There are two strategic steps that, year after year, have been
proven to help brands outperform their competitors. It can't be all
that difficult to remember two of anything, and yet we consistently
see so many companies fail to stick to those two steps.
Recently we revisited research that our firm conducted six years
ago, when our study of more than 500 brands revealed that 90 of
them had consistently outperformed their categories between
1997-2001. That research found that any brand can win, and a
differential commitment to innovation and advertising significantly
increased the odds. But when we looked again early this year, we
found that only 13 of the 90 brand winners from 2001 continued to
outpace their categories through 2007.
It was clear, then, that many once-leading brands allowed
themselves to fall behind. But why? The simple answer is that it's
difficult to sustain commitment to innovation and effective
advertising. While few would dispute that logic, we wanted to find
out why proactive behavior proved so hard to maintain. So we
analyzed the experiences of those 13 brands that were on top in our
first study and were still on top when we revisited our work the
second time. Ultimately, we identified two major missteps that
endanger even very successful brands—missteps that the 13 winner
brands seem to have avoided.
Letting the wrong innovations slip through
Most consumer products companies have put stage gates in place
for innovations as well as thresholds for what's permitted to get
through. But for all the careful procedures they institute, many
companies simply fail to follow them.
First, they fail to set the right target for innovation. Many
companies drastically underestimate—by a factor of two or
three—the value they need to create through new products to
maintain strong growth. Second, if they do set a target, striving
for it can result in too much innovation of the wrong kind. The
pipeline gets jammed with too many small and medium-sized efforts
while the truly big opportunities get lost. Compounding the
problem, innovation too often gets delegated to junior managers who
lack experience and the power to ensure that every part of the
organization stays aligned around concrete metrics.
Neutrogena is a company that has avoided such a misstep. The
cosmetics company requires senior management's hands-on involvement
in the innovation process and follows disciplined guidelines
designed to focus only on innovations that feed long-term growth.
New products can't stray far from established brands and must prove
sustainable. The company thinks of innovation in terms of
initiatives with high value (not just specific products) and that
fit with the medical heritage of owner Johnson & Johnson.
Lack of ongoing commitment to the
Even if companies do an effective job of controlling the
innovation pipeline, they may doom a new product's chances by
taking a common route to short-term budget relief: slashing
advertising when revenues fall rather than investing to increase
awareness. Such a temptation is particularly strong in recessionary
Even during product launch, we've found a surprising number of
companies curtail their marketing efforts after the first year,
seeing advertising as the fastest and easiest place to cut costs
amid inflationary pressures on raw materials or amid slowing growth
in profits. But our research shows that brands that consistently
outgrow their categories are 67% more likely to spend more on
advertising than the category average, committing a good two years
to marketing campaigns post product launch, and maintaining
investments in older brands.
Winners understand the importance of not pulling the plug on
advertising before a product has a chance to prove itself in the
marketplace. For example, it took Danone, the French food product
company, nearly 10 years of uninterrupted advertising, and several
relaunches, to make Actimel yogurt a winner. Originally introduced
in 1994 as a product for active adults concerned about their
health, the liquid yogurt product initially failed to take off.
Market research found that Actimel was perceived as a yogurt drink,
not a wellness product. In 2002, the company relaunched the product
with a $15 million marketing campaign. In two years, Actimel
represented 16% of Danone's yogurt sales in France.
It turns out our finding published in 2003 that "any brand can
win" requires a caveat: Commitment to innovation and advertising is
not enough; only R&D and marketing budget disciplines around
innovation and advertising through the lifecycle of the brand can
keep winning brands winning.
John Blasberg is a Bain & Co. partner based in Boston
and leader of the firm's North American Consumer Products Practice.
Ivan Hindshaw is managing partner of Bain's Los Angeles