If You’re in a Dogfight, Become a Cat!: Strategies for Long-Term Growth

OVER THE PAST decade, brand managers have recognized the need to build deeper and more meaningful relationships with customers in an environment where product lifecycles are shortening, new technologies are enabling product personalization, and social media platforms are changing how consumers engage with brands. Recent research by the public-relations firm Edelman confirms that there is the sizable need and opportunity for companies to close the gap between how they are currently serving customers and what consumers expect from preferred brands.¹

As shown in figure 8.1, while 87 percent of consumers would like to experience a more meaningful relationship with their favored brands, only 17 percent believe companies are currently meeting their expectations.² Three particularly promising opportunities to enhance brand strength and business performance warrant further exploration: personalization, community-based marketing, and customer dialogue.

The Model T was an example of a one-to-many product strategy, where a single product is intended to serve multiple consumer segments, or the market as a whole. The drawback of such an approach, of course, is that consumer preferences vary considerably across market segments. And in fact, General Motors overtook Ford as the largest car company in the world in the 1930s by executing CEO Alfred Sloan’s strategy of producing “a car for every purse and purpose.” Sloan set up multiple brands—e.g., Chevrolet, Oldsmobile, Buick, Cadillac—to create distinctive car designs at differing price points to appeal to a broad range of consumers.³

The success of General Motors under Sloan was an early example of the most common product strategy, many-to-many, where a company creates multiple product offerings to appeal to multiple market segments.

As we’ve moved from the industrial to the information age, the basis of competitive advantage in many product categories has moved from standardized mass production to personalized product design enabled by digital customization. New production technologies have enabled one-to-one product strategies, where products can be uniquely configured to serve individual customers.

The opportunity to exploit personalization to tap high-margin new markets is gaining acceptance across a number of product categories. For example, Hasbro has been using 3-D printer technology to allow customers to put a realistic rendering of their own head atop their favorite action figure. Personalized action figures carry a price premium three times higher than standardized equivalents and appear to be generating an enthusiastic market response.⁴

Similarly, Nike offers customers the option to personalize their sneaker designs. Visitors to the NIKEiD website can choose their own color preferences from among more than two billion combinations and can emboss their initials on their personalized design. Personalization adds $45 to the price of the base sneaker.

Customer information can be exploited to tailor products and services, driving increased customer value, purchase frequency, and brand loyalty. For example, Amazon has enhanced consumer value by personalizing product recommendations and streamlining its one-click checkout process by drawing on a consumers’ past purchase history, demographics, and stored payment information. These personalized enhancements give Amazon a significant competitive advantage over other online retailers selling similar goods at comparable or lower prices.

Similarly, Sephora, an omnichannel cosmetics retailer with nearly two thousand stores in twenty-nine countries, offers a variety of benefits for consumers who opt in for personalized beauty services. To begin with, consumers can visit their local Sephora store to receive a free color consultation, using a patented device to determine a “Color IQ” rating that matches skin color and physiology to one of 110 unique cosmetic shades. This personalized color rating can then be used to identify Sephora’s products best suited to individual appearance, which can be accessed on demand in any Sephora store or company website. Sephora also provides a range of additional services to enhance value for loyal customers, including online beauty clinics, priority access to new products, birthday gifts, loyalty rewards, and free shipping for online purchases.⁵

These examples of personalized services create the potential to significantly enhance consumer value, changing the basis of competition from generic comparisons of product attributes and prices to a consumers’ assessment of what’s best and most convenient for them.

Other examples abound; personalized services including health and wellness, newsfeeds and all forms of social media, and customized products in categories spanning eyewear to lighting systems are indicative of the growing importance of personalizing products and services to strengthen brand value.⁸

While personalization provides a powerful mechanism to enhance the value of specific products and services to individual consumers, there are also opportunities for companies to develop strong customer communities, which strengthen brand appeal by reinforcing the symbolic identities of consumers. Community-based marketing strategies are intended to engage a company’s target customer audience in interactive dialogues to promote and extend a brand’s reach, appeal, and authenticity, and to provide ongoing feedback to adapt and improve products and services.

Companies use a variety of tools to execute community-based marketing strategies, including corporate websites, social-networking platforms, community-of-interest blogs, and sponsored owner groups.

