Archive for March, 2012

Apple and the Power of Differentiation

March 28, 2012

You can learn a lot about marketing strategy by studying Apple. Perhaps the most important point is this: be different.

The folks at Apple clearly understand the power of differentiation. They are masters are both creating it and destroying it.

Apple does a phenomenal job creating products and services that are unique and special. The Apple brand is so strong that even when competitors catch up in terms of product performance, people still think Apple is different and unique. This is why Apple is able to set high prices and command remarkable margins.

It is also becoming clear that Apple is gifted at ensuring that its suppliers don’t have meaningful differentiation. This presumably helps Apple drive down costs; the company isn’t overly dependent on a particular supplier.

One of the surprising things about the latest iPad is that there are multiple suppliers for the same component. For example, when research firm UBM took apart the new iPad, it found displays from Samsung, LG and another company. Chips were similarly sourced from multiple suppliers.

The Wall Street Journal ran an interesting article on the study. You can read it here:

http://online.wsj.com/article/SB10001424052702303863404577285902240772124.html?mod=WSJ_qtnews_wsjlatest

Apple’s secretive culture makes it particularly difficult for suppliers to differentiate; it is hard for them to know where they stand relative to other firms. It is also difficult for them to promote their unique products.

Apple employees are similarly challenged. Since the company releases very little information, employees have a limited opportunity to build their own personal brand. This gives them relatively little leverage when it comes to negotiating.

What happens when you create products that are different and special, while at the same time ensuring that your suppliers are not able to differentiate?

You become the most valuable company in the world.

The Mondelez Challenge

March 21, 2012

Kraft today announced that it will call its new snacks company Mondelez International.

Later this year Kraft Foods will split into two companies, a grocery business and a snacks business. The grocery business will retain the Kraft brand name, which makes perfect sense because many of the grocery products actually use the Kraft name: Kraft salad dressing, Kraft Macaroni & Cheese and Kraft Miracle Whip. The snacks business will take on a new brand name.

Finding a new company brand name isn’t easy. The name has to be unique in order to secure a trademark. It has to have the proper meaning, or at least no negative associations. The name has to work in multiple languages. It has to be available on-line.

Kraft seems to have settled on a very solid name. It is fairly easy to pronounce and spell, and has no obvious negative associations. It is also an available name; if you Google Mondelez you don’t get much aside from Kraft’s announcement. The only thing that really pops up is French, when the word monde (world) appears before the word les (the).

But the team leading Mondelez now has a challenge; they have to build a brand that people know and value. Mondelez won’t be prominent on specific products but the brand will be important for employees, investors, government regulators and business partners.

Intentionally, I suspect, Kraft is starting from the very beginning.

CEO Irene Rosenfeld and CMO Mary Beth West explained today that the name actually has some meaning. They said:

 

“The Kraft brand is a perfect fit for the North American grocery business and gives it a wonderful platform on which to build an exciting future,” said Chairman and CEO Irene Rosenfeld. ”For the new global snacks company, we wanted to find a new name that could serve as an umbrella for our iconic brands, reinforce the truly global nature of this business and build on our higher purpose – to ‘make today delicious.’ Mondelez perfectly captures the idea of a ‘delicious world’ and will serve as a solid foundation for the strong relationships we want to create with our consumers, customers, employees and shareholders.”

“It’s quite a job for a single word to capture everything about what we want the new global snacks company to stand for,” said Mary Beth West, Executive Vice President and Chief Marketing Officer. ”I’m thrilled with the name Mondelez International. It’s interesting, unique and captures a big idea – just the way the snacks we make can take small moments in our lives and turn them into something bigger, brighter and more joyful.”

 

This is a bit of wishful thinking; I suspect most people don’t know what to think when they hear the word Mondelez. Defining this, building the brand, will be a big challenge requiring significant investment and smart marketing.

But the first step is done: finding a name that can become an important global brand.

Coors Light Iced Tea

March 9, 2012

This week the Chicago Tribune reported that Molson Coors will be introducing a number of new products including Coors Light Iced Tea. You can read the article here:

http://www.chicagotribune.com/business/breaking/chi-molson-coors-launching-new-beers-to-boost-share-20120306,0,3634860.story

The goal is to build sales through innovation so that the company doesn’t have to rely so heavily on cost reduction projects to drive profit growth.

This makes sense. Cost reduction projects are fine but a company can’t rely just on margin enhancement to build profits long-term. You can only trim costs so far. New products can build profits on a more sustainable basis.

But I’m rather worried about that Coors Light Iced Tea idea.

My assessment: it has a basic branding problem. One of the key questions in brand positioning is frame of reference. It is important to establish precisely what a brand is. For example, BMW is a type of luxury car, Tylenol is a type of pain reliever and Lipitor is a type of cholesterol medication. Coors Light? That is a type of mainstream beer. Coors Light Iced Tea? That just doesn’t make sense.

- When would one drink Coors Light Iced Tea: a beer occasion or an iced tea occasion?

- What would it taste like? I suspect it would taste like beer, right? But maybe it would taste like iced tea. I haven’t any idea.

- Will it be carbonated? Beer generally is, so I guess so. But iced tea usually isn’t, so perhaps not.

It is possible to change the frame of reference for a brand. Mixing two different frames is rarely a good approach. I salute the focus on new products at Molson Coors but I think the team should spend a bit more time on new product positioning.


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