South China Morning Post

Brand leaders keep to long-term strategy

In early 2008, Bain & Company research found that, of the 90 winning brands in 2001, only 13 continued to outpace their categories through last year.

Par Bruno Lannes and John Blasberg

First published on mai 26, 2008
min


When the Olympic Games kick off on August 8, the bright red logo of Coca-Cola will be everywhere. In 2005, Coca-Cola executives and International Olympic Committee officials announced a deal that extends Coca-Cola as the official non-alcoholic beverage sponsor of the Games until 2020. The company is relying on the strength of its advertising muscle to continue its winning streak in China. After entering the mainland market in the early 1980s, Coca-Cola built up its brands by spending twice as much as Pepsi on advertising and promotional activities over a 10-year period. While its Sprite brand is the mainland's top-selling carbonated beverage, the company's flagship brand is in head-to-head competition with fourth-ranked Pepsi. A major pay-off occurred even months before the first Olympic event has taken place. A survey found that 38 per cent of those interviewed could name Coke as a sponsor without prompting—and an overwhelming 86 per cent with prompting. It is not surprising that such an aggressive marketing push could pay off. Six years ago, Bain & Company studied more than 800 brands and found that 90 had consistently outperformed their categories from 1997 to 2001. Our research found that any brand can win—regardless of size, market position or category—but a differential investment in advertising is one of two factors that can increase the odds. The second factor is the ability to successfully use innovation as a platform for new products and long-term growth. 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 last year. So the bigger question became—why did once-top brands fall behind? One major lesson is that it is difficult to sustain commitment to advertisement as Coca-Cola clearly has on the mainland. To dig deeper to find out why such behaviour is so hard, we analysed the experiences of the 13 two-time brand winners, as well as winning brands that fell away, and drew on our own work with consumer products clients. We identified the major advertising misstep that endangers even the most winning brand: lack of ongoing commitment to a product post-launch. We found that companies may hurt their product's chances by slashing advertising when revenues fall versus investing to increase awareness. Such temptation is particularly strong in recessionary times. But our research shows that brands that consistently outgrow their categories are 67 per cent 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, Coca-Cola-style. A surprising number of companies curtail their efforts after the first year. Winners understand the importance of not pulling the plug on advertising before a product has a chance to prove itself in the marketplace. It has taken Mars, the chocolate snack producer, 10 years to build up its Snickers brand on the mainland. The sums invested by other companies testify to the value of Olympic sponsorship. General Electric is expected to pay fees approaching US $200 million for its eight-year Olympic deal until 2012. Chinese sponsors include Tsingtao beer, Yili milk and Lenovo Group, which has agreed to pay as much as US $80 million for the years 2005 to 2008. Beyond the Olympics, it will be important for these companies to sustain the rate of their advertising spending to gain the full impact of their investments. How do winners afford to promote so heavily? Brand leaders rigorously and constantly cut costs across the organisation. By saving money in the right places, they don't have to curtail the very investments that power their market leadership over the long term. Bruno Lannes is a partner at Bain & Company in Shanghai and head of the Greater China consumer products practice; John Blasberg is a partner in Boston and head of the North America consumer products practice.

When the Olympic Games kick off on August 8, the bright red logo of Coca-Cola will be everywhere. In 2005, Coca-Cola executives and International Olympic Committee officials announced a deal that extends Coca-Cola as the official non-alcoholic beverage sponsor of the Games until 2020.

The company is relying on the strength of its advertising muscle to continue its winning streak in China. After entering the mainland market in the early 1980s, Coca-Cola built up its brands by spending twice as much as Pepsi on advertising and promotional activities over a 10-year period. While its Sprite brand is the mainland's top-selling carbonated beverage, the company's flagship brand is in head-to-head competition with fourth-ranked Pepsi.

A major pay-off occurred even months before the first Olympic event has taken place. A survey found that 38 per cent of those interviewed could name Coke as a sponsor without prompting—and an overwhelming 86 per cent with prompting.

It is not surprising that such an aggressive marketing push could pay off. Six years ago, Bain & Company studied more than 800 brands and found that 90 had consistently outperformed their categories from 1997 to 2001. Our research found that any brand can win—regardless of size, market position or category—but a differential investment in advertising is one of two factors that can increase the odds.

The second factor is the ability to successfully use innovation as a platform for new products and long-term growth. 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 last year.

So the bigger question became—why did once-top brands fall behind?

One major lesson is that it is difficult to sustain commitment to advertisement as Coca-Cola clearly has on the mainland. To dig deeper to find out why such behaviour is so hard, we analysed the experiences of the 13 two-time brand winners, as well as winning brands that fell away, and drew on our own work with consumer products clients.

We identified the major advertising misstep that endangers even the most winning brand: lack of ongoing commitment to a product post-launch.

We found that companies may hurt their product's chances by slashing advertising when revenues fall versus investing to increase awareness. Such temptation is particularly strong in recessionary times. But our research shows that brands that consistently outgrow their categories are 67 per cent 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, Coca-Cola-style. A surprising number of companies curtail their efforts after the first year.

Winners understand the importance of not pulling the plug on advertising before a product has a chance to prove itself in the marketplace. It has taken Mars, the chocolate snack producer, 10 years to build up its Snickers brand on the mainland.

The sums invested by other companies testify to the value of Olympic sponsorship. General Electric is expected to pay fees approaching US $200 million for its eight-year Olympic deal until 2012. Chinese sponsors include Tsingtao beer, Yili milk and Lenovo Group, which has agreed to pay as much as US $80 million for the years 2005 to 2008.

Beyond the Olympics, it will be important for these companies to sustain the rate of their advertising spending to gain the full impact of their investments.

How do winners afford to promote so heavily? Brand leaders rigorously and constantly cut costs across the organisation. By saving money in the right places, they don't have to curtail the very investments that power their market leadership over the long term.

Bruno Lannes is a partner at Bain & Company in Shanghai and head of the Greater China consumer products practice; John Blasberg is a partner in Boston and head of the North America consumer products practice.