REPOSITIONING
Application: New Market Entry, Brand Extension, Competitive Strategy
The Concept
Marketers that work with companies that already have strong brands or a company reputation can “reposition” their offer to command the attention of other customer segments, other market niches, or completely different markets. They can convince existing customers, and new buyers, that they have viable new offers.
Repositioning can also, of course, mean moving to a new area of focus in an existing market. Some fall from a premium or heritage position to niche as forces in the market buffet their brand. Others move in a clear and deliberate strategic manoeuvre. British supermarket, Tesco, was started, for instance, as a least cost (“pile ‘em high, sell ‘em cheap”) provider. In the past few decades, though, its innovation, marketing, and impressive management skills have turned it into the unquestioned market leader which, at the time of writing, is also intent on a strong global position.
Repositioning is no small task (as the case study of Virgin Media shows) and the start of this risky process is a clear understanding that the brand exists in the most important place of all: the imagination of its customers and potential buyers. Years of successful business and rewarding transactions for both the business and its buyers have created a valuable heritage; a brand equity. The goodwill towards the company might have a slightly different meaning to each buyer but each nuance is encapsulated in its reputation. It is this that the firm needs to move progressively into the new market or the new market position.
This manoeuvre needs to be undertaken carefully, taking customers with the strategy. Moreover, under no circumstances must it endanger the existing business or brand franchise. A poorly executed programme is likely to cast doubts on the competence of the firm. It will cause customers to wonder if the company can still run its existing business effectively. The marketer needs to demonstrate that their firm is applying its normal business approach, resources, and skills to the new market. It might have been “innovative” or “respectful” or “fun” or “thoughtful” in its previous ventures. It needs to be the same in the new space. For example, at the time of writing, the Finnish mobile manufacturer, Nokia, is moving into services. As its established reputation is for excellent design and fashionable products, it needs to approach services in the same way.
There are several steps to successful brand repositioning. They are:
Step 1: Undertake a Brand Audit and Identify Transferable Brand Values
The marketer needs to understand the strengths of the company’s brand and the franchise it holds with four distinct audiences: its existing customers, its employees, city investors, and the general public. A “brand audit” is a research process that determines this. It identifies the image that each audience has and reduces these to identifiable values. It also highlights any areas where there may be inconsistencies. These range from items where the design conflicts with perception to operational issues such as flaws in customer service.
The marketer must use this data to identify brand values that might be a basis for a new position in a market. For instance, the firm might be seen as “responsive”, after years of listening to customers and responding to them. Or it may be perceived to be “high integrity” or “high quality”. These might be used in the new position. Any negatives that are identified by the brand audit should be confronted honestly. If they are major perceptions or impediments, they must be confronted by the future strategy and by clear, effective communication plans.
Step 2: Identify the Intended Brand Position
Perceptual maps (see the entry under positioning) can be used to clarify an intended market position. The maps can be used to determine the likely number of customers, the most relevant value proposition, and to anticipate the likely reaction of other competitors. They can also be used to work out the brand style which is appropriate for the firm’s strategic position. This highlights any gaps between what the firm believes and what the buyers actually experience. So it enables the firm to create internal marketing and education programmes.
Step 3: Create a Transition Strategy
There are a number of ways in which a brand can be moved into new markets or a new market space. The first is a phased transition. If the firm has a strong brand, it can create its new business by association with that brand. It can, for instance, create a separate division, which specializes in the new field. IBM used this strategy as it moved substantially into services. As a result of nearly a decade’s investment, “IBM Global Services” is now one of the world’s largest services businesses and has a healthy brand reputation. The juxtaposition of the company name with “services” signalled to buyers that the approach and values of the firm were to be applied to the service market. The heritage, quality, and expertise of the world market leader could be experienced in the service market.
