Brand Failures

Brands are ways of protecting products from failures. Brands create a perception about products. Brands conjure up a emotions in a consumer's minds even before he sees the product on shelf. Today brands have become so entwined with the product that if a product is doing well then it must be the brand which is at fault.Today if a product fails the brand falters too.
Recently i read a book "Brand Failures:The truth about the 100 Biggesst Brand Failures of All times". Its a really good book for marketing guys. I have posted two examples where big brands have failed either because they didn't really understand the consumer's perception about the brand and making the worst possible mistake of cloning it(Coca-Cola) or by not analyzing the market properly(as in Kellogg's case).

1 New Coke
Think of a brand success story, and you may well think of Coca-Cola. Indeed,
with nearly 1 billion Coca-Cola drinks sold every single day, it is the world’s
most recognized brand.
Yet in 1985 the Coca-Cola Company decided to terminate its most
popular soft drink and replace it with a formula it would market as New
Coke. To understand why this potentially disastrous decision was made, it is
necessary to appreciate what was happening in the soft drinks marketplace.
In particular, we must take a closer look at the growing competition between
Coca-Cola and Pepsi-Cola in the years and even decades prior to the launch
of New Coke.
The relationship between the arch-rivals had not been a healthy one.
Although marketing experts have believed for a long time that the competition
between the two companies had made consumers more cola-conscious,
the firms themselves rarely saw it like that. Indeed, the Coca-Cola company
had even fought Pepsi-Cola in a legal battle over the use of the word ‘cola’ in
its name, and lost.
Outside the courts though, Coca-Cola had always been ahead. Shortly
after World War II, Time magazine was already celebrating Coke’s ‘peaceful
near-conquest of the world.’ In the late 1950s, Coke outsold Pepsi by a ratio
of more than five to one. However, during the next decade Pepsi repositioned
itself as a youth brand.
This strategy was a risky one as it meant sacrificing its older customers to

