Putting Your Customers' Needs First

The task in brand management is to figure out which brands have lasting value based on your targeted markets and which one’s don’t! In the consumer world, things tend to be bought as a personal choice item either through prior experience with the product, an ad/coupon offer or referral by a friend or associate. In the business world, purchases tend to be somewhat more structured…especially for products that may be a “specification-grade” item. The process for selecting a vendor and a item is generally a more elongated process involving multiple decision- makers … specifiers, engineers, purchasing, etc. Once a decision is made and the price is determined in the business world and the drawings and bills of material are established…the vendor and item frequently become the “default choice” by an end user customer subject to changing prices, quality, availability and/or decision to discontinue or changeover an item/brand by the vendor or the encroachment by another vendor with a lower price for a similar item or an alternative offering. Therefore, the decision to change or discontinue a brand can have market implications in that it often forces the business buyer to “reconsider” their current vendor of choice … either because the brand and/or the item number changes. This action by the vendor usually requires the customer to update their specifications, drawings, bills of material, certifications and testing (for some specifiable items), etc. This action will often result in the end user deciding to seek other vendors’ options since he/she is now forced to potentially make a change in their documentation and/or buying practices. This will frequently lead to a bidding war on the subsequent replacement for the existing brand/item. When a company decides to divest, discontinue or consolidate brands, they should do an extensive evaluation based on at least these three components beyond the normal profit and loss considerations: Companies tend to forget their heritage…the focus today is on the next month’s accounting statement or the next quarter’s anticipated financial results. We often fail to reflect on what got us to where we are today and are simply focused on where we would like to be in the future. Brand goodwill is a hard term to quantify but it can be a lot more valuable to a company than the goodwill most companies display on their accounting balance sheets. For each market segment, identify the brands with their respective total sales, total cost and gross profit margin. Be sure that the total sales are net of any discounts so that you are looking at true profit margins. What you are likely to encounter is that gross margins and sales levels vary greatly across different market segments and thus your decision to exit a business might not be as simple as looking at the overall gross sales and profits for each brand. Beyond the numbers, make sure that there are no auxiliary products or related business sales that will be adversely affected by your decision to divest/discontinue a brand. o Market Position/Margin o Historical Perspective