A second transition strategy is the dramatic move. This might be achieved through a memorable and visible launch, an acquisition, or a joint venture. A firm may not have the competences to successfully set up and run a new business very quickly. So a less risky investment is through purchase or mutual partnership. Each has its strengths and weaknesses. Acquisition is an immediate commitment. It gives the firm the ability to create its own direction with the new business from day one and, as importantly, signals its intention firmly to its customers. It can change the brand name immediately or it can phase the change.
A third transition strategy is to build on gradual organic growth. A firm might have some elements of the new business. This can be used as a basis to build. However, it is usually difficult to convince the market.
Step 4: Launch and Communicate the Brand
Whichever transition strategy is chosen, the firm must invest in communicating the new brand. This involves serious investment in convincing the market that it now has a viable new position. When, for instance, in 2000, Accenture was first set up from the then accountancy firm Andersen, it was launched with an adverting and sponsorship budget of $100 million. Since then, it has consistently invested in its brand, communicating its “High Performance Delivered” promise. This campaign was intended to demonstrate how the company draws on its work with clients in numerous industries around the world to help transform their businesses. The communication strategy must match the transition strategy though. The communications plan to match a dramatic move, like an acquisition, must be shaped very differently to that supporting a phased transition.
Step 5: Measure the Brand Change
The firm needs to know the view of customers in the intended market of its brand relative to competitor brands. As the brand is such an important asset, it is sensible to set up measures of its health in the market place. It is normal to establish some form of brand tracking survey. These surveys allow the firm to adjust the strategy in light of changing customer views and competitor actions.
History, Context, Criticism, and Development
Consumer product companies have been very successful at repositioning product brands for many decades. They have used, for example, brand extension strategies as a tool to change their market position. Buyers seek a familiar taste or style in the new category of product. For example, the extension of the Dove range of personal hygiene products from one soap turned it into a market leader. Others have gained new customers and a new lease of life for products by repositioning. The health drink, Lucozade, was, for example, languishing as an old-fashioned tonic for ill people until it was repositioned, in modern packaging, in the health drink market. While Mars conquered a seasonal summer hole in its revenues by positioning its Mars Bar brand in the ice cream market. In fact, it was so successful that it created a whole category of products.
Some service companies have also succeeded at penetrating markets through similar brand repositioning. Richard Branson’s Virgin Group has moved from entertainment into airlines into trains and into many other retail areas, such as communications services. This took it from a niche supplier to a major player in the international consumer services market. Each move had a sound business reason (normally based on shaking up a stodgy, cosy market) but each time the brand took existing buyers into that market and picked up others en route. For instance, the early Virgin flyers were young business people who had learnt the group’s style by experiencing its entertainment before they started their career. They also moved with it when they were ready to invest in financial services. Yet, with each move, the brand picked up new customers too.
Voices and Further Reading
- “Finding new positions: the entrepreneurial edge. Strategic competition can be thought of as the process of perceived new positions that woo customers from established positions or draw new customers into the market. … In principle, incumbents and entrepreneurs face the same challenges in finding new strategic positions. In practice, new entrants often have the edge. Strategic positionings are often not obvious and finding them requires creativity and insight. New entrants often discover unique positions that have been available but simply overlooked by established competitors.” Porter, M.E., “On competition”. Harvard Business Review book, 1995.
- “Repositioning: addressing other segments with different threshold requirements … As with resources, some organisations may have inadequate (redundant) competences as customer requirements move on. This could lead to business failure. However, these competences may be adequate to service customers in different segments (repositioning) for example in developing markets.” Johnson, G. and Scholes, K., 2002.
Things You Might Like to Consider
(i) As the case study shows, repositioning can involve much more than just the creation of a new product or a new branded item. It can involve substantial investment in all aspects of the direction of a company or business unit.
(ii) Handled badly, repositioning can seriously mess up existing business and the existing reputation of the firm.
(iii) Surprisingly large companies let themselves be subject to the whims of a market or see market forces as inevitable and irresistible. Their firm or their offer is repositioned by external forces such as the moves of competitors or commoditization effects. In these circumstances, it ought to be the role of marketers to point out that portion that can be influenced by explicit strategy and managerial actions.