For example, consider Procter & Gamble’s challenge in convincing shoppers that their Pampers diaper brand is better than Kimberly-Clark’s Huggies, strictly on traditional product performance attributes (e.g., absorbency, ease of use, comfort, price). Both companies are locked in a stalemate of making similar and often confusing claims of product superiority. As a result, Procter & Gamble and Kimberly-Clark have sought to supplement traditional product-based marketing efforts with initiatives to build brand-sponsored customer communities.

As a case in point, expectant and current mothers who go to the Pampers website will find a well-executed two-way communication portal which features informative video clips, timely and useful parenting tips, customized newsletters to match their baby’s stage of development, loyalty rewards, and links to Twitter streams and Facebook forums.

In some cases, the perceived value of a product may be largely driven by the membership it conveys in a community of like-minded consumers. An excellent example of a company that exploited community-based marketing to strengthen its brand appeal is Harley-Davidson.⁹

Harley-Davidson, currently one of the largest and most profitable motorcycle companies in the world, was on the ropes in the early 1980s. Japanese competitors had launched an all-out assault on the U.S. motorcycle market, and Harley was hemorrhaging market share with poor-quality, outdated, and expensive products. The corporate owner at the time lost patience and sold the company to an investor group which included the founder’s grandson. Considerable credit for Harley’s post-acquisition turnaround has been attributed to the improvements the company made in manufacturing quality and product design.¹⁰ But arguably far more important was the new owners’ commitment to community-based marketing, spearheaded by the creation of Harley Owners Group (H.O.G.) chapters across the country.

Harley-Davidson had always attracted a fiercely loyal following among free-spirited “bad boy” riders, as captured in the 1969 movie Easy Rider (figure 8.2). As Richard Teerlink, the CEO who guided Harley’s turnaround noted, “there are very few products that are so exciting that people will tattoo [your company’s] logo on their body.”

But the new management team realized that once the company addressed nagging quality and product design deficiencies, the essence of the brand could appeal to a far wider audience. Teerlink reenergized the company’s brand promise in terms that would attract new customers beyond its bad-boy roots (figure 8.3).

Figure 8.3 Harley-Davidson succeeded through a broader brand promise that its consumers were not just buying a motorcycle, but becoming members of a community that shared a love of personal freedom, nonconformity, and endless possibilities. Photo © Harley-Davidson, Inc. All rights reserved.

Corporate communications heavily promoted the ownership experience, not just the product, and company-sponsored H.O.G. chapters became local forums to spread the mystique of Harley ownership to new customers from many walks of life.

Two final examples— the United Services Automobile Association (USAA) and GoPro—provide additional insight into the use of community-based marketing to strengthen corporate brands. The USAA, a member-owned insurance provider to over ten million customers, restricts its services to members of the armed forces and their families, explicitly aligning its corporate mission with the values of its military customer community. As the company notes on its corporate website, “USAA began in 1922, when twenty-five Army officers agreed to insure each other’s vehicles when no one else would. Today we follow the same military values our founders prized: service, loyalty, honesty, and integrity. When you join USAA, you become part of a family that’s there for you during every stage of your life.”¹¹

The Fortune 500 insurance provider has built an exceptionally strong bond with its self-selected community of consumers. As a testament to its brand strength, USAA consistently achieved the highest customer satisfaction rating (Net Promoter Score) of 220 companies surveyed by Satmetrix across twenty-two industries between 2009 and 2014,¹² and was ranked among the world’s most admired companies in 2015 by Fortune magazine.¹³

GoPro, which makes small and rugged cameras used to capture riveting video of action sports and other adventures, tries to distinguish itself from growing competition through its community-building media endeavors. To increase brand awareness and user appeal, the company displays GoPro-produced and user-submitted content on its own website and social media channels, and on YouTube, Virgin America’s in-flight television channel, and Roku’s streaming media service. GoPro’s action-packed and melodramatic videos often evoke a viral viewer response, which has helped build an audience of over four million YouTube subscribers and over one billion video views.¹⁴

Professionally produced extreme sports are a recurring theme, featuring jaw-dropping views of mountain bikers, snowboarders, and wingsuit flyers. But some of the most popular videos on GoPro’s distribution channels are shot by independent GoPro users. One of its biggest hits, with nearly thirty million views, is a tear-jerking video of a California firefighter rescuing an unconscious kitten from a burned-out home and then reviving the pet with an oxygen mask and splashes of cold water. GoPro received permission from the firefighter before professionally editing the video and publishing it on the company’s YouTube channel.¹⁵

