Cutting the risk involved in a brand new image: Patrick Hosking finds strong loyalty to long- established brands among consumers
Monday 12 October 1992
Familiar to generations, they command strong customer loyalty and are able to charge a premium price to match.
Yet the owners of both brands, having reaped large profits from them for decades, have just seen fit to change them.
Mars Confectionery has relaunched the Mars Bar after 60 years, with a new recipe and a larger size. Procter & Gamble axed the old washing-up liquid brand after 32 years, replacing it with a new formula and name, Fairy Excel.
Each was a potentially dangerous step. If it ain't broke don't fix it is a rule that applies as much to marketing as anything else.
Huge profits were at stake: in the UK Mars sells one billion bars a year; Fairy Liquid has a thumping 42 per cent of the UK market with sales of pounds 61m last year.
Strong brands allow companies to charge more than the competition for the same quality. Ranks Hovis McDougall's portfolio of brands (Mr Kipling, Bisto and Mother's Pride) explains why Hanson is prepared to offer pounds 781m for it.
Last month Unilever's worldwide chairman, Michael Perry, warned about the 'incredible amount of pious theory' on the topic of global brands at the 33rd World Advertising Congress in Barcelona. (Unilever spends pounds 1.5bn a year advertising its hundreds of brands.)
Nevertheless research published last week shows how powerful a strong brand can be in getting customers to pay more for the same quality of service. (The corollary is that brands are a rip-off).
The consultants Business Marketing Services asked directors buying a number of business services how much discount they would have to be offered to switch from the strongest brand to another prominent brand even if it offered the same level and quality of service.
BMS found a massive reluctance to switch from the premium brands in the case of hotels, car hire, desktop computers and transatlantic flights. For example, businessmen would have to be offered discounts of 11, 41 and 45 per cent respectively to switch from British Airways to Virgin, Delta or Air India (see panel).
BMS spoke to 141 directors from 500 top companies. It concluded that Ladbroke Group's acquisition of Hilton Hotels was one of the most successful brand acquisitions of the past decade.
Its report said: 'The successes unfortunately were outnumbered by the failures and it is now generally acknowledged that Ford paid far too much for Jaguar, that Nestle overvalued Rowntree and that RJR paid way over the odds for Nabisco.'
Other companies have learnt the folly of tinkering with a well- loved brand. The best-known mistake was perpetrated by Coca- Cola, which tried changing its cola recipe in North America in April 1985.
Using meticulous market research and blind tastings, Coca-Cola's guinea pigs said they preferred a new sweeter formula not only to the original one, but also to all rival colas.
Confidently, therefore, it rolled out new Coke. There was an outcry. The 28- strong complaints division at Coca-Cola had to take on 130 extra staff just to field phone calls from furious Coke drinkers. Eventually - after three bruising months - the corporation capitulated. It brought back the original flavour under the label Coca-Cola Classic.
But the damage was done. In that year Coca-Cola lost the number one slot in the huge North American soft drinks market to its arch-rival, Pepsi Cola, owned by PepsiCo. It subsequently won it back, but only after a costly marketing struggle.
Supermarket shelves are haunted by the ghosts of revamped brands that did not work. Guinness put a glitzy gold label on its stout and called it Guinness Extra in a disastrous attempt to seduce lager drinkers. It later reverted to Guinness Original.
According to John Murphy, head of the Interbrand marketing consultancy, 'You don't muck about with your brands. They're valuable assets.' Interbrand was responsible for advising RHM on valuing its brands.
But the reason some brands are changed is because they are losing sales or market share: 'If a brand is drifting off its peak you can't afford not to revamp it. And you've got to adapt your brands to changing tastes and conditions.'
It is a tightrope between alienating your core customers with something new and boring them. And there is often the over-zealous manager who cannot resist tampering with the brand.
Mars and P&G, both owned by American corporations, are secretive about their brands. But both were under external pressure from rivals to do something.
P&G's move with Fairy was a reaction to Unilever, which in 1990 exploited its well-liked Persil washing powder brand, extending the name to a washing-up liquid. Backed by heavy television advertising, Persil liquid grew to take about 18 per cent of the market, enough to start worrying P&G, with 42 per cent.
P&G claims the new Fairy Excel, which it is promoting with a pounds 10m television advertising budget, is 50 per cent better at shifting grease and does less damage to hands.
Analysts say Mars's decision to change the bar was a response to an alarming fall in market share. Mars Confectionery's share of the 'countline' (chocolate bar) market has fallen from more than 45 per cent to about 40 per cent in three years, while Cadbury and Nestle/Rowntree, which makes the top-selling Kit-Kat, both gained share. The Mars Bar's share has fallen from 16 per cent to 12.5 per cent in two years.
Bob Eagle, the Mars UK external relations manager, who claims to eat a bar every day, comments: 'We found that we could make something that was already very good even better.'
The new recipe is smoother and more chocolatey, he says, and follows intense market research and tastings, both in-house and using volunteers from the general public. The bar is also 6 per cent bigger.
'The results (of the research) were sufficiently positive to delight us. The change is not totally free from risk, but we minimise the risk by the consumer research we carry out.'
The total cost of the relaunch is pounds 4m-pounds 5m. Mars is no stranger to expensive revamps. It successfully converted the Marathon bar into the less euphonious Snickers, the name used for the product outside the UK.
So far it is too early to measure the success of the revamp. The publicity inevitably gives a short-lived boost to sales. Mars is eagerly waiting for things to settle down.
But it seems to have learnt from Coca-Cola's misfortune with new Coke. The old-style Mars Bar is being sold in parallel with the new one. Evidently, Mars is prepared to back down if the traditionalists win the day.
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