The New Ways Established Brands Do Battle With Startups
When I started at Procter & Gamble, my first job was in a group called AP/DO, otherwise known as “deodorant” to normal people.
I was on the Secret Brand Team where I found myself in the middle of the deodorant wars between P&G (Secret and Old Spice) and Unilever (Dove, Degree and Axe). It was a “battle” that both sides took seriously, leading the head marketer at Unilever to have a P&G-branded doormat outside his office and for Degree to buy a billboard that mocked our Secret advertising right outside the P&G company cafeteria.
Talk to anyone who grew up in the world of brand marketing and he will tell you similar big brand war stories whether it is Coke vs. Pepsi, Crest vs. Colgate or Ford vs. Chevy.
Competition is nothing new to brand marketers who spent every Monday looking at the latest weekly share reports. But over the last five years, category after category and brand after brand has woken up to realize that the competition has changed. Consider that in 2015, Catalina found that 90 of the top 100 CPG brands lost market share over the previous year.
While the largest companies were trying to figure out how to use digital as a new advertising tool, a new generation of companies and brands was being started by entrepreneurs that viewed digital as a business model that would give them an advantage versus the scale and budgets of their much larger competitors.
In the old world, brands competed with each other head-on, whether that was trying to win at the First Moment of Truth with the largest share of shelf or creating the television ad with the most buzz during the Super Bowl. In this new high-stakes game of business, startups have decided to throw out the old rules. They are not attacking their competitors head-on. Instead, they are disregarding the conventional wisdom of industries and in many cases, redefining markets along the way.
Consider the case of Dollar Shave Club. For decades, the shaving category was entirely focused on product innovation, launching new and improved products at an ever increasing premium price. A new business model in razor and blade was even named after the strategy of market-leader Gillette — to essentially give away the handheld razor in order to make a high margin selling the blades. When Dollar Shave Club was launched in 2011, it knew that competing head-on with Gillette in product innovation on the shelves of retailers was a recipe for failure. Instead, DSC decided to compete in contrast to the very business model that had historically been Gillette’s strength.
Not only did DSC acknowledge a universal feeling that razors were over-priced, it also embraced a business model in subscription commerce that circumvented the inconvenient and frustrating shopping experience of traditional retail. This was accomplished not with a superior product, but a parity blade that was not even manufactured by DSC.
Five years after its founding, DSC had contributed to Gillette’s North American market share in shaving falling from 71 percent to 59 percent. And of course, in July 2016 Unilever bought Dollar Shave Club for a cool $1 billion.
Dollar Shave Club is just one example where digital has become a medium that entrepreneurs and startups are using to attack incumbents in ways they never envisioned. In this new world, disruptive innovators are no longer content to define themselves by the rules that historically govern an industry. They are not content with having a slice of a market; they want the whole market and often something bigger. As Steve Blank, Silicon Valley serial entrepreneur, wrote: “Startups are unencumbered by the status quo. They re-envision how an industry can operate and grow, and they focus on better value propositions.”
The result is that blue chips are faced with a new class of rivals that is incredibly different than my early brand days of Secret vs. all comers. In the same way that the majority of today’s Fortune 500 were born in the era of mass media and mass retail, these new rivals have started with digital at the core of their business model. It is no longer a battle of Goliath vs. Goliath where everyone is playing with the same cards and the same set of rules. Instead, brand leaders need to evolve to thrive in a game of business where the competition is fluid and new players can emerge seemingly overnight.
For big brands, the stakes have never been higher.
Originally published at www.adweek.com.