All weekend there were articles about how 3G Capital and Warren Buffet were wrong in their cost-cutting approach that caused Kraft-Heinz to lose 26% of their value on one day. While everyone found solace in their own way, the two big mistakes for 3G is they failed to recognize what makes CPG brands successful: investment in the brand’s relationship with consumers and investment in the great people who run these brands.
As someone with 20 years of experience in CPG marketing, lucky enough to manage some of the world’s greatest brands, I will admit that to an outsider, there does look like a lot of wasted spending:
- Why do we need prime time TV?
- Why are we still doing that promotion every year?
- Does an end-aisle display matter and why does it cost so much?
- Why are there so many ad agency people in this meeting?
- Will next year’s blueberry flavor do anything for us?
The problem lies in the nativity of those who believe every dollar must be easily explained because the best marketers realize there remains some unexplainable magic in why certain brands work and others fail.
For most CPG brands, a few bright chemistry grad students could knock off the product formula in a lab. Yet, they cannot replicate the passionate and lasting love these brands have with their consumers. It takes a smart strategy to balance the rational and emotional management of the brand-to-consumer relationship. These beloved brands are so exceptional because of how well they treat their most loyal consumers. They make them feel loved.
3G thought they were smarter than the brilliant marketers from the past 120 years. They have learned a hard lesson as they ripped that unexplainable magic out of the Kraft-Heinz brands. The more love you can generate with consumers, the more power, growth and profit your brand will realize.
3G was so busy looking at the cost line, they failed to realize the necessary ingredients to create brand love
Everything must be about the consumer.
You need to know your consumers as well as you know your brand. Dig deep to understand and appreciate the consumer insights, enemies and needs.
The best brands know their consumer better than the competition knows that consumer. Brands must listen, observe and start to know the thoughts of their consumer before they even think it. Not only does the brand meet their functional needs, but the brand must also heroically beat down the consumer’s ‘enemy’ that torments their life, every day.
Brands must invest in Consumer insights to find the little secrets hidden beneath the surface, which explain the underlying behaviors, motivations, pain points, and emotions of your consumers. Your consumers may not even be able to explain the insight until you play it back to them. And when they say, “Yeah, that is exactly how I feel.” Brands should think of consumer insights as a potential competitive advantage, equal in importance to intellectual property.
When you do it right, it is the consumer insights that get consumers to stop and listen to your brand’s promise or brand story, engage in the latest innovation and believe the consumer experiences fits perfect with their life. They open up and are willing to weave your brand into the most important moments of their life.
For 3G capital, they failed to realize there is only one source of income, not the products you sell, but the consumers who buy them. When you stop investing in knowing your consumer, you begin to suck the life right out of your brand.
Dare to be different.
Your brand needs to stand out as being better, different, cheaper, or else it won’t be around for very long. Be the brand that defines your unique value, rather than adding more clutter to the mountain of clutter.
The consumers of today must be won over. They are surrounded by the clutter of 5,000 brand messages a day that fight for a glimpse of their attention. That is 1.8 million per year or one message every 11 waking seconds.
Brands must capture the consumer’s imagination right away, with a brand idea that is simple, unique. It must create as much excitement as a first-time encounter. The best marketing must balance being creatively different from being strategically smart. Find your sweet spot for where the work is different and smart.
3G’s zero-based budgeting pushed hard to explain every dollar before they’d approve. They wanted zero risks and that rips the creativity out of the marketing. Too many brands of today are focused on the immediate gratification of the transaction. The marketing might be smart, but it is not different. You risk boring your consumers, so you never stand out enough to capture their attention. 3G never allowed marketers to push their comfort with creativity and take a chance to ensure the work breaks through the clutter of today.
Attention is like oxygen for your brand.
Build everything you do around your brand idea.
Your brand idea is the first point of connection and creates a lasting impression. The brand idea is the reason consumers first buy. Every time your brand delivers, the bond tightens just a little more. Whenever you fail to deliver, the consumer goes into doubt mode, wondering if they will stay with your brand.