To further engage with its current and prospective customer community, GoPro maintains an active dialogue with viewers on its social media and YouTube channels, often responding directly to consumer questions regarding camera techniques or appropriate equipment. By the end of 2015, GoPro had attracted over sixteen million followers on its Facebook, Twitter, YouTube, and Instagram accounts. These community-building efforts have helped GoPro build exceptionally high consumer awareness, sector-leading market share, and a brand name synonymous with the product itself.¹⁶

GoPro is not alone is maintaining an ongoing dialogue with customers to enhance loyalty and strengthen its brand image. As was shown in figure 8.1, customers value companies that recognize and respond to their individual questions and concerns but are often disappointed with corporate inattention. Social media affords the opportunity for companies to build strong rapport with their consumers in a forum that also reaches a broader audience. JetBlue Airways provides an excellent example of best practice in this regard.

JetBlue’s social media journey began serendipitously, as an outgrowth of a corporate crisis. Following a freak ice storm on Valentine’s Day, 2007, JetBlue suffered a catastrophic operational breakdown that left one thousand passengers trapped on aircraft on the JFK airport tarmac for as long as nine hours. Needless to say, passengers were outraged, and JetBlue’s reputation for customer-friendly service took a serious hit from widespread media coverage.

While JetBlue executives immediately apologized on televised interviews, news coverage continued to focus on the lingering human drama of the ice storm, further damaging the airline’s image.

Five days after the incident, then CEO David Neeleman delivered a heartfelt apology on YouTube,¹⁷ which at the time was a nascent and relatively unknown website acquired by Google just three months earlier. As it turned out, Neeleman’s three-minute video apologia (and call to action) generated considerably more supportive and constructive customer feedback from the four hundred thousand viewers than JetBlue ever imagined.

Out of adversity, JetBlue recognized the power of social media to effectively communicate with customers and the public at large. The airline set up a Twitter account a few months later, which now has over two million followers. JetBlue currently employs more than two dozen full- and part-time employees responsible for social media interactions, resolving problems for individual travelers, identifying policy issues requiring quick attention, and communicating with JetBlue social media followers at large.

For example, in a typical exchange, JetBlue communicated with two of its passengers as follows:

JetBlue Twitter Dialog with Passengers

Passenger1: @jetblue In Denver and want to check my bag but there is no one at the counter. What’s wrong with this picture?

Passenger2: @passenger1 the JetBlue crew in Denver’s usually only there ~2 hrs before the flight. You’ll probably have to wait 30–45 minutes.

JetBlue: @passenger2 is a step ahead of me, but sending a note to the GM and Supes as a heads up anyway. Are there many waiting?

Passenger1: There are probably 5 or 6 waiting. Not too bad.

JetBlue: Sent a note to Theresa, our General Manager out there.

JetBlue: You should see some crewmembers showing up shortly—our offices in Denver are away from the ticket counter.

Passenger1: @jetblue @passenger2 Thanks for the team action.

This entire exchange took place within a few minutes, and shows the power of social media for passengers to communicate effectively not only with JetBlue but with other members of the JetBlue customer community to jointly solve problems.

In another instance, a JetBlue customer in Portland, Oregon, was charged $100 to check a folding portable bicycle on a JetBlue flight, even though it was packed in a travel case that was within the size and weight limits of JetBlue’s guidelines for free checked baggage. The ticket agent explained that JetBlue corporate policy mandated that all checked bicycles, regardless of type, had to be assessed a special baggage charge. Just before boarding his flight, the passenger tweeted and blogged his frustration with what he considered to be an illogical policy. A JetBlue social media representative quickly contacted the gate agent to verify the circumstances and alerted a senior JetBlue executive in headquarters about the situation. While the passenger was still airborne, JetBlue made a quick decision to change its policy, allowing qualifying portable bicycles to be checked for free. JetBlue then arranged to have a gate agent meet the arriving flight to personally deliver an apology and refund to the surprised passenger. JetBlue also publicized their quick response on the passenger’s Twitter account and blog, which virally spread through his network of fellow bicycle enthusiasts.

