1. Today, the authors argue, transformational growth can only be achieved by casting
aside tired and staid existing business paradigms and conceiving, planning and
managing businesses from an entirely new perspective grounded in a superior
understanding of how and why consumers behave the way they do.
48 F O U R T H Q U A R T E R / M I D - W I N T E R 2 0 0 5
2. REFRAMING THE MARKET
To A c h i e v e
Tr a n s f o r m a t i o n a l Growth
How a New View of Competition Can Change the Life of a Brand
BY CARL JOHNSON, SENIOR VICE PRESIDENT / CHIEF STRATEGY OFFICER, CAMPBELL SOUP COMPANY,
and HENRY RAK, MANAGING PARTNER, HENRY RAK CONSULTING PARTNERS
ODAY, THE SEARCH FOR PROFITABLE TOPLINE GROWTH DOMINATES THE BUSINESS
T AGENDA. Blue-chip companies with major brands invest enormous capital and man-
power resources, applying well-known marketing and strategic techniques to this
perennial challenge. Yet the CPG landscape is, as we all can see, woefully short of effec-
tive growth strategies. Particularly with brands or businesses in “mature” categories, these
techniques regularly fall short, as stagnating or declining sales and profits make clear.
So in the following pages, we’d like to introduce you to a new approach, one that is
gaining traction in CPG especially. For example, it has helped the leading soup compa-
ny reverse the decades-old decline in its flagship business. It has helped a leading anal-
gesic company propel its growth from -7 percent to +2 percent in a single year. It has
helped a major food company create, as a late-comer to an established category where the
number one brand was $300 million in sales, a new $600-million brand. And it has
helped a staid, specialized juice product transform itself from a marginalized niche also-
ran into a nine-percent annual growth juggernaut.
HOW DID THESE COMPANIES ACHIEVE SUCH DRAMATIC RESULTS? By completely rethinking
their competitive frame of reference from a new perspective, driven by comprehensive
understanding and systematic leverage of consumer behavior. This approach illuminated
the competitive landscape for these companies in a unique, competitively advantaged
way. This, in turn, enabled them to dramatically change their ability to identify strategic
issues and assess strategic options.
M. Carl Johnson III (carl_johnson@campbellsouop.com) is Senior Vice President / Chief Strategy Officer for Campbell Soup
Company, with responsibility for corporate strategy, research & development/quality, corporate marketing services, corporate licensing and e-
business. Prior to Campbell, he ran three successively larger multi-billion dollar divisions at Kraft Foods. Before Kraft, he led the CPG con-
sulting practice at Marketing Corporation of America. Earlier, he held senior management positions at Colgate-Palmolive and Polaroid.
Henry Rak is managing director of Henry Rak Consulting Partners (www.hrcpinsights.com). He has 35 years of experience in
the CPG industry. Before founding HRCP in 1999, he honed his marketing skills during his 27-year career at Kraft Foods. Among his
accomplishments: developing a strategy for the then-emerging technology of scanner data, changing information methods and practices,
improving the effectiveness of Kraft’s marketing and trade spending and pricing practices. Early in his career, he led the development of
the Stove Top Stuffing national plan. In later years, Rak managed the development of business plans for Tang, based on information
derived from implementing consumer and analytical approaches in the international arena.
F O U R T H Q U A R T E R / M I D - W I N T E R 2 0 0 5 49
3. REFRAMING THE MARKET
PRODUCT USAGE DOMAIN
Illustration
Solo:
Active/Passive
Domain III
Waiting
Chores
Domain I
Domain II Doing nothing
Working Cooking Product Type A
Relax/br ak
e
Studying
Watch TV Product Type C
THE CONCEPT OF Product Type A
Driving Product Type B
Snack Hobby
Music Chatting
As a result, strate-
Product Type D
REDEFINING ONE’S COM- gic information
Product Type C PC/W use
eb Domain IV
Product Type A
Product Type B Playing sports
PETITIVE SET has been Exercise
Product Type A
Product Type C
about the brand and
around for many years. Product Type D
Product Type C
Product Type I
the marketplace is
For decades, CEOs Concert applied tactically ––
Sport event
have cited the logical Cinema
Domain VI
Party
Product Type A
Product Type J
as useful facts
Product Type K
and intuitively appeal- against specific
ing dictum that domi-
Social
issues or problems
nant brands need to
AM Occasion
the company is con- PM Occasion
redefine their markets Product Usage Domain provides a map showing where and tinually facing. That
in order to grow. when products are competing in the broadest sense. This is is, a potentially
the most frequently overlooked or assumed perspective on powerful body of
That is, instead of the marketplace. information gets
thinking you have, say, applied on an as-
a 65-percent share of a needed, relatively
circumscribed category, These analyses of frame of refer- siloed basis against immediate
you should seek a 15-percent share ence provided a powerful analytic problems and one-off new business
of a larger-but-still-relevant cate- tool for marketing management in ideas, not in the integrated fashion
gory. planning and forecasting the necessary for transformational
The challenge here has always growth potential and requirements strategy development.
