new market with very different dynamics and also recognised that its current portfolio of brands made that evolution completely impossible. So brands were sold off and Ford began to redesign its main brand with ultimate success. Over at The Independent, the company opted instead to create an additional brand aimed at increasing its overall market share and complement its existing title.
Except that won’t happen. For all the talk of a new brand for a new target segment, i is actually going to be produced by the same journalists that work on the current paper. The reality for The Independent is that it cannot afford to actually create and deliver a distinct product for this segment. And even if it could, this elusive target segment wouldn’t buy it anyway.
The mistake that The Independent executives made in creating a new product that is clearly more concise and better value when compared to its traditional Independent brand is that the consumer does not look at the world relative to The Independent.
Only Lebedev and his team think that way. When seen from the market’s perspective, this elusive consumer sees smartphones as the most concise and best value way to get their news. The only consumers likely to be attracted to the new, better value “mini Independent” are current customers who are forking out a quid a day for the bigger, less concentrated, traditional version.
And look where that will leave The Independent. It has now doubled its output, increased its costs, spread its already small team of journalists even further and cannibalised much of its more profitable Independent sales to boot. That means that not only will i fail, it will leave The Independent in even worse shape.
Like most companies launching a “sister brand” to alleviate poor sales, The Independent is about to learn that the last thing it needed was a new brand. What it needed was a new approach to its old one.
At its launch last week, there was much debate about exactly what i actually stood for. Can I suggest irrelevant, ill-conceived and, ultimately, ill-fated.
Mark Ritson is an associate professor of marketing, an award winning columnist, and a consultant to some of the world’s biggest brands