It is interesting to note that although American Airlines has been the most active tweeter among U.S. airlines (figure 8.4), its use of social media has not been effective in enhancing customer satisfaction.¹⁸ In a recently released survey of customer satisfaction with U.S. airlines, American ranked sixth, while JetBlue was ranked number one.¹⁹

A review of the use of Twitter by American Airlines suggests two counterproductive flaws. First, a failure to consistently follow up or to meaningfully respond to customer complaints and inquiries. Unlike JetBlue, American has often failed to follow up customer inquiries, or, even more gallingly, has provided disingenuous apologies or unhelpful responses. For example, in one recent exchange, a customer tweeted the airline with a concern about the price of her ticket. American responded with a request for more information. The customer tweeted back that American had lowered the fares for her flight after she had purchased her ticket but refused to let her take advantage of the lower fare without a $200 change fee. After American failed to respond to the passenger’s complaint, she ended the exchange by tweeting to her followers, “I should have flown Southwest.”

American Airlines’s second social media flaw is unwittingly provoking a public forum for customer criticism. Needless to say, when disgruntled passengers feel further aggrieved by unhelpful responses, Twitter and Facebook sites can become forums for widespread customer anger. For example, American recently provoked a firestorm of social-media criticism after denying parents a refund after their nine-year-old son died just before they were due to take a scheduled American Airlines flight.²⁰ The grieving mother posted American’s insensitive denial letter on her Facebook page, and the correspondence soon went viral. Social media is thus a two-edged sword, which can enhance or erode a company’s brand image, depending on how effectively it is utilized.

Given the significant contribution of brand equity to business performance, it is important to understand and avoid three unintentional but common management mistakes that can weaken a company’s brand image:

Strong brands convey a clear promise of what a company and its products stand for, often built up over decades of consistent brand positioning and marketing communications. As such, if a company suddenly reverses course and launches products that break its brand promise, it risks alienating customers, creating brand dissonance, and damaging the brand for years, if not permanently.

One of the most egregious cases of breaking a brand promise involved General Motors, a company that had cultivated the strongest brands in the U.S. car market for decades. Throughout much of the twentieth century, GM had enjoyed market-share leadership in the United States by creating a brand portfolio that delivered “cars for every purse and purpose.”²¹

In GM’s brand hierarchy,²² Chevrolet served as the entry-level brand, featuring models with lower power and fewer luxury features than found in GM’s other brands. Pontiac was distinguished as GM’s performance brand, symbolized by its iconic GTO and Trans Am models, equipped with powerful V8 engines tuned to deliver as much as 350 horsepower.

General Motors’s well-executed brand strategy fulfilled its intent of attracting a large number of entry-level car buyers and then providing logical aspiration paths to retain customer loyalty over successive purchase cycles. By the1960s, GM’s U.S. market share exceeded 50 percent, raising antitrust concerns with its apparent corporate invincibility. But GM’s success and management insularity fueled corporate arrogance toward its workers, suppliers, and customers. The company’s business model drove high levels of product complexity, cost, and internal competition for customers and investment, leaving it far more vulnerable to competition than its management realized.

Following the U.S. gasoline crisis in the early 1970s, high-quality, cheaper, and more fuel-efficient cars from Toyota, Honda, and Nissan began to eat into GM’s market share. In response, GM developed its own small cars, starting with the Chevrolet Vega. Car and Driver magazine commented that “the Chevy Vega is on everyone’s short list for Worst Car of All Time. It was so unreliable that it seemed the only time anyone saw a Vega on the road not puking out oily smoke was when it was being towed.”²³

With the need to improve quality and cut costs becoming more urgent, GM then adopted a disastrously flawed “platform engineering” strategy, spearheaded by CEO Roger Smith, whose background was in finance, rather than marketing or engineering.

The logic behind platform engineering was to cut costs by standardizing the design of major automotive components like chassis and engines for similar-sized cars across its different brand divisions, thereby improving economies of scale. As a result, GM was able to significantly reduce the total number of components required to support its numerous car models. Differentiation between models was primarily maintained by visible styling cues, using brand-specific exterior trim pieces (e.g., front grilles, headlights, and add-on ornaments).

The problem with this approach was that what GM gained from greater economies of scale was more than lost by breaking the strong brand promise of meaningful differentiation that had helped it attract and retain customers for decades. General Motors’s platform-engineered cars blurred the distinctions between its storied brands, as graphically depicted on the cover of a 1983 issue of Fortune magazine.²⁴ Figure 8.6 shows model variants of GM’s midsize cars sold by its Chevrolet, Pontiac, Buick, and Oldsmobile divisions. The cars not only looked alike, but they also shared common performance characteristics, thereby destroying the historical rationale for tiered-brand pricing.

