Are Packaged Goods Margins Merely Margins of Error?
By Tom Dougherty
Packaged goods marketing companies, like P&G and Unilever, continue to fight for every drop of margin they can squeeze out of a crowded category. Traditionally, their brands are powered forward through product innovation, research and development. New advertising campaigns are rolled out when product improvements warrant them. Pampers, LUVS, Tide, ALL, and Mr. Clean are all a case in point.
In packaged goods marketing, preference and margins cannot be found in product enhancements and efficacy — these two improvements are simply the cost of doing business. In today’s crowded market space, your preference and margins stem directly from your brand. In reality, most brand marketers and brand managers are actually product managers and are hard pressed to describe their own brand in any terms other than banal category benefits.
Packaged goods marketing margins come from your brand importance
This pitfall in packaged goods marketing is not to be unexpected. Universities and colleges fail to understand the intricacies of a brand and thus do not prepare future brand executives accordingly. The famous brand management pathway at Proctor and Gamble merely indoctrinates the future brand managers as traditional product managers. Furthermore, it is nearly impossible to mend a brand from the inside out due to the Herculean task of dispassionate brand evaluation and analysis. It is important to note that your brand is not the identity of your product.
For example, Pampers is not the brand; it is the name by which consumers know the brand. Pampers is not about dryness and efficacy as it once was some years ago in a time when the brand was new and the category was immature and not crowded. Those were the days when brand marketers looked for the unique selling proposition (USP) that identified a differentiating product benefit. “How the product is different and better” became the marketing mantra and R&D became the means to an improvement.
Packaged Goods Marketing—The End Result
As a result, the brand becomes product development driven in packaged goods marketing, and the brand strategy falls out of those attributes. Inevitably, the market changes over time. The brand is now the supermarket or retailer where the product is sold. The consumer sensibly believes that everything within the retail category will deliver product performance. When it comes to laundry detergent —Tide, ALL, Ariel, DAZ, and Arm & Hammer – they all clean clothes well.
There is no mystification among consumers that all brands of disposable diapers keep their baby dry and comfortable. Most diapers fit well, stay in place and eventually end up in landfills. Therefore, when the diaper shopper goes to her local retailer, she believes that there is little difference between Pampers, Huggies, Luvs or the store brand. Sometimes, she will choose based on the experience of right fit because different brands of diapers will fit her child better as her loved one grows and changes. Frequently, she will decide based on price or an emotional connection that she neither examines nor understands.
Packaged goods marketing still thinks she will be influenced by the latest cartoon character or color scheme because they are still caught in the times of the stale USP paradigm. If it is so difficult to justify the margins based on product efficacy, what is left? The essence of brand, the value the consumer invests in the brand itself, remains potent regardless of category or product. Brand preference is not an investment in product benefits but rather an investment in self-description and often hidden precepts. What consumers buy today in packaged goods marketing, beyond commodity category benefits, is a reflection of themselves and their lives. When they choose a brand — a REAL brand — what they are in fact reinforcing is their identity, who they believe they are at that very moment in time.
We call this extension of identity a brand face and your consumer shows many. Due to the ample excavation required to bring the customer’s perceptive personality to the surface, brand development is more akin to anthropology than marketing. In packaged goods marketing, if the customer sees its reflection within a brand and affirms, “Yes, I want to be that,” you will keep them for life. Any brand that understands that clearly will win easily in the crowded market place of similar products, similar claims and similar price points. Recognizing and evoking the most acute and important brand face with regard to your brand is a difficult process. But in that germinal seed of self-description, you will find preference, margins and loyalty.