Zara Home: A Branding Issue?

Last weekend I walked in a recently opened Zara Home Shop. I had seen it before as a section of Zara, but this was the first time I actually looked around.
As a customer it didn't take long to become quite confused. The shop didn't look like Zara, of course it had nice linen and small decor items. But still my thought was "I can probably find some decent stuff here at good prices" and that was my biggest surprised. I felt that all items were not cheap at all. Certainly not what I would expect from a Zara brand. So I was wondering is Zara changing prices now? or Zara Home is something else? but if it is why is it called Zara anyways?

Nowadays is pretty well known that there are two extremes of brand portfolio models: House of brands and branded house. Most companies however use some kind of hybrid model. Take Inditex for example who possesses eight fashion brands, the major one being Zara (about 60% of the group revenue). Others include Massimo Dutti and  Bershka. This would typically indicate a house of brands where you have a number of different brands with many in the same category. That makes sense for Inditex as each brand exists on its own and have different positioning. For example, Zara's is something like "fashionable product line for moderate costs and good quality". Massimo Dutti on the other hand "classic/office wear with good quality" and focus on an older and more affluent demographic.
The advantage of the house of brands is that the customer targeting and positioning of each brand is clear and independent. Of course one of the downsides is the lack of synergy and scale.

However, with the launch of Zara Home 10 years ago, the company went into a hybrid model by extending the Zara brand into a different segment, home décor and linens.
The brand experienced significant growth in 2013. Zara Home has been opening several stores globally and online sales channel. This all sound very positive, however its revenue is a mere fraction of the main brand Zara,

In principle wxtending the Zara brand makes sense, Zara is probably the attention focus of the company since most revenue comes from it. This also maximizes scale as many Zara Home shops are extensions of a Zara shop. So it's understandable the pressure to leverage the existing brand. But the question is: Does it fit under the primary brand and share a common positioning statement? Based on my personal experience, I'm afraid it doesn't.

With that said, one can argue that they went with the Brand System Approach in which you can, based on some similarity ( a shared brand experience/perception), establish a brand positioned differently in different categories. Take for example the heavy band Iron Maiden that has launched a beer under its brand.

So I suspect Zara is trying to relate the two different positioned brands by using the same essence, arguably, "fashionable product lines". But in my own experience that didn't work as I don't see Zara having its essence on fashionable items. The affordable part of Zara positioning is key and apparently missing in Zara Home.

For more info on Brand Systems and Brand Innovation check "Kellogg on Marketing" by Alice M. Tybout (Editor), Bobby J. Calder (Editor), Philip Kotler (Foreword)

Book Tip #1

Defending Your Brand offers a straightforward and  practical approach, May 28, 2015  This review is from: Defending Your Brand: How Smart  Companies Use Defensive Strategy to Deal with Competitive Attacks Defending Your Brand offers a straightforward and practical approach  to a topic rarely addressed in the marketing literature: Why and How to  defend a business. This book instantly became part of my required  reference library. During many passages of the book it felt like  Mr. Calkins was with me when I lived some of the same situations  described. Spot on! But I had never thought in this structured way,  so the book is already helping me in my daily work.

to NPS or not NPS

"Net Promoter Score" is a customer loyalty metric developed by (and a registered trademark of) Fred Reichheld, Bain & Company, and Satmetrix. It was introduced by Reichheld in his 2003 Harvard Business Review article "One Number You Need to Grow". (1)

Over the past few months I have seen an indiscriminate use of NPS surveys which fed my curiosity - is the NPS question always relevant? As a result, I went to the source, the original HBR article. (2)

Very shortly, the concept is about a company profitable growth. Specifically, how survey answers on customer loyalty were correlated with growth. The concept can be extrapolated to a brand as well. That seems reasonable in many cases. But the paper concludes that "for most companies in most industries, getting customers enthusiastic enough to recommend a company appears to be crucial to growth."

To me, the first issue is that the paper is about "most" but not "all" industries. Therefore the environment of the company will play a role: regulated industries and/or with several key stakeholders making purchasing decisions will probably not have the same NPS and growth correlation found on the paper. For example, the original study was not done with the Pharma/Devices industry. So the correlation was not proven there. From the paper itself: "The “would recommend” question wasn’t the best predictor of growth in every case. In a few situations, it was simply irrelevant." Those include dominated by monopolies and near monopolies, or when decisions are taken by multiple stakeholders where one specific consumer type may have little choice. A scenario very likely for most companies in the healthcare industry.