been that to do this accurately and of breakthrough brand strategies. The result is brand strategy
meaningfully, you have to be very development from a circumscribed
knowledgeable about your actual
Centrality of Frame of and limited perspective, and conse-
and potential frame of reference. quently, offerings that are not com-
Reference
At least for CPG, now we finally
In most CPG companies today, pelling –– or even relevant –– to
have the information and analytic
the exigencies of everyday pres- consumers and how they live their
tools to unlock the magic in this
sures from competitors and capital lives.
approach. In the companies previously
markets force inordinate attention
Today, a new and comprehensive on the here and now, a focus that cited, a new consumer-based per-
understanding of competitive fram- almost always comes at the spective on where and against
ing can fundamentally change the expense of long-term strategy whom the brands competed –– or
power of strategic brand informa- development. could –– became the blueprint for
tion and drive dramatically differ- integration of all relevant informa-
Similarly, because of day-to-day
ent business results. tion into a comprehensive and
pressures that direct competitors
For the companies cited on the exert, marketers usually assume that powerful body of knowledge for
previous page, a consumer-based the relevant frame of reference for the brand. This comprehensive
and properly defined competitive their products is defined by the com- “knowledge estate” changed the
frame of reference became the petitors sitting next to them on the fundamental strategic paradigms
organizing principle that drove shelf. After all, these are the source of for these brands, and led to
integration of all relevant con- their continual problems as reflected remarkable success.
sumer and marketplace information in their monthly sales and share fig- A BRAND’S STRATEGIC POSITION-
into effective growth strategies. ures and with their customers. ING IS ITS UNIFYING PLATFORM. It
50 F O U R T H Q U A R T E R / M I D - W I N T E R 2 0 0 5
4. A c h i e v i n g Tr a n s f o r m a t i o n a l Growth
Significant growth in today’s environment of extreme competitive and financial pressures cannot be achieved by doing
more of the same, or by tweaking marketing plans and programs around the edges.
drives all marketplace activity and and a “purchase structure,” which businesses are tapped to derive the
aligns all functional areas within defines the specific drivers of pur- broadest feasible set of products to
the company. All effective market- chase behavior in the close-in, spe- be analyzed and a set of hypothe-
ing strategies depend on certain cific product category. ses for how this broad market
fundamental, critical elements: Each provides distinct and vital might operate among consumers.
■ Frame of reference insight into how consumers These hypotheses are then sys-
■ Target behave. Linked, they provide the tematically analyzed, tested against
roadmap that guides the applica- real consumer behavior patterns
■ Benefit
tion of all targeting, need state, and expanded upon.
■ Brand personality product performance, brand bene- The result is clusters of products
■ Effective spending levels and fit and brand equity information in that empirically define how com-
plans developing a powerful and effec- prehensive sets of categories com-
tive brand strategic positioning. pete with each other within the
Of these, frame of reference is
the most fundamental and most With a new, expanded and more actual context of consumers’ every-
important. Why? Because it relevant perspective on frame of day lives. The clustering is driven
defines, from the point of view of reference, managers look at all by elements and needs in key usage
the consumer, the basic role and pur- their other brand information dif- situation(s) that the group of prod-
pose of the product in the consumer’s life. ferently; the information has not ucts is effective at meeting.
It is this core insight and under- changed, but the insights that the This provides specific insight
standing about the role of the true competitive frame provides into where, when, how and by
product that gives meaning to all can be vastly different. whom your brand and a wide set of
the other pieces of strategic infor- Compared to the past, it is now alternative brands / products are
mation –– needs, benefits, target, possible to understand much more used. Just as importantly, it also
etc. Properly understood and uti- clearly who is doing what and why identifies what usage factors are
lized, it directs strategic thinking –– and, therefore, much clearer the most powerful and dynamic in
across artificial “category” bound- strategically what you need to driving product clustering and
aries, addressing how consumers change to make your brand the one usage among this set of products.