Coca-Cola, but ultimately it proved successful. By narrowing its focus, Pepsi

was able to position its brand against the old and classic image of its
competitor. As it became increasingly seen as ‘the drink of youth’ Pepsi
managed to narrow the gap.
In the 1970s, Coke’s chief rival raised the stakes even further by introducing
the Pepsi Challenge – testing consumers blind on the difference
between its own brand and ‘the real thing’. To the horror of Coca-Cola’s longstanding
company president, Robert Woodruff, most of those who participated
preferred Pepsi’s sweeter formula.
In the 1980s Pepsi continued its offensive, taking the Pepsi Challenge
around the globe and heralding the arrival of the ‘Pepsi Generation’. It also
signed up celebrities likely to appeal to its target market such as Don Johnson
and Michael Jackson (this tactic has survived into the new millennium, with
figures like Britney Spears and Robbie Williams providing more recent
endorsements).
By the time Roberto Goizueta became chairman in 1981, Coke’s number
one status was starting to look vulnerable. It was losing market share not only
to Pepsi but also to some of the drinks produced by the Coca-Cola company
itself, such as Fanta and Sprite. In particular the runaway success of Diet Coke
was a double-edged sword, as it helped to shrink the sugar cola market. In
1983, the year Diet Coke moved into the number three position behind
standard Coke and Pepsi, Coke’s market share had slipped to an all-time low
of just under 24 per cent.
Something clearly had to be done to secure Coke’s supremacy. Goizueta’s
first response to the ‘Pepsi Challenge’ phenomenon was to launch an
advertising campaign in 1984, praising Coke for being less sweet than Pepsi.
The television ads were fronted by Bill Cosby, at that time one of the most
familiar faces on the planet, and clearly someone who was too old to be part
of the Pepsi Generation.
The impact of such efforts to set Coca-Cola apart from its rival was limited.
Coke’s share of the market remained the same while Pepsi was catching up.
Another worry was that when shoppers had the choice, such as in their local
supermarket, they tended to plump for Pepsi. It was only Coke’s more
effective distribution which kept it ahead. For instance, there were still
considerably more vending machines selling Coke than Pepsi.
Even so, there was no getting away from the fact that despite the proliferation
of soft drink brands, Pepsi was winning new customers. Having already
lost on taste, the last thing Coca-Cola could afford was to lose its number
one status.
The problem, as Coca-Cola perceived it, came down to the product itself.
As the Pepsi Challenge had highlighted millions of times over, Coke could
always be defeated when it came down to taste. This seemed to be confirmed
by the success of Diet Coke which was closer to Pepsi in terms of flavour.
So in what must have been seen as a logical step, Coca-Cola started
working on a new formula. A year later they had arrived at New Coke.
Having produced its new formula, the Atlanta-based company conducted
200,000 taste tests to see how it fared. The results were overwhelming. Not
only did it taste better than the original, but people preferred it to Pepsi-Cola
as well.
However, if Coca-Cola was to stay ahead of Pepsi-Cola it couldn’t have two
directly competing products on the shelves at the same time. It therefore
decided to scrap the original Coca-Cola and introduced New Coke in its
place.
The trouble was that the Coca-Cola company had severely underestimated
the power of its first brand. As soon as the decision was announced, a large
percentage of the US population immediately decided to boycott the new
product. On 23 April 1985 New Coke was introduced and a few days later
the production of original Coke was stopped. This joint decision has since
been referred to as ‘the biggest marketing blunder of all time’. Sales of New
Coke were low and public outrage was high at the fact that the original was
no longer available.
It soon became clear that Coca-Cola had little choice but to bring back its
original brand and formula. ‘We have heard you,’ said Goizueta at a press
conference on 11 July 1985. He then left it to the company’s chief operating
officer Donald Keough to announce the return of the product.
Keough admitted:
The simple fact is that all the time and money and skill poured into
consumer research on the new Coca-Cola could not measure or reveal
the deep and abiding emotional attachment to original Coca-Cola felt
by so many people. The passion for original Coca-Cola – and that is
the word for it, passion – was something that caught us by surprise. It
is a wonderful American mystery, a lovely American enigma, and you
cannot measure it any more than you can measure love, pride or
patriotism.
In other words, Coca-Cola had learnt that marketing is about much more