Secondly, because of the overuse of the NPS many people are aware of the question and its implications. So I do feel that this is already a bias in the respondents. By the way, the question itself presupposes a positive response "How likely would you...". In addition to it, despite the fact that some may answer 9 or 10 - are they really recommending it to someone else? or just saying...

Thirdly,  a NPS score based on one customer interaction or event is going beyond the original definition and demonstrated correlation. I'd argue that you need repeated events and a relationship to be truly loyal to a company or brand. But to an event or meeting? What a NPS of a meeting means anyways? The meeting is not happening again, so how can I recommend it to someone? How can I be loyal to a meeting or a IT support phone call? Even if I call my IT service and it went well, I can't say that based on this one call, I'd recommend the company to a friend. A true recommendation would come based on a long term relationship with a company. Those examples just show that the whole thing got out of hand.

Finally, NPS also ignores the power of the promoters or detractors. A famous blogger as detractor who will write a bad review is much more powerful than a silent person who rated 0. The same goes for promoters. So a positive and high NPS from a bunch of quiet people is much less powerful than if the NPS comes from vocal thought leaders.

In sum, please before assuming that NPS is the holy grail of market research, do some research yourself and understand your situation. When appropriate and relevant prepare a better survey or question. Propose a research that is thoughtful, and customized to your industry/company/situation.

(1) http://en.wikipedia.org/wiki/Net_Promoter
(2) http://hbr.org/2003/12/the-one-number-you-need-to-grow/ar/1

Kellogg's® Special K® Cracker Chips

Recently while doing my groceries, I saw this big shelf announcing a new comer: the “Special K^® Cracker Chips”

My observation: As a consumer I was really confused, I did not understand what this was. Is this breakfast chips? Is this potato chips? Is a different form of cereal? Does it replace cereal bars?

As a marketer, I did not understand the connection of the Special K brand with chips (a “not-so-healthy” segment)

Regardless, I was so intrigued I took two boxes to try. It actually tastes OK, but certainly not as good as Pringles, and it does not taste healthy at all.

Therefore, to me this is a bad example of line extensions; and it is also a story about branding.

For a line extension product to be part of a branded house, the product brand concept has to fit the core meaning of the brand. Special K is about “staying on track” with healthy eating.
While checking their website, I realized that there are so many products in this branded house that the core meaning is getting lost. And this Cracker Chips doesn’t seem to fit.

However, while doing my research I understand where the pressure comes from. One of the strategy tracks of the company is to “Become a global snacks player”.
As a consequence, in 2011 they introduced the Special K Cracker Chips which remained successful in 2012 according to the company’s annual report. But clearly that wasn’t enough to fully step into the category. Then, in 2012 the company completed the acquisition of Pringles from Procter & Gamble (PG).

The strategic rationale is good - Kellogg increased its snack business and became a leading player. This gives a platform on which to drive growth in both established and developing markets The US Cereals segment hasn't been performing well and the company needs to look elsewhere for growth. Since the 2000s, with the acquisition of Keebler, Kellogg gained terrific brands in the cracker and cookie categories. These include the iconic Keebler brand, Cheez-It crackers and others such as Famous Amos, Austin and Murray cookies.

Therefore the Cracker Chips could indeed be a good addition, but under a different brand and not Special K. It seems that they now have all those other brands in this segment that could be leveraged. And probably one of those has a core meaning that fits better with this Cracker Chips. That would also minimize the cannibalization of other Special K products.

Given what I learned, It was not surprising to see that during 2013 Special K Cracker Chips is presenting an issue as it is coming down and that's weighing upon the snacks business. Internal sales in the cracker business declined in the last reported quarter. Additionally, during the last analysts meeting, there was a concern that innovation is cannibalizing the existing business. Also not a surprise given the “over extension” of this brand.

Special K is a brand that people care about. It is still unique and has meaning, but, as this example shows, the threat of loosing that meaning with line extensions is real.