strategy+business is published by PwC Strategy& Inc.
 
or, sign in with:
strategy and business
Published: September 16, 2008

 
 

A Breakaway Opportunity for “Inferior” Products

2. Find the inferior products that will attract consumers as their purchasing power decreases. Introduce a new brand or sub-brand in the categories to which consumers are moving in this downturn. Of course, companies will run the risk of potential cannibalization, but that’s still better than losing customers altogether. Retailers with their own distinctive product brands, such as Starbucks, will do more business in more nonpremium channels; they may sell proportionately more packaged coffee in groceries or value retailers. Similarly, if you are a spirits manufacturer, increase the distribution and merchandising of your premium brands for consumption at home. If you are a convenience store, turn your own retail brand into an inferior good by making sure you are consistently well-stocked in the staples, like bread and milk, that people need most — so it does not pay for consumers to drive to another store like Wal-Mart when they run short.

3. Cement consumers to your brand. Once you have attracted consumers to your inferior product, bind them to your brand. Give them an experience that merits repurchase. Think about the products you can trade them up to when the economy starts to recover — for example, the health-conscious, convenient, or premium products that will make them stick to your brand as their incomes increase. The previous wave of premiumization left behind many food manufacturers. When the economy bounces back, they may have a chance to replay the game.

4. Make the new normal feel better. Downturns represent breakaway growth opportunities for those clever enough to influence consumers’ attitudes; you can help consumers feel good about migrating to inferior goods by enabling them to justify their decisions in terms other than affordability. Toyota Motor Company’s Prius is a great example: Consumers don’t feel bad about trading in their BMW or Escalade, because they are doing their part for the environment; it’s not simply that they can’t afford anything more expensive. The objective is to leverage the downturn to get ahead of new trends in consumer behavior.

How long will the new normal last? It depends on the industry. In some, this will probably be a permanent phenomenon. For example, U.S. car buyers may no longer equate luxury with vehicle size; they may well continue to drive smaller, more fuel-efficient vehicles with less environmental impact. In other sectors, such as casual dining, consumers are likely to change their behavior again once economic growth and individual income growth return.

In many categories, for at least the next few years, companies will need to be prepared to effectively compete under both the old and the new normal. Brand owners and companies that offer products or services to customers across a broad range of price points, and that can manage the cycle, will fare better than those with more focused products and offerings that can’t adapt up- or downstream as consumer choices change.

Author Profiles:


Leslie Moeller is a partner with Booz & Company in Cleveland. He leads the firm’s North American work in the consumer, media, and retail industries, and previously led the firm’s global efforts in marketing and sales.

James Ryan is a principal with Booz & Company in New York. He specializes in helping consumer companies achieve breakthrough growth via operational and organizational transformation.

Juan Carlos Webster is a principal with Booz & Company in New York. He has extensive experience in strategy and change management for the consumer and industrial sectors.
 
 
 
 
Follow Us 
Facebook Twitter LinkedIn Google Plus YouTube RSS strategy+business Digital and Mobile products App Store

 

Resources

  1. Nikhil Bahadur and John Jullens, “New Life for Tired Brands,” s+b, Spring 2008: Offers a step-by-step guide to determining whether a brand has enough equity to make it worth revitalizing.
  2. Robert L. Heilbroner, The Worldly Philosophers: The Lives, Times, and Ideas of the Great Economic Thinkers, revised 7th ed. (Touchstone, 1999): A classic that provides easily digestible insights into major economists and their theories.
  3. Christine Kinealy, This Great Calamity: The Irish Famine 1845–52 (Gill & Macmillan, 1994): Our source on the famine’s population impact.
  4. Leslie H. Moeller, Nick Hodson, and Brad Wolfsen, “The Superpremium Premium,” s+b, Winter 2004: A look at the opportunities inherent in the premiumization trend.
  5. Paul A. Samuelson and William D. Nordhaus, Economics, 18th ed. (Tata McGraw-Hill, 2006): A staple of economics education that has greatly influenced thinking on the subject.