New generation brands control the “route to consumer”
This is the latest of my monthly posts on the Marketing Society Blog.
The vast majority of consumer goods brands face a daily, bloody battle to get their products on the shelves of ever more powerful supermarket giants. Even when you do get your precious new product listed, chances are it won’t be merchandised how you want it. And the cheaper, own-label copycat will soon be sitting next to it, riding the wave of the millions you’ve spent on R&D and advertising.
A new generation of brands are doing business in a different way, by taking control of the “route to consumer” and reaping huge benefits.
Take Nespresso. The brand sells its super-premium coffee capsules and machines exclusively through an online store and a network of 200 exclusive boutiques, in posh places like the Champs-Elysées. But this is no longer some little niche upmarket brand. Global revenue is over $2.5 billion. And in the nine years from 2000 to 2009 the brand grew at – wait for it – an average of 30% a year.
On a more modest scale, Hotel Chocolat in the UK is using a similar business model. Again, sales are done online and through a chain of boutiques. And, again, the model is delivering excellent results, with sales growing from £44million in 2008 to £53million last year, despite the recession.
The benefits of owning the route to consumer like Nespresso and Hotel Chocolat are huge.
– First, you can create perfect presentation of your brand, with your most profitable lines taking pride of place, rather than languishing on the bottom shelf of the supermarket out of sight.
Second, you get instant, 100% distribution of new products. Nespresso is able to do a global, synchronised launch of its annual limited edition range, in a way conventional consumer goods brands can only dream of.
Finally, you can test new products and get consumer feedback free of charge in real market conditions. Hotel Chocolat do with their monthly tasting selection, which 100,000 people have signed up for.
So, what is the key to success in this new form of branding?
– Product innovation: success starts with a fantastic product. In the case of Nespresso, 16 years of R&D went into creating the system, and in particular delivering the “crema” topping you get on a real espresso.
– Premium pricing: a superior product allows a premium price which in turn means high margins to invest back in brand building
– Members not consumers: by owning the route to consumer brands like Nespresso and Hotel Chocolat can treat their consumers like members. Indeed, both brands work as a club, with exclusive benefits such as advance samples of new products and invitations to special events.
In conclusion, brand leaders of the future will no longer let retailers rule the roost when it comes to consumer interaction. They will re-take control of the route to consumer to drive superior growth and stronger brand equity.