General Motors’s brand-killing platform strategy reached its nadir with the 1982 launch of J-body compact cars, with similar-looking variants across all five of its car brands, including Cadillac. After tarnishing Cadillac’s image for six years and suffering dismal sales (despite deep discounts), Cadillac’s J-body Cimarron was discontinued in 1988. Although GM tried to restore more meaningful brand differentiation in the years that followed, the consequences of breaking its brand promise exacted a heavy toll. General Motors was forced to discontinue two of its brands (Oldsmobile and Pontiac) and declared bankruptcy in 2009. Nearly three decades after discontinuing the Cimarron, Cadillac is still struggling to restore its brand legacy of automotive excellence.

In the summer of 2011, Netflix was flying high. Its combined DVD rental and streaming video business was growing strongly, and its stock price had increased by more than 500 percent over the prior two years. The company’s main competitor, Blockbuster, had recently declared bankruptcy, and its top executive Reed Hastings had been lauded as Fortune magazine’s 2010 CEO of the year for leading a company so well attuned to serving its customers.²⁵

It thus came as a shock when Hastings announced on July 12, 2011, that the company would soon be splitting into two separate entities. Customers who wanted to continue to use both DVD rental and streaming video services would now have to sign up for two separate accounts and pay $16 per month—a 60 percent increase in subscription rates.

Hastings further infuriated customers by publicly explaining this change in terms of what was best for the company, while dismissing complaints from subscribers. As Hastings noted, the core competencies of the DVD rental and streaming video businesses were quite different, and the company could be best managed by separating the two services. But customers didn’t care about Netflix’s core competencies; they felt betrayed by a company that broke its longstanding brand promise of convenience, selection, and value.

During the first quarter after the plan was announced, eight hundred thousand Netflix users cancelled their subscriptions. By the time Hastings announced he was abandoning his ill-considered plan on October 10, Netflix’s stock had tumbled by nearly 60 percent.

Normally, when a company commits such a severe breach of its brand promise, it costs the CEO his job, does permanent damage to the brand, or both. But Hastings executed a remarkable turnaround, quickly restoring the original service at discounted rates for former subscribers, while taking full personal responsibility for the company’s error and accepting a 50 percent cut in his stock option award for the year.

But Johnson made the same mistake as Hastings in trying to address the company’s problems without adequate consideration of customer input, compounded by the breathtaking speed with which the transformation was implemented. Within six months of coming on board, Johnson repriced all the merchandise in JCPenney’s stores, replaced its ad agency, fired nearly all top executives and thousands of middle managers, and changed the company’s logo.

Customers will not pay a penny more than the true value of the product. We are going to rethink every aspect of our business, boldly pursue change, and create long-term shareholder value, as we become America’s favorite store. Every initiative we pursue will be guided by our core value to treat customers as we would like to be treated—fair and square.²⁶

But customers didn’t buy Johnson’s vision of how they wanted to be treated or to shop, and they began defecting in droves to competitors still offering traditional promotions and discounts. In the first quarter of 2012, Macy’s reported a 38 percent jump in profits, while JCPenney disclosed a big miss, sending its stock plunging 17 percent in a single day.

Over the remainder of 2012, Johnson continued to defend and implement his plan, as consumers continued to revolt. JCPenney’s last-quarter 2012 earnings report was perhaps the worst quarterly performance ever recorded in the history of major retail: same-store sales were down 32 percent, to $3.8 billion.²⁷ By April 2013, with JCPenney’s stock down 60 percent during his tenure, the board had seen enough, replacing Johnson after only seventeen months on the job. JCPenney has yet to recover the ground it lost under Johnson’s leadership, as their market value declined by another 40 percent over the ensuing thirty months.

In retrospect, both Reed Hastings and Ron Johnson had a sound business rationale to change their companies’ strategy. Had consumers gone along with their plans, both Netflix and JCPenney would have improved their efficiency and profitability. But neither CEO anticipated that by breaking their company’s brand promise, once-loyal customers would feel betrayed and take their business elsewhere. It takes a long time for a company to build a valued brand promise, but a frighteningly short amount of time to betray the trust of its customers.