actually use products to meet the needs that best meets consumers’ needs. THIS ANALYSIS VENTURES FAR
they experience in their everyday lives. BEYOND STANDARD PRODUCT AND
TWO ESSENTIAL COMPONENTS OF BRAND USAGE ANALYSES of categories
Usage domain structure by linking together products from
CONSUMER BEHAVIOR DEFINE A COM-
PLETE UNDERSTANDING of frame of A consumer usage domain structure disparate but relevant categories
reference: consumer product is an analysis of actual consumer and illuminating the most powerful
usage patterns and consumer pur- behavior that identifies clusters of factors driving consumers’ use of
chase patterns. products drawn together by a similarity of these products to meet the broad
There are two very powerful end usage by consumers. array of needs they experience
analyses that allow marketers to Analysis of domains begins with across time.
empirically understand, validate, identifying and clarifying for the In the example (box, opposite page),
and leverage these behaviors: a company and its businesses a set of note that the “Product Types” are
“usage domain structure,” which critical, pragmatic business issues. not simply different brands, but
analyzes the largest viable set of The experience and expertise of substantially different product genres
competitive/substitutable products; the people most familiar with the that cut across manufacturers’ com-
F O U R T H Q U A R T E R / M I D - W I N T E R 2 0 0 5 51
5. REFRAMING THE MARKET
CATEGORY PURCHASE STRUCTURE
Illustration
mon definitions. Market that soup was a “closed competitive
The key behavioral drivers of set,” that is, a belief that soups pri-
Segment 1 Segment 2
product clusters and usage parti- marily compete with soups. Ergo,
tions in this example are a) the Brand A Brand B
the category is closed –– no substi-
time of day, b) whether the usage tutes and a zero sum game.
is alone or social, and c) whether Form 1 Form 2 Form 1 Form 2 This thinking underpinned
the user is in an active or passive Campbell’s Condensed Soup mar-
Flavor 1 Flavor 2
situation. keting and advertising for many
It tells us that Product A is Size 1 Size 2 years. A familiar marketing call was
extremely versatile –– something Image Set A
“Have a Campbell’s Soup and a sandwich.”
probably already understood. Image Set B When a new CEO and executive
More important, by defining spe- team charged with turning around
Category Purchase Structure
cific usage domains and identifying the company arrived in early 2001,
identifies how the hierarchy of
exactly which competitive prod- preferences for different product
one of the first acts was to build a
ucts operate there, we can now attributes –– such as flavor, size strategic information base for the
begin to understand what the rele- or brand name –– drive purchase US Soup category. Among other
vant benefits are in each domain behavior within a category. analyses, one of the most important
–– and how Product A, or new and valuable was to understand the true
brands, can win within each. which everyone else is playing. competitive set for soup. This work was
THIS UNDERSTANDING PROVIDES AN THIS IS WHAT TRANSFORMS the competitive domain analysis.
ENORMOUS STRATEGIC ADVANTAGE TO GROWTH PROSPECTS.
Campbell’s RESULTS OF THIS ANALYSIS PROVID-
A MARKETER in determining how to Condensed Soup provides a dra- ED A REVOLUTIONARY FINDING for the
(1) competitively position existing matic example. Campbell Soup Company. One
brands for growth, (2) create pri- Back in 2001, as Campbell Soup executive called the findings “the
orities across a portfolio of Company was embarking on its Rosetta Stone for soups.” Soup, in
brands, and (3) develop and man- Transformation Plan turnaround, fact, was found to compete in the
age new brands. one Wall Street analyst called bigger “lunch and dinner main
These insights provide the basis Condensed Soup — Campbell’s dish” arena –– a wide-open com-
for assessing the broad strategic largest business — a “Buggy petitive set, not merely a “soup
landscape. They form the founda- Whip.” This comment reflected only” set.
tion for all strategic positionings. the prevailing view that condensed Thus, instead of having 75 per-
Domain usage structure identifies soup, which had been steadily cent-plus of the soup category,
precisely the categories and prod- declining at a rate of about two Campbell’s had only three percent of
ucts with which you compete in percent per year for over 15 years, main dishes. This revelation meant
key situations –– the principal would continue to do so. The rea- that the positioning battle cry was
sources of volume opportunity and soning: Consumers were abandon- not “Soup and a sandwich,” but
vulnerability –– and points the ing condensed soup in favor of the “Soup instead of a sandwich,” since
way toward what is necessary to more convenient ready-to-serve soup competes against sandwiches
win in your segment. soup, which does not require the (and salads and yogurt, too, as
This fundamental understanding addition of water or milk. Indeed, other examples) for main-dish
of the patterns of consumer behav- there appeared to be an inverse rela- lunch choices.
ior and the principles that drive tionship between condensed soup
Happily, compared to cold sand-
them equips a marketer with the and ready-to-serve soup.