Positioning Virgin in the Media Market
Almost 10 million customers choose Virgin Media in the UK today, which makes it one of the largest residential broadband providers in the country; the UK’s largest mobile virtual network operator, and the second largest home phone and pay TV provider. In cabled areas, its advanced fibre optic cable network reaches 12.6 million homes, delivering high quality TV with pioneering, on-demand, content as well as broadband services up to 50 Mb. In addition, Virgin Media offers ADSL broadband and telephony throughout the country, delivered over telephone lines.
But it’s not all about size. Virgin Media is a company that understands people as much as technology. In other words, it’s a typical Virgin company (in fact the largest Virgin branded company in the world with revenues just over £4 bn in 2008) even though it was created from six very different companies as recently as 2006.
CREATING A NEW VIRGIN COMPANY
In November 1999, Virgin Mobile launched as the world’s first mobile virtual network operator, listing on the London stock exchange in July 2004. In March 2006, ntl and Telewest, the UK’s two leading cable companies, announced the completion of their merger (which also included Flextech Television, responsible for channels such as Living, Challenge, and Bravo, Virgin.net an ADSL based national internet service provider, and ntl: Telewest business – providing business to business IT, data, voice, and telephony products and services). On 4 July 2006, ntl: Telewest completed its acquisition of Virgin Mobile.
At this point, planning began to re-launch the group of companies as a Virgin branded company. The newly merged exective board wanted a re-launch within three months, and a new Managing Director of Brand, Ashley Stockwell was hired to lead change workstreams across the company. He quickly reset expectations on the executive team that a brand launch like this one was about more than a logo, and as such would take much longer than they had planned. The re-launch would have to cover more than 15,000 staff, 100 buildings, and a fleet of over 5,500 vehicles.
Coming from the Virgin Group, the new MD understood his first job was to make sure that everyone inside the new organization knew what it meant to be a Virgin company. A cultural change programme was designed to brief all staff on Virgin’s core values:
- value for money;
- competitively challenging;
- innovative;
- brilliant customer service;
- good quality;
- fun.
All of the companies involved had very different cultures, so the merger and creation of a new single culture under the Virgin brand was a critical success factor. Luckily, most people were thrilled to represent the Virgin brand, and welcomed Virgin as a distinctive and attractive company for which to work.
Perhaps more challenging was the need to consolidate legacy systems and processes across the new company. Members of the newly formed brand team collaborated with workstream leaders on a number of change projects to make sure the customer experience would deliver on the Virgin brand promise. For example, in the billing workstream, a number of legacy systems were consolidated with the aim of simplifying bills so that customers would quickly be able to understand their bill and have charges for all the services they used in one place.
Brand team members reviewed all services and propositions to customers, again making sure that they represented the Virgin brand and values, and would meet customers’ expectations around great service and value for money.
As the re-launch date loomed, an internal teaser campaign began with the words “Start the revolution”. All the usual internal communications channels were used in addition to more guerilla tactics such as stickers appearing behind toilet doors. For managers, the campaign was titled “Lead the revolution” and involved a special programme of workshops to brief them on how to lead in a Virgin company. This was followed up with the do-it-yourself “Revolution takeaway” in a Chinese takeout-style bag, containing tools and props to help managers work through with their teams what being Virgin meant in their area of the business.
One key message that all managers received was that expectations internally and externally would be high with the creation of a new Virgin company. Known for coming into markets and shaking things up on behalf of the consumer, everyone expects change overnight when a Virgin company launches. Stockwell made it clear to all that the launch was more of a journey, which would take the company 3–5 years to complete.
THE BIRTH OF VIRGIN MEDIA
The combined company re-launched as Virgin Media in February 2007. Virgin Media was a new entertainment and communications company offering consumers a great choice of the latest products and technology, outstanding customer service, and great value.
Internally, the launch campaign built on the teaser campaign, with the rallying cry “Start the revolution”. On launch day, everyone received a “Party in a box” containing bunting, streamers, balloons, coasters, and a shot glass along with a little red book that explained what it meant to be a Virgin company.
