NMBS Conference 2014: Growing your core business
Published: 20 June, 2014
David Taylor is one of the world’s 50 leading marketing thinkers according to the Construction Institute of Marketing, and a Fellow of the Marketing Society. His clients include Tesco and Cadbury, and he spoke to delegates at this year's NMBS Conference about the importance of growing the core of their business.
He began by explaining that most brands are "famous for something", and that the source of their reputation and authority - and therefore their profit base - is the thing that made them famous in the first place. This is still the case even if their brand as gone on to spread into different areas; they still have that central core business. He said that 78% of companies who have enjoyed sustained, long-term success were still the market leaders in that once central thing that made up the core of their business.
As a result, he urged delegates in their own businesses to "focus on doing one thing really well". He added, however, that companies do still need to innovate - they can't just stay doing the thing that made them famous in the first place.
But he warned that while innovation is the "sexy" bit of marketing and branding, it's not as simple as it sounds. He highlighted that people tend to look at strong brands and what they do well and then try to imitate it in their own businesses, but that the things that make one business successful can't always be transferred into other sectors. As an example he highlighted Easyjet. The airline is famous for it's 'no frills' airline model, but that when the company tried to start a chain of cinemas using the same business model, stripping out the food and popcorn stands and asking customers to book much earlier, it was unsuccessful.
"Stretching into new markets is difficult," he said. "It's one thing to have the idea, but quite another to have the systems and competencies in place that you need, along with the ability to do that really well."
One pitfall that many businesses fall into is to innovate and expect steady growth from that innovation, while also expecting its core market to continue at the same rate of growth or stability that it always has in the past. In reality, he said, what often happens is that the innovation doesn't succeed as well as the company had hoped, creating less profit than expected, while the core business gets neglected as staff are taken off it to work on the innovation, often causing the core product to suffer as a result.
"So, rather than think out of the box, as we're often expected to do, why not make the box bigger and focus on making your core business better?" he urged delegates.
As an example, Mr Taylor highlighted the Burberry brand, which was struggling a number of years ago when chief executive officer Angela Ahrendts joined the business.
The company was known for its trenchcoat, which had been the core of its business since being used in World War One, but had since diversified into many different sectors including scarves, bags and buggies, among many others. According to Mr Taylor, Ms Ahrendts called a meeting of her senior managers and noticed that none of them had arrived to the meeting wearing a Burberry coat, instead choosing to wear many other brands.
"That's when she saw the problem," said Mr Taylor. "After all, if the people who work for the company don't believe in the brand, how can they expect their customers to? The threat to the core often comes from inside the business. Burberry were doing too much with its brand and not capitalising on its core. They weren't proud of it, and weren't innovating around it."
The company proceeded to put the trenchcoat back at the heart of its business, focusing its social media around the product and introducing the trenchcoat in new styles, colours and fabrics. They made the trenchcoat the icon of the company and built their brand around it.
"You have to grow the core before you add more," reminded Mr Taylor.
He then went on to explain ways in which companies can grow their core, highlighting three potential opportunities:
- Core extension
One example of a company expanding its core distribution is the bakers Greggs, which has opened an outlet in a branch of Travis Perkins. This, Mr Taylor said, was an interesting idea, with Greggs growing its core by extending its distribution from purely the consumer retail sector, into trade in order to attract a new type of customer.
Dominos Pizza is another business which has expanded its distribution in order to grow profits, with two-thirds of its business now coming from people ordering pizzas either by phone or online.
Core extension, on the other hand, means not introducing something completely different, but simply adding a new range which enhances the company's core business.
Wates, for example, is a building company which specialised in retail office building. When this sector struggled during the recession, however, it made the decision to acquire a building company that specialises in social housing, rebranding it as Wates Living Space.
Mr Taylor explained that, when purchasing products, people make 90% of their purchasing decisions on autopilot, using intuition and hard-wired associations known as memory structures. He said that this was how people could enter a supermarket containing 30,000 products, and take an average of only 30 minutes to choose approximately 30 products out of that entire choice.
He said that getting a business' brand recognised by those memory structures takes between two and three years of consistent messaging, and the key way of doing that is by creating a distinctive brand. How a company presents itself can create a distinctiveness between that company and its competition, regardless of whether the company's product offering or message is fundamentally any different.
As another example, Mr Taylor drew delegates' attention to the cat food brands Felix and Whiskas. In 2000 Whiskas was a market leader, with Felix a small brand in comparison. Both companies created television advertising to promote its products as the type of cat food that cats prefer, but, he said, while there was nothing particularly distinctive about the Whiskas advertisement, the Felix ad told a story, and gave a similar message in a far more memorable, more distinctive way. By 2005, Felix had overtaken Whiskas' market share.
"You don't have to do something different from your competition, but you have to find a way of standing out while doing the same thing," he said.
Mr Taylor concluded by highlighting the brand overhaul that the James Bond film franchise has undergone in recent years.
In 2000 the franchise was struggling to be seen as relevant, with competition from edgier, more gritty film franchises such as Jason Bourne's The Bourne Identity and 24 on television making the Bond series seem outdated.
Producer Michael Wilson announced that they were going to take the franchise "back to basics". They looked at what made the Bond films famous and what they were known for - girls, gadgets, cars and bad guys. They also considered the fact that the basic format of all Bond films were the same - Bond kills the bad guy while saving the world and gets the girl. In essence, this was the 'brand' of every James Bond film.
They then updated that brand by introducing Casino Royale - the same core format with a grittier, edgier James Bond in the form of Daniel Craig, which went on to be the most successful Bond film of all time.
Mr Taylor concluded by acknowledging that, just as the Bond franchise has continued to do with Skyfall, that core reinvention process never stops - businesses have to constantly reinvent and refresh themselves in order to stay on top, while never losing sight of what made them successful in the first place.