Due to B&D´s slower growth rate and increasing foreign competition in its core business (hardware market), and its recent success in launching new products in the American Households market (Dustbuster, Scrub Brusher and Spotliter accounted for 30% of company’s sales), the company decided to penetrate further in the Households market through the acquisition of the GE division.
Opportunities and threats to new B&D
GE´s acquisition was a good strategy since the new B&D has the opportunity to grow both in sales and profits in the new targeted market. In order to do so, the new B&D must take advantage of synergies created between both companies (highlighted), with special focus on the good use of the high brand equity heritage from GE (information, brand , plant facilities, sales force, management team, etc), as well as the brand name, which was allowed to be used by B&D for the next three years. At this stage the new B&D reaches a bigger market as it has a broader product offering (16 product categories) and larger and appropriate distribution channels, which used to have a win – win relationship with GE (push programs).
Nevertheless , the transfer of the brand is not the only marketing challenge (if badly dealt could create product confusion by consumers and weakness in brand image), but also the increasing fierce competition generated by the death of the strongest brand name in the market (GE) and the new company’s definite positioning in the market. Competitors in the Households segment such as Sunbeam, Proctor-Silex, Hamilton Beach and Norelco, as well as specialist competitors in each product category will try to increase its market share by means of price reductions and promotional and merchandising allowances. All this aggressive marketing will definitely affect consumers, who are not indifferent to brand names but have low loyalty for them. Consumers are willing to switch from recognized brand names such as B&D and GE because they are attracted by competitor’s lower prices and increased end user promotions.
Strategy for the brand transfer
A complete analysis of the five alternatives proposed by B&D executives is presented in Annex 1, evaluating the benefits and risks of each alternative. The proposed solution doesn’t match with any of those alternatives, and is based on two key issues: having a different strategy for the “low premium” and “high premium” (stars on the BCG matrix) products as well as the timing of the changes which should be finished in two years.
For the low premium products we will change the name within 6 months, having time to create brand awareness, study possible promotions, design the new packaging and replace GE inventory. For the high premium we will introduce them gradually as innovations are made on each category. This strategy has the following advantages:
- It helps to increase the brand awareness of B&D as a household appliances producer with the quick introduction of the low premium products, but reducing the risk of losing market share with the most important or core categories. Low premium products also have very low brand loyalty, so a switch towards B&D is feasible.
- B&D will have more time to develop certain innovations on the key lines. This will allow to present a change in the brand (to B&D) linked with an improvement on the product when it is launched. The perception of the consumer will be that B&D has improved the current GE product.
- GE main products market share is maintained, and the demise of the product will be effectively substituted by the B&D new product.
- Gradual introduction minimizes the risk of having competitors gaining market share on all categories at the same time (gradual and overlapped substitution leaves little space for competitors).
- We will keep the line names used by GE, like SpaceMaker TM, which represent a useful link between both brands and that is already known as a quality product.
Communication, advertising and promotional programs
Even if it is very expensive to maintain both programs, a mix of push and pull communication programs is highly recommended. A push program towards the channel is needed because:
- Market is mature and requires intensive promotions.
- Keeping shelf space is critical, since purchases are mainly decided at the point of sale depending on the availability of products and promotions proposed.
- Retailers are highly concerned about losing the current GE promotional programs, so a good relationship is necessary to remain well positioned in the shelves.
- Competitors are ready to launch strong promotions to take space in the channel.
- B&D has very little access to the required distribution channels, so maintaining the GE position is vital in this early stage.
- The promotional program of GE will be continued.
A pull program is absolutely necessary to create the brand awareness of B&D as a household appliances producer. B&D has a new target, which are women above 21 in urban and suburban areas with medium-high income, and they still have a perception of B&D as a “hard work garage oriented brand”. The advertising should clearly have in mind that a “smoothening” of the brand perception should be achieved.
Advertising should not emphasize on the change from GE to B&D naming GE, since GE it is not a brand that will disappear (it operates in lots of markets). The campaign should include TV ads, retailer’s catalogs, specialized magazines and clerk’s incentive programs.