Strong brands have an obvious incentive to launch new products that can exploit their broad consumer awareness and positive reputation. There are numerous examples of successful product-line extensions that have helped companies with strong brands create new profitable growth opportunities.

Consumer-packaged-goods brands routinely add new flavors, performance enhancements, and packaging varieties to their branded product lineup. For example, Dannon has maintained a strong position in the U.S. yoghurt market by continuously adding flavor varieties to its traditional yoghurt, Greek-style yoghurt, and diet lines.

But if a company ventures too far afield by launching products that fail to deliver meaningful differentiation and create consumer confusion, they can fail in their own right, and, in some cases, weaken the parent-brand image. For every successful product-line extension, there are many more examples of failed launches,²⁹ some of which provide fodder for lovers of schadenfreude.

Harley-Davidson, known for its rugged motorcycles and related brand accessories (e.g., belt buckles, leather jackets), inexplicably and unsuccessfully waded into the perfume category with an eau de toilette called Hot Road. Ill-advised product-line extensions into perfumes have tempted others as well. Zippo, known more for lighter fluid than perfume, tried its hand with a range of Zippo-branded fragrances. And even Burger King entered the fray with a branded body spray promising “the scent of seduction with a hint of flame-broiled meat.”³⁰

Coors, struggling to compete with its larger competitors in the U.S. beer market in the late 1980s, tried unsuccessfully to leverage its Rocky Mountain heritage with a line of Coors-branded sparkling water. Unfortunately it became the unconvincing “101st product on the shelf” in an already crowded category and was soon withdrawn.

Guinness, best known for its full-bodied stout beers, could not resist the siren song of the growing appetite for light beers in the late 1970s. With its first new product launch in two hundred years, the company introduced Guinness Light in 1979, supported by a major print advertising campaign carrying the tagline “They said it couldn’t be done.” But consumers shunned the new entry, suggesting that Guinness Light shouldn’t have been done, and the company quietly withdrew the product after less than two years on the market.³¹

After succeeding with product-line extensions into lighters and razors, Bic tried to expand further into panty hose. Bic panty hose didn’t resonate with consumers and was quickly dropped.

Can a misguided product-line extension not only fail in its own right but also harm the reputation of its parent brand? Recent research suggests that consumers tend to be relatively tolerant toward strong brands even after they fail to gain market traction with misguided product-line extensions.³² However, there are circumstances where illogical product launches can damage brand image, most notably in cases where a new product introduced within the company’s core business undermines established brand values.

For example, few customers seemed to care when GM dabbled briefly and unsuccessfully with a line of personal-mobility devices in partnership with Segway. Consumers apparently shrugged this product failure off as an inconsequential corporate dalliance. However, as previously noted, Cadillac severely tarnished its brand image—self-promoted over the years with hubristic taglines like “Creating a Higher Standard,” and “Standard of the World”—with its disastrous Cimarron product-line extension into compact luxury cars.

In a similar vein, many marketing professionals have questioned the wisdom of Starbucks’s VIA instant coffee, which was launched with an advertising campaign challenging customers to compare the taste of VIA to the company’s store-brewed coffees.³³ Even if VIA’s taste were comparable to the store-brewed coffee (a point contested by many published reviews), the broader question remains whether VIA is congruent with the company’s reputation for delivering a distinctive customer experience in the luxuriant ambience of its stores.

These examples raise the broader question of the requirements for successful product-line extensions: that they should not only succeed in their own right but also exploit and reinforce the parent brand.

Successful product-line extensions exhibit two fundamental properties: brand leverage and category fit. Brand leverage refers to the strength of specific attributes “owned” by a brand that can be leveraged to successfully extend the brand into new categories. For example, brands can leverage their reputation for functional superiority (e.g., Jeep), category leadership (e.g., Planters peanuts), or prestige intangibles (e.g., Louis Vuitton) to cast a positive halo over new products.

However, consumers have to grant permission for a brand to be accepted in a new category. This is where category fit comes in. Category fit refers to the degree to which a brand’s attributes appeal to, and are valued by, consumers in a new product category, i.e., the degree to which an extended brand “fits” consumer expectations.