wiches, Campbell’s soups provide
ability to change the rules by The implicit assumption was hot, more nourishing and satisfy-
■ Continues on page 58
52 F O U R T H Q U A R T E R / M I D - W I N T E R 2 0 0 5
6. A c h i e v i n g Tr a n s f o r m a t i o n a l Growth
A Talk with Henry Rak:
Digging Deep, Getting Smart About Consumer Behavior
GMA Forum: Let’s of soup, it’s not the right way of thinking about the
define what we’re company’s business situation: Actually, Campbell has a
doing here in conversa- five percent share of lunch. That change in frame fun-
tional language, for our damentally changes how you think about opportunity.
Henry Rak
many readers who
Managing Partner For example, rather than making the a priori
may not be familiar
HENRY RAK CONSULTING
with what you mean assumption that all that’s relevant is soup, they started
PARTNERS
by “purchase struc- talking not about soup and a sandwich but about soup
ture,” “usage domain instead of a sandwich. Why? Because they realized that
structure” and “knowledge estates.”
many consumers choose one or the other. They don’t
Henry Rak: Well, the conversational way to think eat both.
about it is the competitive set that you operate in. The goal is
That fundamental change in the way condensed eat-
to very comprehensively understand who your imme-
ing soup is positioned caused a significant change in
diate competitors are, and who your secondary and
marketing spending. The spending level has gone up
tertiary competitors are –– not based on what you
dramatically. Together with other marketing programs,
believe or what you think, or on information from focus
this reversed a 30-year trend of -1.5 percent a year or
groups or any of that sort of stuff, but based on behav-
so; soup growth went, almost overnight, to eight per-
ior. It’s all about really understanding the actual behav-
cent or so in terms of consumption.
ioral tradeoffs that consumers make when they make
choices within a broad, competitive arena.
For example, when people decide about lunch and GMA Forum: Obviously, if you spend more,
dinner, they literally have hundreds of choices to you’re going to get more sales in this business. But
how does a company know it will get enough
make. The questions are: “What are the choices
additional sales to pay back the investment in
they’re making with respect to, say, soup? What are marketing spend?
the choices they make when they think about eating
Henry Rak: Your spending must be related to the
soup at lunch? If lunch isn’t soup, what is it? “
potential size of the business and how big a share you
Now, there are two ways of looking at this. One is have of a competitive set. If you have a low share of a
to ask, “Are there any other soup alternatives?” large competitive set with decent margins, it will
Campbell's Red and White soups have a 75 share of make sense to spend a lot more money, because you
soups, so asking the question this way limits the can expect to drive volume profitably.
choices. So let’s look at the question more broadly:
But the important thing is to know the facts. And the
“If it isn’t soup, what is it? Sandwiches? Salad? Hot
problem across almost all CPG companies today is
dogs? Something else?” This line of questioning is
that they don’t know the facts about the world they’re
critical to understanding your real competitive space
competing in. They don’t know, really, what their
–– that is, where you can draw volume from. It’s about
position within that world is.
defining the white space for your products –– what
we call “domain structure.”
GMA Forum: Would it not be fair to say that just
about every food product competes for breakfast,
GMA Forum: So you’re reframing the market lunch or dinner business?
opportunity.
Henry Rak: Let’s consider the case of, say, cereal
Henry Rak: While Campbell has a 75 percent share bars. A cereal bar marketer needs to understand its
F O U R T H Q U A R T E R / M I D - W I N T E R 2 0 0 5 55
7. REFRAMING THE MARKET
NEED STATE INTEGRATION WITH PRODUCT USAGE DOMAIN
Example
Domain III
Waiting
Chores
Domain I
Domain II Doing nothing
Working Cooking Product Type A
Usage Domains
Relax/break
Studying
Snack Hobby Watch TV Product Type C
Product Type A Product Type D
Driving Product Type B Music Chatting
Product Type C PC/Web use Product Type A Domain IV
Product Type B Playing sports
Product Type C Product Type A
Product Type D
Exercise Product Type C
Product Type I
Easy/Convenient
Avoid Negatives Domain VI
Balanced
Concert Product Type A
Need States
Light/I Person Cinema Party Product Type J
(driving product
Sport event Product Type K
clusters in
Usage Domains) Adult Favorite
Habit
The reason products and behaviors cluster into different domains is that consumer needs
clearly differ. This analysis enables marketers to directly link attitude and need state data
to behavior in actionable ways.
