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Protecting the Load-Bearers

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At the end of 2019, after a long period of hesitation and overthinking, I signed the contract to do a small extension to the back of our house. So, through the first part half of 2020, just when the COVID19 pandemic hit, the project gave me a crash course in aspects of building construction. Among the many things I had to decide with the builder, I found I was oblivious to matters that were in fact — parallel to my research area at the Ehrenberg-Bass Institute.

Managing a brand’s product portfolio is like keeping your house structurally sound through alterations, demolitions, or expansions. The building needs to keep on standing.

Some walls are not meant to be knocked down – as they are load-bearing walls. A load-bearing wall forms an active structural element of a building – it holds the weight of the element above it, by passing its weight to a foundation structure below the wall. It keeps the integrity and stability of the whole building. If a load-bearing wall needs to be altered or removed, the engineer would have to think of how its function could be replaced or alternatively arranged. Failure to adhere to this principle would cause the building to weaken or collapse – it may not happen overnight, but it is bound to happen.

Similarly with a brand’s product portfolio. Core products are extremely important for the structural integrity of the brand – dismantle them and you are risking the performance for the entire brand. Through a research at the Institute, we find that a single top-selling SKU (stock-keeping unit) is responsible for around half of the brand buyers and 40% of the sales. When you expand it to the top-half of the portfolio, these core products contribute approximately eight out of ten brand buyers and three-quarters of the sales, on average.

The trouble is – these stalwarts are often considered stable enough to be dismantled bit by bit. Resources are often siphoned out of core products to support shiny new product introductions – worse, they may be temporarily cleared off the store shelves to promote new SKUs. Those responsible for the brand may not realise that to compensate the potential loss of buyers and sales of the core products, they will have to sell a lot more of the new SKUs just to cover the created void.

By all means, innovations and new products are important. However, they should not be at the expense of the core – and nor should they be done without a clear strategic intent. Otherwise, it’s like adding a walk-in wardrobe but jeopardising the entire house because you’ve sacrificed a crucial load-bearing wall.

When you know the ones to protect, demolitions or expansions are possible.

When Coca Cola decided to discontinue Tab in the US in 2020 and Lift in Australia in 2022, there were protests and uproar from some vocal heavy buyers – and from those who may have nostalgic attachment to the brand (and yet have not bought it for years). The majority of soft drink buyers simply have forgotten about the brand or not considered them whenever they are in the market to purchase.

Tab’s and Lift’s demise may also be self-fulfilling prophecies. Both brands were allowed to merely exist without any continuous advertising support. Another research at the Institute also reports that getting a brand to go dark without any advertising actually accelerates its demise – especially for small brands.

Of course, we all have expressed disappointment when certain brands are being discontinued. However, when we think about it, the disappointment doesn’t linger at all – its place would simply be replaced by other alternatives in the market. After all, Andrew Ehrenberg says that consumers are ‘satisficers’ who would simply make do with something else that would the job equally well.

The move by Coca Cola also highlighted the opportunity for brands to make calculated decisions to rationalise and re-allocate resources from underperforming areas to support potential productivity gains. In the bigger scheme of things, Tab and Lift are not load-bearing brands for the company. It would be unthinkable for Coca Cola to discontinue Coca Cola Classic or Coke Zero!

When you know the crucial SKU(s) for the survival and growth of the brand, the knowledge provides a sharper strategy. It gives a clear picture on the load-bearing walls that need to keep on standing – and the other walls that can be demolished to extend the area of the house. There may be load-bearing walls that need to be established too or to replace old load-bearing walls as the house expands.

In a well-designed house, each wall and each room has a clear reason for its existence – and so should each product in a portfolio.

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