The brand must show up consistently at every consumer touchpoint, whether it is the promise the brand makes, the stories they tell, the innovation designed to impress consumers, the happy purchase moments or the delightful experiences that make consumers want to tell their friends the brand story. The consumer keeps track to make sure the brand delivers before the consumer is willing to commit. Only then will the consumer become willing to open up and trust the brand.
Marketing research experts suggest the right balance between brand-building and transactional advertising should be a 60/40 split that favors building your brand first. Let me use the analogy of the jar we keep at our front door, where we put our loose coins. Brand building is like adding a few coins for when you need it, whereas transactional ads are like taking a few coins from the jar. If all you do is trigger sales transactions, eventually you will have no coins left in the jar. Same for your brand. If all you do is keep telling consumers to buy your brand now, eventually they will forget why they should ever buy your brand.
You must focus your brand’s limited resources to key breakthrough points you believe will tighten the bond with your consumers, putting the brand in a more powerful position to drive higher profits. You have to know your consumer, know what your brand stands for and be willing to focus on the strategies that will pay back in building the brand.
It takes a strategic mind to figure out brand love as brands move from unknown, indifferent, like it, love it and onto the beloved brand status. Without investment, you run the risk of getting stuck at the indifferent stage where consumers feel OK about your brand. How sad for some of the glorious brands under the Kraft-Heinz portfolio. For generations, these brands have been tugging at heartstrings to tighten the bond with their most loyal brand fans.
3G Capital uses something called zero-based marketing budgeting, which starts off each new year assuming all brand budgets are zero and the brand must prove their case to earn its budget level. While it makes perfect sense in theory, with 20 years of experience with marketing budgets, this is not an easy concept to implement. One risk is zero-based budgeting leads to short-term and highly transactional marketing.
A brand needs to balance brand-building activities, which add to the long-term connection with consumers with transactional call-to-action messaging intended to trigger purchases. For instance, if you tell me “Buy two, get one free” for five straight years, your consumers will eventually forget why they should buy your product at all, let alone two. There is a degree of uncertainty in making investment decisions. Get comfortable with your instincts to balance the degree of ambiguity to make the smart decision.
The passion of your people matters.
You must exhibit incredible passion in the marketing execution, consistently focused on surprising your consumers, with a goal of becoming one of their favorite brands. Always remember “I love it” is the highest bar you can set for achieving great work. If you do not love the work, how can you ever expect your consumer to love your brand?
The brand soul defines the moral fiber for why everyone who works on the brand “wakes up each day to deliver greatness on behalf of the brand.” The brand soul must be an inspiration to align the team behind a common purpose, cause or excitement for why they do what they do. Just like the soul of a human, every brand brings a unique combination of unexplainable assets, culture, motivations, and beliefs.
Some of the greatest marketers of the last century have come through the doors of Kraft or Heinz. I know many brilliant minds who started there. When I hear 3G cut 20% of the labor and 40% of the overhead, I just realize how little they invested in their people.
The brands I see invest equally in their people as they do their brands. The smarter your people, the better the work they will create and the greater results you will see on your brand.
3G needs to understand that brand love generates brand power
The tighter the bond a brand creates with its consumers, the more powerful the brand will become with all stakeholders. Think of brand love as stored energy a brand can unleash in the form of power into the marketplace. You can use that power with consumers, competitors, new entries, employees, influencers, media, suppliers and channel partners.
These beloved brands command power over the very consumers who love them, as consumers feel more and think less. The beloved brands become part of the conversation whether it is through social media or at the lunch table at work. These consumers pay price premiums, line up in the rain, follow the brand as soon as it enters new categories and relentlessly defend the brand to any attackers. They cannot live without the brand.
Beloved brands have power over channel customers, who know their consumers would switch stores before they switch brands. Stores cannot stand up to the beloved brand; instead, they give the brand everything in negotiations. The beloved brand ends up with stronger store placement, better trade terms and better promotions from retail partners.
The competitors, whether current competitors or new entries, cannot match the emotional bond the beloved brand has created with their brand fans. The beloved brand has a monopoly on emotions, making the consumer decisions less about the actual product and more about how the experience makes consumers feel. Unless a new brand has an overwhelming technological advantage, it will be impossible to break the emotional bond the consumer has established with the beloved brand.