A dire example of a company that damaged its brand with excessive product-line complexity is Rubbermaid, a leading U.S. manufacturer of plastic household containers. Rubbermaid had enjoyed double-digit annual growth through the early 1990s on the strength of innovative product design, earning the company recognition as Fortune’s Most Admired Company in 1993.

But low-cost foreign competition began to emerge, finding a receptive audience from consumers and big-box retailers who valued “good enough” products at rock-bottom prices. In response, Rubbermaid CEO Wolfgang Schmitt chose to double down on product innovation, announcing that “our objective is to bury competitors with such a profusion of products that they can’t copy us.”³⁵

True to his word, Schmitt guided Rubbermaid through a frenetic level of new product development, resulting in five thousand distinct products in 426 unique colors (including eighteen different shades of black), decentrally managed through ten thousand vendors. This high level of complexity increased the company’s costs and caused supply-chain bottlenecks, creating an opportunity for competitors whose quality and efficiency was steadily improving. With viable competitive alternatives, Walmart balked at Rubbermaid’s high prices and low (75 percent) on-time delivery and began pulling many of the company’s products from its shelves. At other retailers, Rubbermaid was experiencing declining demand, as many customers no longer found the company’s product variety justified its premium prices. By 1998, with losses mounting, Rubbermaid opted to sell to Newell Brands—a turnaround specialist—at a price well below its peak stock value.³⁶

A more recent example of a company that allowed excessive product-line complexity to weaken its brand image and value proposition is Evernote. Founded in 2008, Evernote is a cross-platform, “freemium” app designed for note taking and organizing and archiving personal information. In other words, Evernote is designed to help individuals and work teams store and retrieve any information in any format on whatever devices they happen to be working on.

By 2013, the company seemed to be on a roll; it had registered eighty million users and attracted over $300 million in investment from venture capitalists who valued the company at one billion dollars.³⁷ But over the next two years, the company ran into trouble. In 2015, Evernote laid off nearly 20 percent of its workforce, shut down three of its ten global offices, and replaced its CEO.³⁸

It turns out that the vast majority of Evernote’s users signed up for only the free app and didn’t see enough value to upgrade to a paid subscription. Struggling to generate revenue, Evernote lost its focus and continuously released new products that added complexity and often performed poorly. The company developed so many features and functions that it became increasingly difficult to explain to newcomers or even veteran users exactly what the product was.

As Evernote’s former CEO Phil Libin explained, “people go and they say, ‘Oh, I love Evernote. I’ve been using it for years and now I realize I’ve only been using it for 5 percent of what it can do.’ And the problem is that it’s a different 5 percent for everyone. If everyone just found the same 5 percent, then we’d just cut the other 95 percent and save ourselves a lot of money. It’s a very broad usage base. And we need to be a lot better about tying it together.”³⁹ Evernote wound up spreading itself too thin and lost sight of its core identity and primary consumer value proposition.

Why would a company allow itself to undermine its brand value and business viability with such excessive product-line complexity? The tendency to continuously add product variety to economically unjustified levels is actually quite common. To see why, imagine for illustrative purposes that you are the brand manager for a consumer packaged goods product, clawing for fractions of a percent of market share against aggressive national and store-brand competitors.

The pressures to add product-line extensions may seem compelling if your competitors have recently begun to gain market share by launching new flavors, packaging designs, and value-priced variants, supported by increased promotional spending. Your product line may have begun to look stale, and you haven’t had a new “story” to tell to retailers or consumers for a while. Perhaps your company’s “Big Data” analysts have detected pockets of untapped demand in certain ethnic, gender, and geographic segments that arguably could be better served with targeted new offerings.

Each of these market signals suggests a pressing need for new variants in your product lineup, and as a marketing professional, you would be expected to unleash your creative talents to craft new products to boost demand.

Faced with similar circumstances, marketing executives have proliferated product lines across a range of industries:

• Amazon is putting pressure on manufacturers and brick-and-mortar retailers by putting an apparently limitless array of goods just a mouse click away from consumers. For example, if you’re in the market for dog biscuits, Amazon gives you (and Fido) well over one hundred unique choices.

But in adding product variety in search of increased sales, product planners and brand managers often overlook a number of adverse impacts, including increased costs, decreased quality, brand dilution, and customer confusion.