than the product itself. The majority of the tests had been carried out blind,
and therefore taste was the only factor under assessment. The company had
finally taken Pepsi’s bait and, in doing so, conceded its key brand asset:
originality.
When Coca-Cola was launched in the 1880s it was the only product in
the market. As such, it invented a new category and the brand name became
the name of the product itself. Throughout most of the last century, Coca-
Cola capitalized on its ‘original’ status in various advertising campaigns. In
1942, magazine adverts appeared across the United States declaring: ‘The
only thing like Coca-Cola is Coca-Cola itself. It’s the real thing.’
By launching New Coke, Coca-Cola was therefore contradicting its
previous marketing efforts. Its central product hadn’t been called new since
the very first advert appeared in the Atlanta Journal in 1886, billing Coca-
Cola as ‘The New Pop Soda Fountain Drink, containing the properties of
the wonderful Coca-plant and the famous Cola nuts.’
In 1985, a century after the product launched, the last word people
associated with Coca-Cola was ‘new’. This was the company with more
allusions to US heritage than any other. Fifty years previously, the Pulitzer
Prize winning editor of a Kansas newspaper, William Allen White had
referred to the soft drink as the ‘sublimated essence of all America stands for
– a decent thing, honestly made, universally distributed, conscientiously
improved with the years.’ Coca-Cola had even been involved with the history
of US space travel, famously greeting Apollo astronauts with a sign reading
‘Welcome back to earth, home of Coca-Cola.’
To confine the brand’s significance to a question of taste was therefore
completely misguided. As with many big brands, the representation was
more significant than the thing represented, and if any soft drink represented
‘new’ it was Pepsi, not Coca-Cola (even though Pepsi is a mere decade
younger).
If you tell the world you have the ‘real thing’ you cannot then come up with
a ‘new real thing’. To borrow the comparison of marketing guru Al Ries it’s
‘like introducing a New God’. This contradictory marketing message was
accentuated by the fact that, since 1982, Coke’s strap line had been ‘Coke is
it’. Now it was telling consumers that they had got it wrong, as if they had
discovered Coke wasn’t it, but rather New Coke was instead.
So despite the tremendous amount of hype which surrounded the launch
of New Coke (one estimate puts the value of New Coke’s free publicity at
over US $10 million), it was destined to fail. Although Coca-Cola’s market
researchers knew enough about branding to understand that consumers
would go with their brand preference if the taste tests weren’t blind, they
failed to make the connection that these brand preferences would still exist
once the product was launched.
Pepsi was, perhaps unsurprisingly, the first to recognize Coca-Cola’s
mistake. Within weeks of the launch, it ran a TV ad with an old man sitting
on a park bench, staring at the can in his hand. ‘They changed my Coke,’ he
said, clearly distressed. ‘I can’t believe it.’
However, when Coca-Cola relaunched its original coke, redubbed ‘Classic
Coke’ for the US market, the media interest swung back in the brand’s favour.
It was considered a significant enough event to warrant a newsflash on ABC
News and other US networks. Within months Coke had returned to the
number one spot and New Coke had all but faded away.
Ironically, through the brand failure of New Coke loyalty to ‘the real thing’
intensified. In fact, certain conspiracy theorists have even gone so far as to
say the whole thing had been planned as a deliberate marketing ploy to
reaffirm public affection for Coca-Cola. After all, what better way to make
someone appreciate the value of your global brand than to withdraw it
completely?
Of course, Coca-Cola has denied that this was the company’s intention.
‘Some critics will say Coca-Cola made a marketing mistake, some cynics will
say that we planned the whole thing,’ said Donald Keough at the time. ‘The
truth is we are not that dumb, and we are not that smart.’ But viewed in the
context of its competition with Pepsi, the decision to launch New Coke was
understandable. For years, Pepsi’s key weapon had been the taste of its
product. By launching New Coke, the Coca-Cola company clearly hoped to
weaken its main rival’s marketing offensive.
So what was Pepsi’s verdict on the whole episode? In his book, The Other
Guy Blinked, Pepsi’s CEO Roger Enrico believes the error of New Coke
proved to be a valuable lesson for Coca-Cola. ‘I think, by the end of their
nightmare, they figured out who they really are. Caretakers. They can’t
change the taste of their flagship brand. They can’t change its imagery. All
they can do is defend the heritage they nearly abandoned in 1985.’