Beloved brands even have power over employees, who want to be part of the brand. They are brand fans, who are proud to work on the brand. They embody the culture on day 1 and want to help the brand achieve success.
3G needs to understand that brand love means brand profits
With all the love and power the beloved brand generates, it becomes easy to translate that stored power into sales growth, profit, and market valuation. Here are the eight ways a brand can drive profits:
- Premium pricing
- Trading up on price
- Lower cost of goods
- Lower sales and marketing costs
- Stealing competitive users
- Getting loyal users to use more
- Entering new markets
- Finding new uses for the brand.
Beloved brands can use higher prices and lower costs to drive higher margins
Most beloved brands can use their loyal brand lovers to command a premium price, creating a relatively inelastic price. The weakened channel customers cave in during negotiations to give the brand richer margins. Satisfied and loyal consumers are willing to trade up to the next best model. A well-run beloved brand can use their high volume to drive efficiency helping to achieve a lower cost of goods structure.
Not only can they use their growth to drive economies of scale, but suppliers will cut their cost just to be on the roster of the beloved brand. The beloved brand will operate with much more efficient marketing spend, using their power with the media to generate lower rates with plenty of free media. Plus, the higher sales volumes make the beloved brand’s spend ratios much more efficient. The consumer response to the marketing execution is much more efficient, giving the brand a higher return on investment.
Beloved brands use higher shares of a bigger market to drive higher volume
The beloved brands use their momentum to reach a tipping point of support to drive higher market shares. They can get loyal users to use more, as consumers build the beloved brand into life’s routines and daily rituals.
It is easier for the beloved brands to enter new categories, knowing their loyal consumers will follow. And finally, there are more opportunities for the beloved brand to find more uses to increase the number of ways the beloved brand can fit into the consumer’s life.
To learn more about this type of thinking, you should explore my new book, Beloved Brands.
With Beloved Brands, you will learn everything you need to know so you can build a brand that your consumers will love.
You will learn how to think strategically, define your brand with a positioning statement and a brand idea, write a brand plan everyone can follow, inspire smart and creative marketing execution and analyze the performance of your brand through a deep-dive business review.
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Beloved Brands: Who are we?
At Beloved Brands, our purpose is to help brands find a new pathway to growth. We believe that the more love your brand can generate with your most cherished consumers, the more power, growth, and profitability you will realize in the future.
We think the best solutions are likely inside you already, but struggle to come out. Our unique playbook tools are the backbone of our workshops. We bring our challenging voice to help you make decisions and refine every potential idea.
We start by defining a brand positioning statement, outlining the desired target, consumer benefits and support points the brand will stand behind. And then, we build a brand idea that is simple and unique enough to stand out in the clutter of the market, motivating enough to get consumers to engage, buy and build a loyal following with your brand.
We will help you write a strategic brand plan for the future, to get everyone in your organization to follow. It starts with an inspiring vision that pushes your team to imagine a brighter future. We use our strategic thinking tools to help you make strategic choices on where to allocate your brand’s limited resources.
Our brand playbook methodology will challenge you to unlock future growth for your brand
- Our deep-dive assessment process will give you the knowledge of the issues facing your brand, so you can build a smart plan to unleash future growth.
- Find a winning brand positioning statement that motivates consumers to buy, and gives you a competitive advantage to drive future growth.
- Create a brand idea to capture the minds and hearts of consumers, while inspiring and focusing your team to deliver greatness on the brand’s behalf.
- Build a brand plan to help you make smart focused decisions, so you can organize, steer, and inspire your team towards higher growth.
- Advise on advertising, to find creative that drives branded breakthrough and use a motivating messaging to set up long-term brand growth.
- Our brand training program will make your brand leaders smarter, so you have added confidence in their performance to drive brand growth.
To learn more about our coaching, click on this link: Beloved Brands Strategic Coaching
To learn more about our training programs, click on this link: Beloved Brands Training
If you need our help, email me at email@example.com or call me at 416 885 3911
You have my personal promise to help you solve your brand building challenges. I will give you new thinking, so you can unlock future growth for your brand.