■ Continued from page 52
ing lunches. This behavior-based Soup portfolio also continues to analysis is conducted within the
learning fundamentally changed show encouraging progress. closer-in definition of a product
how Campbell’s was selling its category (e.g., margarine, lunch-
condensed and ready-to-serve meat, ice cream/frozen novelties,
soups. It led to a complete reposi- purchase structure etc.). It analyzes all key product
tioning of its brands against the The second element of a behav- variables –– such as brand, flavor,
broader “simple meals” competitive ior-based understanding of a prod- size, form, price, diet/regular, etc.
frame, along all marketing and uct’s frame of reference is a purchase –– that can influence consumer
advertising dimensions. structure. A purchase structure is a purchasing, and determines the
Together with other important behavioral analysis that identifies, hierarchy of their importance to
improvements in marketing and in their relative order of impor- consumers in driving actual pur-
sales activities — including a unique tance, the key drivers of purchase chase behavior.
gravity-feed shelving system that behavior among products within a The purchase structure analysis is
makes soup dramatically easier to given category. based on actual purchase-to-pur-
shop — Campbell’s Condensed The overall context within chase switching / substitution behav-
Soup is now growing again. which the purchase structure is ior to determine the importance /
In fact, Campbell’s Condensed has analyzed and utilized is the usage leverage that each product variable
grown significantly in volume and domain structure –– the overarching has in driving consumer purchase.
dollar terms during the last 12 perspective of a brand’s usage pro- THE PURCHASE STRUCTURE IDENTI-
months, a feat unseen in many, many file and competitive set. FIES THE RELATIVE POWER each prod-
years. The balance of Campbell’s However, the purchase structure uct attribute / variable has in driv-
58 F O U R T H Q U A R T E R / M I D - W I N T E R 2 0 0 5
8. A c h i e v i n g Tr a n s f o r m a t i o n a l Growth
A Talk with Henry Rak
position in the war for breakfast; it’s part of that cate- you get that understanding, it really does change how
gory, so it’s vital to understand that category and how you go to market.
high or low its share is within a very broad set. That, I think, is what many food companies are suf-
On the other hand, a marketer’s ability to draw fering from: not really having the correct, broad-
from the breakfast-eating stage may be very limited. based view of the competitive landscape they’re oper-
The important thing is to know, based on behavior, ating in. They make a lot of assumptions and operate
what your situation is. If you don’t know that, you’re on an awful lot of conventional wisdom.
groping in the dark in terms of trying to develop any Consider soft drinks. What the majors haven’t fully
sort of effective strategy. grasped is that there is such a thing as “refreshment
In my opinion, it’s because food companies don’t beverages.” And carbonated beverages are just one of
know this that so many have so much difficulty grow- the competitors within refreshment beverages. But
ing their business. the soft drink companies keep advertising themselves
as if they’re talking to themselves. That’s why they
suffer. Basically, they just talk about their brand as if
GMA Forum: Well, what part does the current
they operate in the world all by themselves. They
wellness / obesity issue play in that?
don’t line them up against the other guy, and they
Henry Rak: Generally speaking, the health and well- don’t line them up against anything else that con-
ness issue is really at the margin. For example, the sumers use as a refreshing beverage alternative.
carb craze had an impact on the cereal category –– There’s just brand personality. There’s nothing in the
but really only to the tune of about one or two per- messaging that’s “competitive set.”
cent. And by the way, that impact went away.
In fact, about a year ago I had a conversation with
GMA Forum: Okay, how do I get from there to a
one CPG CEO about just this. Certain of his compa- better strategy via your “Product Usage Domain”
ny’s products were suffering, he maintained, because illustration on page 50? What should we take
of their price points versus private label and because away from that complicated-looking chart?
of the health and wellness issue. And I said, “It has
Henry Rak: The point being made is that your com-
nothing –– or very little –– to do with that.” The
petitive set could be breakfast, it could be beverages,
real problem is that they do not comprehensively
it could be something else. That when you think
understand where their products compete. A company may
about beverages, “beverages” is not one market.
have a 70 share of, say, the macaroni and cheese mar-
Beverages is actually five markets. And each of those
ket –– but what they’re not considering is that maca-
market definitions is, in fact, describing different
roni and cheese competes with pizza and other kinds
needs and different situational contexts that con-
of products. They don’t have a clue about that.
sumers have. That’s why these sets of products cluster
As a result, they don’t grow their businesses. together into these domains.