Lessons from New Coke
Concentrate on the brand’s perception.
In the words of Jack Trout, author of Differentiate or Die, ‘marketing is a battle of perceptions, not products’.

Don’t clone your rivals. In creating New Coke, Coca-Cola was reversing its
brand image to overlap with that of Pepsi. The company has made similar
mistakes both before and after, launching Mr Pibb to rival Dr Pepper and
Fruitopia to compete with Snapple.

Feel the love. According to Saatchi and Saatchi’s worldwide chief executiveofficer, Kevin Roberts, successful brands don’t have ‘trademarks’. They
have ‘lovemarks’ instead. In building brand loyalty, companies are also
creating an emotional attachment that often has little to do with the
quality of the product.


Don’t be scared to U-turn. By going back on its decision to scrap original
Coke, the company ended up creating an even stronger bond between the
product and the consumer.


Do the right market research. Despite the thousands of taste tests Coca-Cola
carried out on its new formula, it failed to conduct adequate research into
the public perception of the original brand.


Kellogg’s in India

Kellogg’s is, of course, a mighty brand. Its cereals have been consumed around
the globe more than any of its rivals. Sub-brands such as Corn Flakes, Frosties
and Rice Krispies are the breakfast favourites of millions.
In the late 1980s, the company had reached an all-time peak, commanding
a staggering 40 per cent of the US ready-to-eat market from its cereal
products alone. By that time, Kellogg’s had over 20 plants in 18 countries
world wide, with yearly sales reaching above US $6 billion.
However, in the 1990s Kellogg’s began to struggle. Competition was
getting tougher as its nearest rivals General Mills increased the pressure with
its Cheerios brand. Kellogg’s management team was accused of being
‘unimaginative’, and of ‘spoiling some of the world’s top brands’ in a 1997
article in Fortune magazine.
In core markets such as the United States and the UK, the cereal industry
has been stagnant for over a decade, as there has been little room for growth.
Therefore, from the beginning of the 1990s Kellogg’s looked beyond its
traditional markets in Europe and the United States in search of more cerealeating
consumers. It didn’t take the company too long to decide that India
was a suitable target for Kellogg’s products. After all, here was a country with
over 950 million inhabitants, 250 million of whom were middle class, and
a completely untapped market potential.
In 1994, three years after the barriers to international trade had opened in
India, Kellogg’s decided to invest US $65 million into launching its number
one brand, Corn Flakes. The news was greeted optimistically by Indian
economic experts such as Bhagirat B Merchant, who in 1994 was the director
of the Bombay Stock Exchange. ‘Even if Kellogg’s has only a two percent
market share, at 18 million consumers they will have a larger market than in
the US itself,’ he said at the time.
However, the Indian sub-continent found the whole concept of eating
breakfast cereal a new one. Indeed, the most common way to start the day in
India was with a bowl of hot vegetables. While this meant that Kellogg’s had
few direct competitors it also meant that the company had to promote not
only its product, but also the very idea of eating breakfast cereal in the first
place.
The first sales figures were encouraging, and indicated that breakfast cereal
consumption was on the rise. However, it soon became apparent that many
people had bought Corn Flakes as a one-off, novelty purchase. Even if they
liked the taste, the product was too expensive. A 500-gram box of Corn
Flakes cost a third more than its nearest competitor. However, Kellogg’s
remained unwilling to bow to price pressure and decided to launch other
products in India, without doing any further research of the market. Over
the next few years Indian cereal buyers were introduced to Kellogg’s Wheat
Flakes, Frosties, Rice Flakes, Honey Crunch, All Bran, Special K and Chocos
Chocolate Puffs – none of which have managed to replicate the success they
have encountered in the West.
Furthermore, the company’s attempts to ‘Indianize’ its range have been
disastrous. Its Mazza-branded series of fusion cereals, with flavours such as
mango, coconut and rose, failed to make a lasting impression.
Acknowledging the relative failure of these brands in India, Kellogg’s has
come up with a new strategy to establish the company’s brand equity in the
market. If it can’t sell cereal, it’s going to try and sell biscuits. The news of
this brand extension was covered in depth in the Indian Express newspaper
in 2000:
The company has been looking at alternate product categories to
counter poor off take for its breakfast cereal brands in the Indian
market, say sources. Meanwhile, the Kellogg main stay – breakfast
cereals – has seen frenzied marketing activity from the company’s end.
The idea behind the effort is to establish the Kellogg brand equity in
the market.
‘The company is concentrating on establishing its brand name in the
market irrespective of the off take. The focus is entirely on being present
and visible on the retail shelves with a wide range of products,’ explains
a company dealer in Mumbia.
As per the trade, Kellogg India has disclosed to the dealers its intention
of launching more than one new product onto the market every month
for the next six months.
These rapid-fire launches were supported with extensive ‘below-the-line’
activity, such as consumer offers on half of Kellogg’s cereal boxes. Although
most of the biscuit ranges have so far been a success with children, due in part
to their low price, Kellogg’s is still struggling in the cereal category.
Although the company tried to be more sensitive to the requirements of
the market, through subtle taste alterations, the high price of the cereals
remains a deterrent. According to a study conducted by research firm
PROMAR International, titled ‘The Sub-Continent in Transition: A strategic
assessment of food, beverage, and agribusiness opportunities in India in
2010,’ the price factor will restrict Kellogg’s from further market growth.
‘While Kellogg’s has ushered in a shift in Indian breakfast habits and adapted
its line of cereal flavours to meet the Indian palate, the price of the product
still restricts consumption to urban centres and affluent households,’ the
study reports.
Kellogg’s tough ride in India has not been unique. Here are some further
examples of brands which have managed to misjudge the market:

Mercedes-Benz. In 1995 the German car giant opened a plant in India to
produce its E-class Sedan. The car, which was targeted at the growing ranks
of India’s wealthy middle class, failed to inspire. By 1997, the plant was
using only 10 per cent of its 20,000 car capacity. ‘Indians turned up their
noses at the Sedan – a model older than those sold in Europe,’ reported
Business Week at the time. ‘Now Mercedes has to reassess its mistakes and
start exporting excess cars to Africa and elsewhere.’

Lufthansa. Germany’s Lufthansa airline joined forces with Indian company,
the Modi Group, to launch a new domestic private airline, Modi-
Luft, in 1993. However, three years later ModiLuft had gone bust and
Lufthansa filed a lawsuit against one of the Modi brothers, claiming he
had used funds obtained from the German company in other ventures.
In return, the Modi Group accused Lufthansa of charging too much and
of producing defective planes.

Coca-Cola. The Coca-Cola company understood that distribution was the
key to building a strong Indian brand. It therefore decided to buy out one
of India’s most successful soft drink companies and manufacturers of
popular soda brand Thums Up. However, although this gave Coca-Cola
an instant distribution network, Thums Up remained more popular than
Coke for many years. Most Indians initially thought that the new entry
to the market wasn’t fizzy enough.

Whirlpool. When Whirlpool launched its refrigerators on the Indian
market, it found the market unwilling to buy larger sizes than the standard
165 litres.

MTV. When MTV India was launched, the aim was to bring Western
rock, rap and pop to the sub-continent. Now, however, the music policy
has shifted to accommodate Indian genres such as bhangra.

