Esquema del árbol de decisión en Python

[Please refer back to Figure 6.1]

Moving further into the uncertain arena of product development, new prod-ucts and services can be created to appeal to the existing customer franchise.

To reduce risk, these new products may be able to rely on an existing brand’s strength in terms of heritage and reputation to increase the likelihood of trial or repurchase, ie they are line extensions/new variants rather than new brands. Heinz used to claim to have 57 varieties, but nowadays, thanks to the strength of the brand, it’s more like 5,700. While many of these products will have had intrinsic functional benefits in terms of flavour and appetite appeal, their successful introduction will have depended heavily on the trial-inducing reputation of Heinz. Thus, over time, Heinz (like Kellogg’s, Campbell’s, and many other fast-moving consumer goods brands) has migrated from its ori-ginal core products to establish a presence in many other food and drink cat-egories. The same process has occurred in many other markets. Starting with

light bulbs in 1891, Philips has diversified its brand into durables as varied as electric razors, audio and video equipment and even defibrillators. The issues facing brand extensions are dealt with in greater depth in Chapter 16.

A radical example of product development can be found in the United States with General Motors’ creation of an entirely new brand and dealer network in the shape of Saturn. Saturn was established as a radically different kind of customer-friendly, transparently priced car marque to appeal to a customer segment looking to avoid high-pressure sales techniques and decades of (to them) negative imagery associated with existing brands such as Chevrolet, Cadillac, Buick, Oldsmobile and Pontiac. Car buyers in this segment were increasingly attracted to Japanese marques, and GM judged it essential to launch a new brand against this threat rather than attempting to re-launch existing brands. Thus it could be argued that there was also an element of market development in the launch of Saturn: a defensive launch into an emerging customer segment.

It has been said that one of the ways to create innovative new product ideas is to juxtapose two different categories and, in conceptual terms, put them at right angles to each other as if a pair of doors, and then look at what might be created at the ‘hinges’. We have already seen the convergence of mobile phones and photography, and, on a more parochial level, the combination of two of the most distinctive black food and drink products in the UK market – Marmite with Guinness (Figure 6.3).

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Figure 6.3 Marmite with Guinness, promotional pack for St Patrick’s Day 2007

Reproduced by kind permission of the Marmite brand

The taste of Marmite has always been polarizing for consumers and the brand has capitalized on this truth in recent years by positioning itself as the spread that you either love or hate:

No one hated the brand Marmite, and no one loved the brand Marmite; it was the taste you loved or hated, so it was a subtle difference, but quite an important one.

We’d written ads around Marmite being your best friend, where you might have it as your best man at your wedding, but it wasn’t about that, it was about the sort of reactions to the taste that you loved or hated. So that realization made all the difference actually. (Lucy Jameson, Executive Strategy Director, DDB London) Guinness too is regarded as an acquired taste for drinkers. Thus the genius of this partnership is that it has generated lots of newsworthiness around two long-standing and well-established brands and given customers a powerful new reason to reconsider and try. Originally conceived as a limited-production promotional item to be launched in the run-up to St Patrick’s Day on 17 March 2007, only 300,000 jars were produced. Priced at £2.49 in UK supermarkets, over two-thirds of the quantity had already been sold by the due date. The power of the partnership between these two great brands and its novelty value has been confirmed on eBay where single jars were selling for in excess of £10 and entrepreneurial traders who have added a bit of green gift packaging and a touch of Shamrock blarney were asking double that! A combination of media coverage and viral ‘word of mouse’ has spread aware-ness of Marmite with Guinaware-ness around the world: Unilever, which owns the Marmite brand, found itself dealing with sales enquiries from the Americas, Middle Eastern and Asia-Pacific regions. Perhaps it will become a continuing line, rather as Cadbury’s Creme Eggs used only to be available at Easter time, but are now on sale all year round.

Diversification

[Please refer back to Figure 6.1]

Of the four operational quadrants of the Ansoff Matrix, ‘diversification’ is the most risky. By definition, there is little relevant expertise or the potential to leverage the scale and resources of the existing business because you’re embarking on the process of selling completely different products or services to unfamiliar customers. Cognizant of this risk and being wary of collateral damage, companies often create a completely new business to lead the charge.

