Monday April 29, 2024

Executive Briefings Business & Management: Brands & Customers

Careful before you tweak

Fate can be cruel to highly successful brands that may have for years, set benchmarks in customer loyalty. This could be the result of altering a product design or a business model, but really is a bungling of customer expectations, in what they perceive to be the key attributes of their brand. In a desire to appeal to a changing set of customers, companies sometimes forget their loyal ones and what their brand stands for.

Sir Freddie Laker pioneered international aviation, when he established Laker Airways in 1966. His airline gained recognition for its innovative business model, which sought to democratise air travel by offering affordable fares to the masses. At that time, overseas travel was a prerogative of the wealthy. Laker Airways unsettled the industry with the introduction of ‘skytrain’, the world’s first low-cost long-haul carrier. Doing away with amenities and focusing only on basic transportation, Sir Freddie dramatically reduced ticket prices, expanding the universe of his customer segment. These were frequently people who had never travelled before. Laker Airways experienced exponential growth for more than a decade, but then Sir Freddie had a change of heart and revisited his no-frills strategy. The airline sought to reposition itself as a full-service carrier, targeting a different segment of customers. He forgot his old patrons and they dropped him, as newer entrants offered just what Laker Airways had pioneered in the first place. By the early 1980s Laker was done.

Business history has recorded several such mishaps, including Coca Cola’s ill-famed attempt to re-formulate its classic soda, to appeal to a younger set of customers. A global boycott in the market place, led to a swift reversal to the original product. McDonald’s cut a sorry figure following the launch of Arch Deluxe burger, that sought to target a more upscale and sophisticated customer segment. Arch Deluxe failed badly and had to be withdrawn. There was nothing fundamentally wrong with the product design offered by the companies, explained in these examples. But the common mistake was that they had forgotten their customers and the fact that customers emotionally owned the brand.

There are dozens of recent instances of brand relaunches, to appeal to a younger customer segment, with tragic results. These include, J Crew, an American retailer, in its attempt to revitalise its clothing; PepsiCo’s bid to revive ‘Crystal Pepsi’, originally launched in the 1990s, in response to a belief in retro-inspired products and Burger King’s introduction of ‘Satisfries’ a lower calorie alternative to potato chips to appeal to health-conscious customers. J. Crew filed for bankruptcy; PepsiCo quickly discontinued Crystal Pepsi and Burger King learnt the hard way that its customers put taste before health – why else would they eat fast food?

Whilst it is necessary to innovate, for instance, to improve the value of offerings, managers must remember never to forget who their customers are, and what their brands stand for. The desire to tweak products to appeal to a younger customer segment, comes with the risk of alienating traditional ones. Factors such as brand identity, consumer preferences, pricing, and marketing effectiveness, all play crucial roles in determining the success or failure of such endeavours. Success stories of transformations like Apple, prove that with careful planning, brands can stay ahead of the curve, while retaining the loyalty of existing customers. Heritage can command a premium but it can also be constraining.

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