The inexorable rise of the ‘commoditised category’.

Muzeable Thinking No. 6 Tim Brooks 3rd March 2013

As more and more categories become ‘commoditised’ brands need to find new and better responses. No quick fix, but a focus on deeper holistic thinking and rigorous execution has a chance… 

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Consumption without consequences

We already live in a world with too much choice. This is not made any easier by the rise of the commoditised category – where the choice itself becomes of increasingly marginal interest. Some of these categories are still packed to the brim with brands and brand owners who might be doing ‘ok’, but they are rarely growing sustainably and are often in denial about the reality of their situation. Beyond offering some sign posting – giving shape to the bun-fight – they cannot hide from the fact that the category is basically commoditised and consumers substitute with grim alacrity. The signs are clear; the steady growth of own label sales; over promotion feeding the habit of consumers/shoppers who’ve become promotional junkies; the increasing number of fixture/ message magpies – attracted by an minor increment of difference, but not seeing much added value. Consumers bounce around making often ad hoc choices, but with no real personal consequence or risk. It all does the job. The worry for brands is the number of categories that are – if we’re honest – creeping towards this slippery slope. OTC medicines, financial products, lots of food categories, everyday toothpaste etc. are knee deep in this reality.

Other categories are even worse off and the market [or sometimes just the retailer] has decided it doesn’t really need brands at all. I have been going bananas recently; I mean working in the bananas category. It might be the most challenging category I have ever looked at – much fun though it is! In the UK there are no brands [except Fair Trade which in this context doesn’t really count] in the major retailers… all this in a category where arguably the UK’s first food brand was created [Fyffes Blue Label]. Categories like this have drifted into uninspiring, un-engaging, undervalued and mundane shopping rituals. But, people still love bananas… Europe imports over 5m tonnes a year. So, surely this situation does not have to be an inevitable outcome? So, in the context of growth, how much does it matter?

Obviously, lots. Because if the consumer and just as worryingly, if they are your key route to market, the retailers see little point to your brand beyond product supply and – perhaps for the major mults – your cash, then you are on borrowed time. Theoretically the category would function just as well with or without your brand or even your investment. All it needs is an alternative supply chain

 Is this the end of brand loyalty?

The implication of all this is that there is no value in brands or consumer brand loyalty left. HOGWASH [NB remember we are talking about categories we describe as ‘commoditised’] it is just that loyalty fits into a new context – and understanding this is part of the solution. In a world where your loyalty is defended by superior quality or there is a perceived quality compromise in using the alternatives it is robust and protectable. Once this is differential removed or overtaken by value considerations or parity creep – where all the products AND messages in the market are the same – the consumer will park their loyalty and over time this evolves into entrenched behaviour. It doesn’t mean there is NO loyalty, it just means it is part of a behavioural repertoire, not a given. We have to work to leverage it EVERY TIME the consumer enters the fray.

What worries us about this situation is the way the tools of response are too often vested in sales/retail strategy – price and promotion, category rhetoric etc.  These are vital, but rarely will deliver a sustainable solution. They are too reactive [to customers] and not broad based enough to deliver a sustainably winning response. We value category strategy, but it is a subset of the solution.

A point of context…I am always irritated [my problem not theirs!] when brand marketers say that major retailers ‘hate brands’ and unreasonably want to remove them. Having worked indirectly [for a brand owner] and directly [as a consultant] with major retailers my experience is that they are best described as ambivalent about brands. Often [perhaps grudgingly or silently] accepting that the category… even they themselves, need strong brands and they have a key role [beyond the cash they feed into retailers’ bottom lines]. They provide Investment, generate most of the innovation, they invest in consumer and shopper insight and consumption demand, they think more holistically, they even occasionally think beyond this afternoon’s till receipts etc. The commoditised – often stuck – categories are clearly failing to do all, or some, of these things well enough to engage retailers.