GMA Forum: So you’re saying a product that GMA Forum: If I’m a beverage manufacturer, I
may be targeted very narrowly –– at children’s may well respond, “Yes, but I know that. What I
lunches, say –– might have a wider market. really need to know is: What am I supposed to do
Henry Rak: Exactly. Many of these products can about it?”
play much bigger roles. In fact, a lot of today’s prod- Henry Rak: But they don’t know. They may have a
ucts should actually be carry-out, readily consumable sense that, “Well, maybe my juice stuff competes with orange
out of the home. Again, the important thing is to get juice.” What they actually have is not knowledge, but a
a grasp of what the potentialities for the product are, tremendously imprecise understanding of what the
both near in and in the much broader context. When competitive landscape actually looks like.
■ Continues on page 63
F O U R T H Q U A R T E R / M I D - W I N T E R 2 0 0 5 59
9. REFRAMING THE MARKET
ing purchase behavior. It partitions (1) Where your brand currently tive and application of all other
products into sets based on these operates in the structure; brand information.
important variables. (2) With whom you compete Both of these structures are behav-
The output typically resembles most closely; iorally based: They clarify and illumi-
an organizational chart, with the (3) What the critical drivers of nate exactly what consumers do across a
sets of products higher up in the purchase behavior are; wide array of products and situations.
structure tending toward dual / This understanding then informs
multiple usage by the household, (4) What you need to own in
your brand positioning to com- and directs application of all relevant
and those further down competing strategic information in the brand’s
in a more either or relationship. pete effectively with these com-
petitors; entire knowledge base into break-
The sets higher up fulfill some- through competitive strategies.
(5) How you should think
what different needs for the house- Virtually all major competitors
about positioning your brand (or
hold in the grand scheme of things; have similar types and, frequently,
a new brand) to compete at a
these sets are broadly required amounts of strategic information.
across the consumer landscape and higher and more attractive level in
the structure. It is only when someone who
are thus powerful drivers of pur- understands both the information
chase behavior. Purchase structure also identifies and the dynamics of a business rec-
the highest-potential new product
Competing at this level involves ognizes what pieces of information
large volume potential –– but also entry points in the structure and are both strategically relevant and
high spending requirements. The how to manage key attributes (form, differentiating –– and puts those
product sets that form lower down in type, brand, etc.) in new product pieces together in a way that no
the structure compete more directly and line extension development. one else has done before –– that
in a direct either/or substitution man- Finally, purchase structure breakthrough, paradigm-changing
ner, and are more limited in their embodies an invaluable planning strategies are possible.
ability to source and grow volume. and forecasting tool, which pro- A linked usage domain /purchase
ONE OF THE MOST VALUABLE BENE-
vides simulation capabilities for structure provides the roadmap
FITS OF A PURCHASE STRUCTURE IS THE
evaluating potential for new prod- that directs that process.
UNDERSTANDING IT PROVIDES for
uct introductions and new strategies
for existing brands. The forecasting As noted earlier, in addition to
portfolio management: What are frame of reference, the elements of
realistic and appropriate expectations for capability includes volume, dollar
sales, share and earnings, as well successful strategic positionings are
each brand? How can we plan and man- benefit, target and brand personality.
age the overall portfolio to achieve corpo- critical advertising required, pricing
rate goals? principles and source of business. INSIGHTS IN ALL THREE OF THESE
AREAS ARE TAKEN TO A HIGHER LEVEL
The purchase structure also iden- by understanding the usage
tifies critical consumer segments, Usage Domain and domain. Instead of being analyzed
called image sets, that operate in the Purchase structure: relatively independently as three
structure. These are key subgroups The Combined Power distinct buckets of information
organized by specific sets of needs within AS USEFUL AS THE INSIGHTS FROM about the brand, brand attribute,
the category. They are essential target EACH OF THESE ANALYTIC TOOLS –– benefit and targeting are integrated
groups to address in product and USAGE DOMAIN AND PURCHASE STRUC- against consumer needs informa-
promotion planning for the brand. TURE –– ARE,it is in the integration of the tion in a manner that facilitates a
THE PURCHASE STRUCTURE ENABLES two structures that strategic power deeper understanding of which pieces are
YOU TO SEE AND LEVERAGE: is exponentially increased by relevant and differentiating from the stand-
changing management’s perspec- point of consumer behavior.
■ Continues on page 64
60 F O U R T H Q U A R T E R / M I D - W I N T E R 2 0 0 5
10. A c h i e v i n g Tr a n s f o r m a t i o n a l Growth
A Talk with Henry Rak ■ Continued from page 59
“Most people in this business think innovation is about creativity. That’s wrong. It’s about BENEFITS.
The world is not short of innovative products. The real question is, ‘Are they relevant? Are they fulfilling
a need that really does exist?’”
