Knowledge Bank Blog, Pricing & Promotions, Range & Portfolio, Channel Execution

Tackling Things Head On

Are you doing what needs to be done?

In September 1982, seven people in the Chicago area died after taking the painkiller ‘Extra Strength Tylenol’.  They died because the painkillers had been laced with cyanide.

Industry experts predicted that the Tylenol brand, which accounted for 17% of Johnson & Johnson’s net income, would never recover from the sabotage.  So, what did J&J do?

They tackled the issue head on.  James Burke, J&J’s chairman, made the decision to recall all Tylenol capsules from the market.  This was 31 million bottles of Tylenol.  It was a costly move – estimated to be about $100m.  This was at a time when companies just didn’t recall products.

And it worked.  Only two months later Tylenol was back in the market with new tamper proof packaging and a big media campaign.  A year later their share of the $1.2bn analgesic market was back to where it was before the incident.  How J&J handled this is still taught as a crisis management case study in Business schools around the world.

Why are we talking about this?  Well, we often face challenging issues in our industry.  Why don’t shoppers shop with us?  Why don’t shoppers buy into a category?  Why do shoppers buy a competitor brand instead of our brand?  Should we cut the weaker SKUs out of our range?  What is the most important thing to say in our communication?

Addressing any of these issues contains an element of risk and reward.  Risk is the downside of doing the wrong thing.  Reward is the upside of doing the right thing.  To get the reward, you have to accept some risk.  However, there is often a reluctance to take the risk.  The “what if it doesn’t work?” voice outweighs the “what if it does work?” voice.  So we often play around the edges and don’t tackle things head on.

That must have been a temptation for James Burke.  Do a few small things and hope the crisis subsides.  But instead he recalled 31 million bottles.  The brand survived and then thrived.

So, what can you do to tackle things more head-on?

Price.  For a lot of brands, a big barrier to purchase is price.  It used to just be a challenge for premium brands.  Now it is also a challenge for mainstream brands in a market disrupted by Discounters.  What do you do?  Keep quiet about your price?  Hope Aldi don’t do a comparative advertising campaign?  Hope quality eventually wins?  Or address the issue head on?  Talk about value.  Use it as a reason for shoppers to come to your store or buy your brand.

Stella Artois was the classic example of this with the “Reassuringly Expensive” tagline.  M&S is another example at the moment with their “Spend it Well” communication.  They are re-framing the choice for shoppers – from a price choice to a value choice.  It’s not about how little can you spend, but how well you can spend it.  Is there more risk in this?  Yes.  Is there more potential reward?  Definitely.

Proposition.  We see a lot of low risk behaviour in proposition communication.  The safe behaviour is to talk more generally about why your brand is good.  The safe behaviour is to say a lot of things so that you cover a lot of bases.  The riskier behaviour is to prioritise.  Pick one thing to talk about, then talk about that clearly and consistently.  Some shoppers will say “no” to what you are saying.  But many shoppers will say “yes”.

Pepsi Max are doing this at the moment.  They have a 6 sheet poster campaign with the headline “too much taste to call ourselves a zero”.  Is it a bit risky?  Yes.  Does it, in one message, reinforce the Pepsi Max proposition and call out a direct advantage over a competitor?  Definitely.  Coca Cola want ‘zero’ to be about ‘zero sugar’.  Pepsi want it to be about ‘zero taste’.  The battle lines are drawn.

Channels.  We see a lot of manufacturers who are really well set up to win in large supermarkets.  As long as this store format is strong, their business is strong.  The only problem is that this format is not strong.  The majority of grocery retail growth is coming from 3 channels – eCommerce, Discounters and Convenience.  This is leaving many companies with big decisions.  Play in Discounters or not?  Adapt your portfolio to win in Convenience or not?  Develop new ways of selling in eCommerce or not?

The low risk thing to do is to keep selling what you are currently selling in the places in which you are currently selling it.  The higher risk thing to do is change that model.  Go into new channels.  Adapt your portfolio (brand, format, pack size).  Develop new selling models – like Unilever have done with Dollar Shave Club or Nestle Purina have done by taking a majority stake in  Lots of companies talk about these things, only a few are acting decisively.

So, look at some of the issues your company, category or brand faces.  Then ask yourself if you are really tackling things head on.

Don’t look at the risk (31 million bottles of Tylenol and $100m cost).  Look at the reward (crisis averted, enhanced reputation).

Feel free to forward.  Have a great weekend and speak to you next week.