In search of solutions…

So, if you work in one of these commoditised or fast commoditising [where brands still do ‘ok’, but are adding so little value that their % of sales on promotion, their static or declining average price, their substitution levels, the volume growth of own-label etc. mean are in reality ‘hanging on’ because of infrastructural and historical precedent] what should you do?

Actually, if you look around there is a lot to give us hope. Ultimately it must start with a clear strategic approach to your future business success. Much is based on an old, dark art… it’s slipped my mind, what’s that thing… oh I remember… it’s called marketing!

Fix 1: The cult of personality.

If all other things are equal, you can create an engaging and meaningful personality. Without a point of salience it is merely window dressing, but… E.g. Innocent. They weren’t the first, but they might have been one of the best… They built a personality in a category of potential commodity, they tied it to some benefits and things that are interesting and/or important to consumers and they executed with absolute single-mindedness – we all read the pack copy with surprise and delight. We all look at it now as if it was obvious, but… most people selling mashed up fresh produce and competing with other people selling similar mashed up fresh produce would have ended up spiralling into commoditisation; over promoting, moaning about retailer own label and struggling to innovate. Innocent had the chutzpah to actually do something about it.

To vastly varying degrees of success and authenticity you see Cravendale in milk, Happy Eggs, Filoppo Berio olive oil, Volvic in water all trying this.

Fix 2: Innovate.

No-one else will… you can innovate in anything. The problem is that most innovation we deliver is flawed and doomed to failure. But, that is not a reason for giving up on it. We believe that we need a new model, based less on ideation and more on understanding the growth context. But that is for another missive…

Some proof of possibility is found in a favourite sub-category [I exaggerate] of mine – cheddar cheese.

When I were a lad there was own-label and Cracker Barrel – which I only remember as a treat for my lifelong bachelor, Bow Bells, East-Ender, Uncle Fred… Now… I counted four brands at my last supermarket visit, some clear segmentation, a premiumisation approach, innovation founded on need-states/occasions – convenience, out of home etc. I haven’t got the data, but I am pretty certain that the cheddar market is healthier now than 10 years ago… and I am certain that at some point consumers and retailers were contented with the commodity status quo of blocks of yellow dairy produce… do they need all the stuff being produced, maybe not, but reality is if they don’t want it… it won’t survive.

Fix 3 Messaging.

We don’t work nearly hard enough on claims and messaging. Innocent didn’t just build a brand they build a language that reflected their personality. It was a way of describing the same things, but in new and engaging ways. We can all do this. It needs to be treated as seriously as innovation, which is why we don’t think you should always see it as part of the advertising/creative process. There claims are often treated as a prop, or in an ad hoc, one-off way… claims are part of a strategic continuum.

Fix 3 Insight and category led approach

This is key. A brand, either versus competition or to engage with retailers must try to own the universal understanding of the category and how it works. We refer to this as the mechanics of growth, the deep and sustainable view of how we’ll physically grow… you look at categories like Coffee… again there was a time when OL and its quality/parity were threatening the brands… but the category development… provenance, occasions, innovation, insight and strong merchandising and fixturisation delivered by Kenco/Nestle has build the category and maintained a meaningful branded premium… great stuff.

Beyond the single, quick fix.

So, a strong, vivid and authentic personality, some innovation, some reworking of the segmentation and fixture can all work, but only if viewed holistically and with a clear sense of category [BUT BEYOND THE CONSTAINTS OF ‘CATEGORY STRATEGY’ PROJECTS] and adjacencies. This must be founded on a clear view of growth and insight.

BUT… never, never, never just start by looking to create a larger than life personality or comms idea, or through up-weighting you ideation/messaging – that’s like kissing frogs… ALWAYS START WITH GROWTH… really understand how the category works/will work then define HOW to GROW [your GROWTH FRAMEWORK] and then define the role of disruption and differentiation. Strategy simply should never start with strategy it must always start with GROWTH.

PS sorry for the cheap plug, but this is what Muzeable do.

 

 

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