Saturday, September 15, 2007

Child of Vision

I had my first class in strategic marketing this week and I must say it was a bit of an eye opener.
The first topic that our lecturer explained to us was the growing problem of short termism in major companies, and how quarterly/annual profit levels are paramount on the agenda and are prioritised above safeguarding the long term health and effectiveness of the brand in question.

The current situation that Irish drink producer C&C find themselves in was highlighted as being a perfect example of such short term thinking. C&C is the company behind the cider "Bulmers" in Ireland and "Magners" in the UK, and up until recently was involved in the production of variety of soft drinks most of which fell under the "Club" range.
However C&C decided that their soft drink range was not offering quite the same profit margin or growth potential as the growing cider market in the UK and Ireland, so sold off their soft drink division earlier this year, placing all their eggs in a very much cider dependant basket.

Cider is a product that has great seasonal fluctuations, it is a summer drink and very much marketed by the company as being so. If you live in Ireland or the UK you may have noticed that this has been one of the worst summers in the past few decades, and sales of cider predictably fell considerably.
On top of the bad weather, the competition in the Cider marketing has been heating up with competitors such as Kopperberg and Bulmers (confusingly and entirely separate brand owned by a Scottish company) stealing market share from C&C at an alarming rate.

Having sold off their soft drinks division they now have no form of fall back, and what may have at the time been a profitable decision has now left them in a great deal of trouble with sales very much down and the company’s share price about half of what is was just after the sell off.

The American bag maker “Coach” was also briefly highlighted as a brand which had destroyed its brand image through short sighted decisions made in the pursuit of profit.
“Coach” used to enjoy a very exclusive image and in terms of fashionable bags was up there with the best of them. Then coach decided to launch a range of more affordable bags and blanket bomb retails outlets everywhere around the United States, sales for that period rocketed, however once EVERYONE had a Coach bag, they were no longer exclusive or stylish and now the brand lies in tatters.

So why is this happening? Surely someone has the sense to see that decisions such as these might impact on the long term future of the company? According to our lecturer (who is the exception to this rule and a member of several boards) the main problem is that it is extremely rare for a board of directors to contain a person from a marketing background as they are seen "to not pull their weight". However considering most companies would be crippled without effective marketing I find it particularly stupid to exclude someone who has the knowledge of how to most effectively operate and maintain the brand health.

Marketing like any other business activity requires strategic thinking, and if you start putting quarterly or annual profit goals ahead of the life long health of a company… you’re in trouble.


Hugo said...

ed, you only need to look at the last 7 or so years at Leeds United to see this short termism going horribly wrong.

jedimasterbooboo said...

Cider is not marketed in the US as far as I know, but we consider it a winter drink and serve it hot. Someone over there should get on that commercial right away, a family around a fireplace on a dreary overcast day curling up with a hot cup of cider. Yum! Isn't cider one of the ingredients in a Hot Toddy? I forgot, but anyway, it can be sold that way.