Posted on : 2023-03-26 20:41:15
Article : Good Morning Monday Management Solution for TASK 234- To compete against small upstarts, big companies must accommodate and also align their expectations for what small brands can deliver.
Build brand equity for the long term has been a mantra for large global companies and rightly so. With huge up-front investments, these organizations have developed brands that have lasted decades and continue to be relevant. However, such an orientation also leads to extensive research, obsessive testing, long innovation cycles, and huge investments to build awareness and distribution. It leads to product launch processes that take 18 -24 months. And it breeds a culture of risk avoidance, to the extent that some big companies haven’t launched a new brand in years. Contrast this with small, local companies that get to market faster, correct their mix as they get real consumer feedback, and invest in line with the revenues they generate.
Take Wardah, is a small-but-growing women’s cosmetics brand in Indonesia. Wardah took hold by being better at finding a consumer segment, and at engaging with consumers within that segment. Wardah is not only meeting a need among Muslim women for make-up and skin care products that are tailored to the local consumer’s skin type, but these products also meet “halal standards”, which is an important factor for this consumer segment. Wardah communicates the unique positioning of its product through its packaging as well as directly at Islamic colleges and at traditional beauty stores. Beauty Advisors educate women on how to use Wardah’s products and explain how the product is formulated using halal methods, keeping in mind their religious values.
At its start, Wardah had far less to invest in marketing than its big-brand competition, so it took a direct and personal route. In the recent past Wardah has more than doubled its market share in the personal care category in Indonesia. Large, global companies have long been aware of consumers’ desires for halal products; ignorance hasn’t been their stumbling block. The problem has been global brand-focused business models that don’t allow them to serve this consumer segment in ways that meet their needs.
To compete against small upstarts, big companies must accommodate a more experimental operation that tolerates more moving parts, and moves smaller brands out into the market more quickly. In doing so, brand failure rates will rise. They must also align their expectations for what small brands can deliver. Hyper-targeted, highly relevant brands could “peak” at just a few percentage points of market share. They can still be profitable, and they have to be willing to do so in a shorter burst with more flexibility.
Big brands need to get closer to local consumers and empower teams on the ground to generate new ideas. Sometimes this happens through M&A. There is spate of examples where big companies acquire small companies, their brands, and their talent in recent years, such as Unilever acquiring Dollar Shave Club and J&J acquiring OGX. Acquiring small brands, however, M&A is just one alternative for large companies. Encouraging a flow of new ideas internally through relevant external partnerships is still critical for these companies to succeed.
End point- The good news for incumbent, global companies is that they can still flourish in a landscape that increasingly favours small, focused, local brands if they are willing to be nimble and engaged with their customers. The winners will be those that make those changes with speed and conviction.
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