Entrepreneur brands such as Virgin and Easy are prime examples of this.

Diversification for Virgin often involves partnership with other businesses that have operational experience in the category but lack the strong brand appeal.

Ideally a joint venture partnership is created in which operational and

invest-ment risks all round are minimized: a win–win situation for both parties. This model is underpinned by the extreme elasticity of these brands. They are able to stretch themselves a long way before they occasionally reach their breaking points, at which point a cola or a cinema chain fails to perform like the airline at the company’s core. The crucial thing about these sorts of brands is that the

‘glue’ that holds them together is very clearly understood by the company, its employees, franchisees and agencies. ‘Virgin’ is a clever brand name for two main reasons, which can outlive its founder. First, it is still a provocative name, though clearly nothing like as controversial as when it was first used, and that provocative nature is intrinsic to its challenging character and its self-casting as David to so many corporate Goliaths. Second, its implication of youth and purity also translates into how it approaches markets, with a fresh unsullied eye and an innocence that means anything is possible. Here’s how one of the most senior people in Virgin describes the brand:

Consistent execution and the philosophy of what the brand really means to people are the important things in brand extensions. We alighted on what that was for Virgin, as it emerged from the research we were doing in the late 1980s, and which was mainly driven by Virgin Atlantic and Virgin Records. We had this reputation with the public of being what we did, and doing it with quality.

However, we were also considered a value-for-money brand, an entrepreneurial company, and then it became very competitively challenging as a result of the airline. These ideas that Virgin stood for – ‘competitive challenge’, ‘entrepre-neurialism’, ‘quality’ and ‘value for money’ – and doing it all with a sense of fun and style were so important. It just was incredibly consistent.

Virgin also had something else: it had the personality of the single entrepre-neur owner. Vance Packard had written in the 1950s about brands in America and the way the big American corporates work. He said one of the biggest prob-lems for American businesses and American brands was the divorce of ownership from control. Quite clearly, Virgin doesn’t have that divorce. So we went about our diversification with the number one thing in mind: that the Virgin owner-ship will always remain with Virgin, and the brand would only be licensed for whatever we did in the future. The brand is owned by Virgin Enterprises Ltd, and Sir Richard owns 100 per cent of that. (Will Whitehorn, President, Virgin Galactic and former Group Corporate Affairs and Brand Development Director, Virgin)

And that sense of ‘brand’ strongly pervades Virgin’s communications advisors, as illustrated by the ex-CEO of Virgin Mobile’s UK agency:

The classic Virgin new product launch is all about challenging, and that chal-lenge is against one of two things. They are either challenging a specific competitor in the market or the very status quo. So, for example, when Virgin Atlantic launched it was really all about attacking British Airways. BA had been the UK’s national monopoly carrier, and though they’d been privatized they were able to exploit their near-monopoly situation. And so Virgin identified that and presented itself as a liberating competitor.

The Ansoff Matrix 43

The other way that Virgin enters a market is by challenging the status quo, the tired, old-fashioned, confused way that things are, to offer a fresh alternative.

That was the case with the Virgin Direct launch into financial services, where they talked about themselves as trying to clear the FOG. The FOG was the Financial Old Guard. The acronym and the analogy were perfect as it described what the FOG were peddling, which was confusion and complexity. What Virgin would bring was clarity and simplicity. (James Murphy, former CEO, RKCR/Y&R)

Although subsequently running into problems, NTL’s 2006 purchase of Virgin Mobile for £962 million to create the first ‘four play’ provider of mobile phone, fixed-line telephony, cable TV and internet access is yet further evidence of the importance of the brand in diversification strategies. The premium NTL paid for the Virgin Mobile business reflected its desire to use the Virgin brand for its new integrated business – a property for which it will also be required to pay an annual 0.25 per cent royalty on revenues for 30 years – with a minimum annual payment of £8.5 million. Such is the commercial value of risk reduction in diversification and the reassurance that a brand like Virgin can give investors.