Companies with a broad product range which fail to focus their marketing effort on carefully targeted consumer groups, stand the greatest chance of failure in Europe.
That was the main finding of recent study by the management consultancy Kurt Salmon Associates (KSA) of European brand performance, reported in the German Newspaper Frankfurter Allgemeine Zeitung.
The study offers some useful reminders to European brand builders by examining the success factors of 215 companies, mainly operating in the areas of clothing, sports goods and shoes across the region.
The most successful company on the basis of turnover and profit growth was found to be the jeans-wear company Diesel. Others in the top ten included Burberrys, Nike, Hermes, Max Mara, and Reebok.
Analysis of their performance and strategies showed three common criteria lay behind their success.
Firstly, they had been sensitive to market trends early, and acted upon them. They were all found to be innovative and able to apply this innovation to all parts of the value chain, from materials and production through to distribution, marketing and advertising comm- unications.
Finally, all of their brands achieved a high level of recognition among consumers in respective target groups.
Dividing the companies by strategy, the report found that the approach most likely to succeed was that of following a clearly focused international “vertical” model such as Max Mara, Woolford or Burberrys. In this case it was calculated that such international luxury brands with lifestyle oriented products and their own distribution stood a 54 per cent chance of success. The second most effective approach was that of international brands like Nike and Boss which have achieved a high degree of recognition and broad distribution. Such companies stood a 40 per cent chance of success.
The practice of awarding percentages in this way is far from an exact science. Having said this, the overall findings of the research support the influential statistical analysis of Harvard’s Michael E Porter, whose work in defining the relationship between return on investment and brand management strategy has led to many recent brand rationalisation programmes.
The findings are also in line with the pan-European findings of Grey’s own Brand Loyalty+ brand evaluation programme.
The key learning from these three sources is that profitability is determined not by the development of an increasing number of brands, but by the ability to concentrate significant levels of expertise and resources in selectively developing a restricting number of potential mega-brands, which are highly distinctive and precisely tuned to meeting consumer requirements.