And that is one of the major hindrances to the once you’ve made that basic decision, you can go back
development of strategy: lack of precise understanding of and ask the question, “WHY is somebody going to buy this
what you compete with and what you don’t. product instead of the other available products?”
That becomes the basis of your positioning.
GMA Forum: As a consumer, very often I might The reason 95 percent of new products fail is
order an iced tea or coffee. I know that soft because they don’t ask the first question. All their
drinks are available, so is there really anything
makers are concerned about are the benefits, which
new they could say to me to make me change my
are generally stated in a way that is very generic, not
mind?
specific enough to be compelling to consumers to buy the
Henry Rak: Well, if a marketer started talking new product. The product fails because consumers walk
about how really well a certain soft drink goes with away saying, “This product does nothing for me.”
meals or food –– which they’ve never done –– you
And if you don’t ask the first question, your second
might in fact give it a try. And while such a message
question is either going to be wrong or very fuzzy,
may not at the outset revolutionize the choices peo-
and consequently the way you go to market in terms
ple make, there are lots of examples of companies
of your advertising is going to be very fuzzy. It’s not
changing their positioning, and as a result totally
changing their volume and profitability. going to be precise enough to persuade people to
change their behavior to buy your new item.
In short, if you believe in the power of advertising,
GMA Forum: So it’s a matter of rigorously, sys-
and if you line up things according to the true compet-
tematically doing your homework.
itive set, and if you say things based on attitudinal
information –– knowledge that your brand has equity Henry Rak: That’s right. When you start
and leverage versus alternatives –– you have to believe approaching new product development or reposition-
that it’s going to help your business over the long term. ing this way –– that is, on the basis of consumer
behavior –– you begin to understand how vital
understanding consumer behavior is to developing
GMA Forum: What impact do you think this compelling new product concepts and ideas. Most
process would have on today’s high rate of new
people in this business think innovation is about cre-
product failure?
ativity. That’s wrong. It’s about benefits. The world is
Henry Rak: When you think about introducing a not short of innovative products. The real question is,
new item, you have to ask the question, “What are con- “Are they relevant? Are they fulfilling a need that real-
sumers going to STOP doing, what are they going to STOP buying ly does exist?”
in order to buy my product?” Now, that’s a purchase struc-
ture question, because you need to go back to the pur- But you can’t answer that question unless you ask
chase structure and say, “Here is where this product will the first question, which is: “Where is the business going
enter, here are the items it will compete with, and here are the items to come from?”
it’s going to take business from in order to establish itself.” And And most marketers don’t ask that question. ■
F O U R T H Q U A R T E R / M I D - W I N T E R 2 0 0 5 63
11. REFRAMING THE MARKET
■ Continued from page 60
Simply having the comprehensive brand does/can own to differentiate itself in ucts with positioning and marketing
usage domain structure begins to this segment? Is there a different seg- plans (simulations) that will succeed
imply how consumer needs operate ment, with different needs, against in new areas of the structure.
to drive the structure: It is, after all, which my brand might better be Integrating the same kinds of
because a group of products is effective positioned? If no one owns the high strategic information against the
at meeting some common set of needs that ground, do any of my brands have purchase structure leads to stronger
they cluster together to begin with. attributes and perceptions that give brand marketing plans, because
However, in conjunction with them the potential to own it? If not, each element is aligned with the
an in-depth knowledge of con- could a new brand be married to key drivers of consumer behaviors
sumer needs from A&U’s, syndicat- that specific need and own it? and priorities. It also leads to new
ed studies, need state studies, etc. In the same fashion, targeting and better product development
–– which many companies already information and consumer segmen- plans, because they’re built on rele-
have in their information portfolios tation data are better understood vant and differentiating positioning,
–– it is possible to overlay specific and integrated into strategic posi- with marketing and advertising
consumer need states against the tioning from understanding and plans developed against critical tar-
partitions of the structure to see in overlaying them on the dynamics gets and competitive sets.
much greater depth how the con- of frame of reference. IN ONE CELEBRATED CASE, A MAN-
sumer needs interrelate with each UFACTURER DEVELOPED A TECHNO-
other and drive product usage in LOGICAL BREAKTHROUGH IN A
each domain. Integrated Marketing
Information in Action FROZEN FOOD CATEGORY, and built a
In the example on page 58, over- product and positioning against
laying the detail of a need state study Using this integrated marketing the strategy of being the premium
on the structure makes much clearer information construct and process brand in the frozen category.