Externally, a teaser campaign led up to the launch on 8th February 2007, using advertising, direct marketing, and press coverage to announce the arrival of Virgin Media and demonstrate with both the look and feel, and the tonality of the communications, that this really was a new company built from the best of the companies that merged to create it.
Just as he had done many times before for other Virgin companies, Richard Branson took part in a publicity stunt on launch day. He spent 8 February in a glass box in Covent Garden, London, alternatively using his mobile, broadband, and TV to spread the word about Virgin Media, and receiving celebrity visitors through the day.
A special package was sent to existing customers letting them know that Virgin Media was now their supplier, summarizing what had changed, and how the changes would benefit them. For most existing customers, the visible change occurred when they turned on their television or went online. Where once they saw an ntl or Telewest home screen, they now saw the new Virgin Media electronic programme guide, and the old ntl and Telewest portals were replaced with virginmedia.com.
The old Virgin Mobile stores were re-branded and began to sell the other three services now available to customers. Signage on all other premises in the estate was changed over a two-month period. Perhaps the most challenging external re-brand was on the fleet of vehicles, which took longer to change simply because it was a working fleet and so needed to be tackled gradually to avoid any drop in customer service.
REPOSITIONING THE BRAND AS IT GROWS
When Virgin Media launched, its focus was on announcing its arrival and its points of difference to challenge competitors in the market. The competitors were tough – and had deep pockets with which to fight back once Virgin Media was established in their industry. With customer churn a vital industry performance indicator, it wasn’t long before things became very competitive and frenetic, with everyone competing for more customers at the expense of creating real value throughout 2008. For example, everyone was leading their advertising with price messages, and then with the technological features of the offer – benefits were hard to spot and so customers increasingly treated the services on offer as commodities.
Virgin is used to this type of competitive response from larger, more established players, having only roughly 20% of its major competitor’s resources in most of the markets in which it competes. And so, while its early offers to customers were around better value and led with price, over time the company began to reposition itself around its other differentiators. In April 2009, Virgin Media began to emphasize its great service, the entertainment aspects of its offers, and its benefits. The message to customers was clear – Virgin was different and worth paying more for.
Today, the brand team remains at the heart of the business, looking after corporate identity, core brand look and feel, tone of voice, championing the customer’s experience, and delivering the brand via internal communications. The team regularly gets involved in new product development, for example taking the lead on the design of a new modem to support the new ultrafast 50 Mb internet access, the UK’s fastest broadband service, in December 2008.
CREATING VALUE THE VIRGIN WAY
At the heart of Virgin’s ethos is the idea that if you look after your staff, they will look after your customers, and your shareholders will be happy. This has certainly worked at Virgin Media.
Brand tracking measures show a steep climb for the brand since it launched in February 2007: Marketing magazine’s “Best Loved Brand” survey showed a leap from 53rd in the UK to the 6th in just 12 months, and a recent Readers Digest survey showed Virgin Media on a par with the BT brand; quite something in just two years.
Customer Churn is significantly down from the ntl: Telewest days. Virgin Media also uses the “net promoter score” (NPS) to keep track of how it is doing. The company tracks NPS through every part of the “customer journey”, and can score individual agents, giving them specific feedback on what they’re doing well and what they need to improve.
As more people join the company, it remains just as important to share what it means to be a Virgin employee, and this is reinforced in the recruitment process, induction programmes, training, and performance reviews. When he can, Richard Branson will call in to see staff around the country, listening in on their conversations with customers to keep in touch with what they expect from Virgin.
He also gets involved in helping customers use the services on offer, creating “webisodes” that can be viewed online, which explain how to get the best out of the services available.
So, by being the first people in the UK to offer customers TV, broadband, phone, and mobile, Virgin Media sees the future as bursting with fresh entertainment and communication possibilities. Their ongoing mission is to bring customers all the excitement possible and make their entertainment the brilliant experience it should be.
RATING: Practical and powerful