Domino’s Pizza. Initially, Domino’s Pizza transferred its Western offerings
direct to the Indian market, but the company eventually realized that it
had to bow to local tastes, as Arvind Nair, chief executive officer at
Domino’s Pizza India explains. ‘Initially, our focus was to stay only in
metropolitan areas, but in the last two years we have felt the need to spread
ourselves into “mini metros” and B-category towns. We have also experimented
with our taste options, especially when we went into smaller
towns. We have focused on more regional flavours now,’ he says. As a result
of this change of strategy, Domino’s came up with localized toppings such
as ‘Peppy Paneer’ and ‘Chicken Chettinad’. This move was greeted with
a wry smile from Domino’s main Indian competitor, US Pizza, which was
the first to offer local topping. ‘In 1995, when we offered tandoori chicken
and paneer toppings, some made fun of us saying, why not offer spaghetti
and pasta toppings? The same companies are now offering chole and spicy
masala pizzas,’ says Wahid Berenjian, the managing director for US Pizza.
He told the Hindu newspaper Business Line that US brands such as
Domino’s made the mistake of thinking that US tastes are universal. ‘You
cannot change the taste buds that were developed more than a thousand
years ago,’ he said.

Citibank. When Citibank entered the Indian market, the firm’s aim was
to target only high-income earners. But, in the words of the Business Line
newspaper, Citibank soon realized that ‘in India it makes sense to go the
mass banking way rather than the class banking way.’
One of the reasons why Kellogg’s and these other brands’ passage to India
was not smooth was because they had been blinded by figures. The Indian
population may be verging on 1 billion, but its middle class accounts for only
a quarter of that figure. However, a 1996 survey conducted by the Indian
National Council on Applied Economic Research in Delhi found that the
sub-continent’s ‘consumer class’ numbers are around 100 million people at
the most, and that buying habits and tastes vary greatly between the Indian
regions. After all, India has 17 official languages and six major religions
spread throughout 25 states.
As a result, only those companies which are in tune with India’s many
cultural complexities can stand a chance. One of the companies which has
managed to get it right is Unilever. However, the conglomerate has had a
head start on those Western companies which entered the market after 1991.
Indeed, Unilever’s soap and toothpaste products have been available in India
since 1887, when the sub-continent was still the crown jewel of the British
Empire. The secret to Unilever’s longevity in India is distribution. Hindustan
Lever Limited (Unilever’s Indian arm) has products available in a staggering
total of 10 million small shops throughout rural India.
As for Kellogg’s, it remains to be seen whether its move into other product
categories, such as snack food, will be able to help strengthen its brand. The
dilemma that it may face is that if it becomes associated with biscuits rather
than cereals, core products like Corn Flakes could become a marginal part
of the company’s brand identity in India.
‘Kellogg’s is caught in a bind,’ one Indian brand analyst remarked in India’s
Business Line newspaper. ‘It realises that cornflakes can make money only in
the long haul, so it needs a product which will give it some accelerated growth
and the tonnage it is desperately looking for. However, its area of strength
worldwide lies in breakfast cereal and not in the snack food category.’
However, other impartial Indian commentators are more optimistic about
Kellogg’s future prospects within the sub-continent. Among those who
believe Kellogg’s will eventually succeed is Jagdeep Kapoor, the managing
director of Indian marketing firm Samiska Marketing Consultants. ‘With
every product offering, Kellogg’s chances improve based on its learning in the
Indian market,’ he says.
Only time will tell.

Lessons from Kellogg’s

Do your homework. Why did Kellogg’s cereals have a tough ride in India?
‘It was just clumsy cultural homework,’ says Titoo Ahluwalia, chairman
of market research company ORG MARG in Bombay.

Don’t underestimate local competitors. Although Indian brands were worried
they would struggle against a new wave of foreign competition following
the market opening of 1991, they were wrong. ‘Multinational corporations
must not start with the assumption that India is a barren field,’ said
C K Prahalad, business professor at the University of Michigan, in a
Business Week article. ‘The trick is not to be too big.’

Remember that square pegs don’t fit into round holes. When Kellogg’s first
launched Corn Flakes in India it was essentially launching a Western
product attempting to appeal to Indian tastes. Globalization may be an
increasing trend, but regional identities, customs and tastes are as distinct
as ever. It may be easy for brand managers of global brands to view the
world as homogenous, where consumer demands are all the same, but the
reality is rather different. ‘There is a bigger opportunity in localizing your
offerings and the smarter companies are realizing this,’ says Ramanujan
Sridhar, chief executive officer at Indian marketing and advertising
consultancy firm Brand Comm.

Don’t try and make consumers strangers to their culture. ‘The rules are very
clear,’ says Wahid Berenjian, the managing director for US Pizza (which
has successfully launched a range of pizzas with Indian toppings) in an
article for the Hindu newspaper, Business Line. ‘You can alienate me a bit
from my culture, but you cannot make me a stranger to my culture. The
society is much stronger than any company or product.’ Brands who want
to succeed in India and other culturally distinct markets need to remember
this.