why the types of products in each of creates a competitive advantage Forecasting and modeling analyses
the segments compete with each from the brand’s “knowledge estate” projected a business of approxi-
other, based on the six different need by allowing the marketer to recognize mately $150 million and a critical
states that participate in the market and put together key pieces of strategic introductory advertising level of
and drive the clusters of product information in a way that none of his com- $18 million to $20 million.
interaction and competition. petitors is able to do. This can exponen-
tially increase the growth prospects However, while the project was
This more organic and systemat- of existing and new businesses. in development, the company
ic understanding of need states implemented the kind of integrat-
within the usage domain paves the With the strategic usage domain ed marketing information process
way for better integrating addition- as the blueprint, the marketer is described above, and conducted
al strategic information into a able to build dynamically different both usage domain and purchase
strategic positioning: brand benefit strategic positionings and long- structures analyses. The structures
and product attribute data. range plans for the business. With revealed a startling insight into
the knowledge of the broad com- consumer behavior: the primary
The strengths and weaknesses of petitive sets in the market, the con-
each brand and its key competitors frame of reference for the product
sumer needs that drive these key category was not other frozen food
are now aligned against the most product partitions, the current /
important needs that drive the par- categories, as logic had suggested,
potential benefits your brands and but in fact restaurant-prepared versions
titioning of their specific competi- competitors possess, and what key
tive sets in the usage domain. Does of the specific product.
consumer groups exist within and
any brand own the high ground –– a beyond your current franchise, you This was an enormous category,
major need defining the domain are able to build brand positionings with very heavy ad spending, and
partition? If a competitor already that will win with consumers. You’re the technological improvement of
does, are there additional needs that my able to develop new brands or prod- the new product made it an effective
64 F O U R T H Q U A R T E R / M I D - W I N T E R 2 0 0 5
12. A c h i e v i n g Tr a n s f o r m a t i o n a l Growth
KNOWLEDGE ESTATE INTEGRATION
Illustration
STRATEGIC POSITIONING & PLANNING MARKETING PLAN DEVELOPMENT & EXECUTION
Domain Structure
Domain III
Where/with whom Waiting
broadly compete Chores
Domain II Doing nothing
Relax/Break Product Type A
Cooking Product Type C
Purchase Structure
Entry points and Snack Hobby Watch TV
positioning elements Product Type A Marketing Leverage
for new entries Music Chatting of Brand within
PC/Web use Product Type A Category
Product Type B Competitor A Your Brand Competitor C
Product Type C
What’s important in Entry points and
key product sets — Easy/Convenient positioning elements
Etc. Adult Type Kid Type Etc.
and to whom for new entries
(Attitude/targeting
Avoid Negatives Flavor 1 Flavor 2 What products
research)
are critical
Light/I Person to have in line
Size 1 Size 2
Which benefits do/
could you or BYF Image Set Role of how to
competitors possess promote within
Deaf Image Set category
(Attitude research)
Linking usage and purchase behavior provides the foundation to integrate all brand knowl-
edge and information in a powerful and dynamic way. This enhances every element of
strategic and marketing planning.
competitor in critical strategic imperative for consumer and marketplace infor-
terms of product quality with the transforming a brand’s growth mation to formulate powerful
restaurant take-out version. The prospects. But, like the adage about strategic positionings and growth
product positioning was completely the weather, it has been much strategies for key brands.
revamped; both volume and spend- Significant growth in today’s envi-
talked about but little acted on ––
ing targets were dramatically
until now. We now possess the ronment of extreme competitive and
increased in line with modeling
tools and applications to clearly financial pressures cannot be
against the new frame of reference.
understand how consumers organ- achieved by doing more of the same,
Product rollout was phased, pro- ize their behavior and use of prod- or by tweaking marketing plans and
gressively increasing the ad spend- ucts to systematically meet their programs around the edges.
ing as each region met expecta-
critical needs. Transformational growth can
tions. The result: a truly paradigm-
changing $600-million business, This consumer-based and prop- only be achieved by casting aside
with ad spending in excess of $50 erly defined competitive frame of tired and staid existing business
million, as compared to the original reference needs to become the paradigms and conceiving, plan-
$150-million / $20-million plan. organizing principle by which ning and managing businesses from
CPG companies manage their an entirely new perspective
CLEAR, ACCURATE, EMPIRICALLY DRIV-
EN UNDERSTANDING OF A PRODUCT’S brands. Management needs to use grounded in a superior understand-
ACTUAL AND POTENTIAL FRAME OF REFER- this understanding to drive the ing of how and why consumers
ENCE HAS LONG BEEN RECOGNIZED as a application and use of all relevant behave the way they do. ■
F O U R T H Q U A R T E R / M I D - W I N T E R 2 0 0 5 65