In fact, excessive product proliferation can actually decrease a company’s sales for two reasons. First, research studies have found that when confronted by an excessive number of choices, consumers may respond by forgoing a purchase altogether. For example, in one experiment, Columbia Business School professor Sheena Iyengar set out samples of jam on supermarket tables in groups of either six or twenty-four. Iyengar found that while about 30 percent of those who were given six choices went on to actually buy some jam, only 3 percent of those given twenty-four choices did.⁴³ As psychologist Barry Schwartz explained in The Paradox of Choice, an excess of consumer choice leads to angst, indecision, regret, and ultimately, lowered satisfaction with both the purchase process and the products themselves.⁴⁴ Too much choice or too much information can be paralyzing.⁴⁵

A second reason that increasing complexity can decrease sales is related to adverse impacts on retailing operations. Product proliferation increases forecast errors and stockouts, and the need for inventory-clearing discounts and obsolescence write-downs.

The difficulty in isolating and measuring these impacts often complicates corporate efforts to reign in the insidious drag of excess complexity. Since the real costs of increasing product-line complexity are widely dispersed across the organization and largely invisible to brand managers, the seemingly free choice of attacking, defending, adapting, and responding to the marketplace often provides an irresistible justification for adding new products.

By this reasoning, one could expect that the In-N-Out Burger restaurant chain would seek to attract new customers by adding a variety of chicken, fish, egg, and sausage food items to compete with the ever-expanding menu at McDonald’s. Yet In-N-Out Burger has chosen not to respond to the competitive environment in such a fashion. Why not?

In-N-Out Burger has made a concerted management decision to limit the range of products it brings to market, focusing instead on delivering superior quality within a deliberately limited menu, selling only hamburgers (with or without cheese), a single portion size of fries, and a variety of cold and hot drinks.⁴⁶ Limiting product complexity lies at the very core of In-N-Out Burger’s business strategy. Its ability to significantly outperform sector competition is driven more by what it is not willing to do than by what it is willing to pursue.

In-N-Out Burger attracts a fiercely loyal clientele who evangelically rave about the taste of its cheeseburgers in reverential terms not normally applied to McDonald’s. On the surface, both fast-food chains are selling similar products at similar price points. But In-N-Out burgers taste better because its hamburgers are made from fresh patties, delivered daily, with no freezing before use; buns are baked fresh in store, multiple times per day; fresh vegetables are delivered daily from local farms, strictly controlled for product quality; and hamburgers are cooked strictly to order, with no microwave ovens or heat lamps before serving.

If these business practices consistently yield a better-tasting product, why can’t McDonald’s simply replicate In-N-Out Burger’s approach? The reason is that McDonald’s has chosen a strategy of high product-line complexity, ubiquitous global locations on a global scale, and extended service hours, and this strategy complicates its logistics and service operations, requiring bulk shipments of frozen food products, in-store freezers, and pre-cooked orders kept warm by heat lamps in each establishment. The resulting quality compromises are very real, caused by structural differences in the underlying product-line strategies.

To add to McDonald’s challenges, its growing product-line complexity has also slowed its ability to rapidly fulfill customer orders, compromising the performance of one of the pillars of the company’s brand promise: fast food! According to a Wall Street Journal article, “Between March and July [2013] alone, McDonald’s added Premium McWraps, Egg White Delight McMuffins, blueberry pomegranate smoothies and new Quarter Pounders to its menu. The fast pace of the new-product introductions created challenges for [the company’s] franchise operators, making their operations more complex in ways that slowed service.”⁴⁷

Determining an optimal product-line strategy is not strictly an analytical exercise to be turned over to technocrats armed with elegant analytical models. While companies should certainly seek to selectively weed out nonperforming product lines over time, a far more important strategic imperative is choosing the basis upon which your company wishes to compete: broad market coverage versus targeted product superiority.

For companies like In-N-Out Burger, Apple, and many others, there is no such thing as a free lunch when it comes to product-line complexity. These companies could not consistently deliver superior products without explicitly choosing to limit the range of their offerings. For them, less can be more.

In summary, effective product strategy and brand strategy are mutually reinforcing. By continuously innovating to create meaningfully differentiated products and services, a company can strengthen its brand promise, build mutual trust, and deepen its customers’ symbolic identity with the brand—the hallmarks of great brands.

Companies can further strengthen their brand equity by exploiting effective product personalization, building brand communities, and maintaining a dialogue with customers, while avoiding breaking their brand promise, adding incongruent product-line extensions, or carrying excessive product-line complexity.