Why a brand need to re-position itself while it has already been “positioned” with a sustainable brand differentiation strategy?
There are many reasons. One of the top ones is the rapid change of the business environment. In a flat world, a great theory today should be changed to match the changing reality tomorrow. A brand may be the market leader this year but it may unnoticeably disappear in the next year.
From the No.1 position in camera industry (film camera), these days the one-time giant Kodak has nearly disappeared due to its failure of catching the digital camera trend.
Nearly three years ago, Nokia dominated the cellphone market. The crisis quickly came. At the end of 2012, Nokia sold its headquarter in Finland to cope with the unbelievable brand down-turn. The main reason is that Nokia could not manage to “reposition” themselves to come up with the smartphone segment, a fertile pie which is now dominated by iPhone, Samsung and partly Blackberry.
As Philip Kotler, the modern marketing father, claimed that “No brand positioning can fit the market forever.”
The failure of Lining
Established in 1989 by a sport coach with the same name, Li Ning has quickly held the second position in the sport ware and shoes market in China, only after Nike and followed by Adidas.
Li Ning’s revenue and profit continuously increased until 2010 when the brand recorded the revenue of USD 1.5 billion and the after-tax profit was over USD 170 million.
However, the company’s brand repositioning campaign in the middle of 2010 violated the rule of brand awareness: every brand engraves with a certain brand association. Once Li Ning positioned itself as a medium brand, it is hardly for customers to change their minds that Li Ning is now a sport brand for premium segment.
In addition to the logo change and a new advertising campaign, Li Ning increased the prices and switched its distribution focus from low markets to metropolitan cities like Beijing and Shanghai.
Unfortunately, this way did not draw the attention of young clients who inherently care about brand imprints and are willing to spend more to buy Nike or Adidas products.
Market responded very negatively. In contrary to constant yearly 30% growth rate, its turnover sharply dropped and its share price decreased by 30%. Evidently, Li Ning brand failed to change its brand image of becoming “premium” since Nike and Adidas have possessed this word in the mind of customers. In this practice, Li Ning has tried in vain to realize its slogan “Everything is possible”.
Classic failure of Coca
Similarly, Coca Cola’s repositioning mistake with New Coke campaign became a classic lessons for marketers.
In 1985, Coca Cola spent $ 4 millions dollars in a blind taste test for the New Coke product with 200,000 respondents in the main cities of the America. The research findings revealed that people preferred the New Coke to Old Coke and remarkably to Pepsi (New Coke tastes sweeter). Subsequently, New Coke was rolled out nationwide with the hope of making a milestone for Coca Cola. The market reaction after launching was bloody surprising: Coca Cola’s headquarter received around 6,000 calls of complain a day, sales slumped sharply and as a result, New Coke was recalled from shelves just in two months afterwards.
And stories of Vietnamese brands
In Vietnam, Mai Linh was very successful in positioning itself as the leading taxi brand. In many years, Mai Linh has always been the TOM brand in the customer’s mind in taxi transportation segment.
At the end of 2012, Mai Linh surprised everyone by claiming that it is in the verse of bankruptcy. The main cause of this is that this number 1 taxi brand has spread its investment in too many business categories, especially in the real estate sector.
“If Mai Linh had only focused on taxi, Vinasun would have hardly competed with them” admitted Dang Phuoc Thanh, Vinasun’s chairman.
In addition to refreshing brand image and business strategy adjustment, repositioning also aims at business category extension. So, the story of “brand repositioning” often relates to the trap of “brand extension”. FPT brand is also a typical example.
Thinking of FPT, consumers instantly associate with the number one IT brand in Vietnam. But that was a story in the past. After investing in many different categories, FPT “repositioned“ as a multi-sector brand. In the revenue structure in 2011, the core ICT (Information and Communication Technology) product group only account for 41% of FPT revenue. And the rest 59% came from commercial activities and different product distribution. It may be the reason why at the end of 2010, FPT categorized as “machine & spare part wholesale trade” amongst 178 listed companies in HCMC Stock Exchange.
In the book “Focus to be differentiated”, the experienced marketing expert Al Ries showed failures of world famous companies due to their out-of-focus business strategy. He claims that only focusing on the core business can create sustainable competitive advantage for a brand.
The concept is no longer new. In Vietnam, we also have an old proverb “Master your profession, master your destiny“ which means that no one can be good at everything, and you can only be successful when utilizing your advantage.
In the changing world, repositioning is an essential strategy to avoid being left behind and eliminated from the increasingly fierce competition. Irrespective of any purpose, brand repositioning should not go beyond the core value which is inherently the established brand differentiation.
Nguyễn Đức Sơn
Brand Strategy Director – Richard Moore Associates