Dan Ratner, managing director of branding and communications agency Uberbrand, looks at the warning signs and turnaround strategies for businesses in the red.
From manufacturers to retailers and service providers, every year thousands of organisations fail.
Many of these failures are new ventures that never really get off the ground, but recent years have seen some well-established, well respected brands go through difficulties or disappear altogether.
In a consistently competitive marketplace, organisations can’t afford to be complacent about their brand.
Whether you have been around 50 days or 50 years, you must constantly look out for the danger signs that your brand, and subsequently your business, is under pressure. By monitoring your brand risk you can address the issues and potentially save your business.
If a brand sees profits and revenue stagnating or shrinking, the first port of call would be to check whether the market as a whole is suffering or whether you are just crowded out in your segment. Don’t presume that because you have a well-known brand that’s enough. Think about how your brand stands out, where it should be playing and how you are going to get it there.
Signs to look out for:
1. Increased competition in the market
Being unique and different is a key strength for brands. If you offer a unique service or product you stand out from the crowd. An increase in the number of direct competitors indicates your brand is becoming more mainstream. If your profit is not increasing in line with the growth in of the market as a whole, you may be under threat.
For example, a few years ago the mobile phone industry was a very different market, with a few key players and a limited audience. Then mobile phones became mainstream. Up until now, Apple has thrived in the market by always being innovative and offering something unique. This built brand equity which feeds back into the brand’s strength. If the market grows significantly but your market share doesn’t, think about adapting your brand to stay fresh and innovative.
2. Your space in the market isn’t clearly defined.
Just as important as the number of competitors is where those competitors sit in the minds of your customers. Think about your competitors and plot your market out by product range, price and availability.
If your brand is in the same space as several competitors, you could be in trouble. When you are competing for share of mind and wallet with very similar products or services it can be difficult to come out on top. If you need to reinvent yourself, look for the spaces in the market. These are your opportunity areas with less competition. Plan how you will move from your crowded space to an emptier one. Examples of companies who have done this well include Red Balloon and Roses Only.
Red Balloon recreated gifting. It changed the perception of gifting from being about physical products to being about experience. This created an entirely new category, which many others have since emulated. Roses Only created a specialist category to keep them top of mind for anyone wanting to buy roses. Once customers have experienced this core offering – they are more likely to return to buy other products.
3. Low customer understanding.
Is it easy for your customers to understand your product or service? Perceived simplicity is a vital part of a consumer’s decision-making process. As customers are presented with more choice, they often go with what they can easily understand or already know. A brand cannot be successful if its potential customers don’t understand its offering.
It’s also important that customers understand how any new products or services link back to your core offering and that these new products reinforce what makes the brand a success. Darrell Lea for example, is enjoying success again after a long period of decline due to a lack of relevance. The business had become focused on a core idea around ‘commoditising the vintage lolly shop’.
However, it failed to notice its customer base had evolved and modernised – continuing an unmanageable product range and distribution channel. It was this core idea and distribution approach that lost relevancy and resulted in its decline. Today, under new ownership, the product range is consolidated and distribution modernised.