Synopsis: Leveraging Brand Strategies – Tools and Equipment Manufacturer
Background
Our client was one of five divisions of a global tool and equipment manufacturer. This division had recently been acquired and blended into a division that was previously a competitor. The acquisition had brought a duplicate set of brands, products, and sales organizations to the corporation, so the client had previously chosen to streamline the two independent sales rep organizations, by eliminating almost half of the rep firms. The client came to us because there was substantial confusion in the market over the integration moves that had been made to date, particularly brand strategy. Additionally, sales were down and management was concerned that the decisions they had previously made may have contributed to the decline.
Management asked us to help them determine the appropriate brand strategy. They had chosen to keep the two brands, and continue selling both full lines, despite the fact that a great amount of overlap in products and channels existed. They began to think maybe they should consider moving to one brand.
They sought our recommendation for using a single brand (if so, which of the two) or continuing with both brands. And if our recommendation was to continue with 2 brands, then should the brands be segmented by product type (i.e. One brand for certain products, and the other brand for other types of products).
QDI’s View of the Need
We recognized that in addition to a brand strategy, the client needed to evaluate the effectiveness of the reorganized sales force and develop a channel strategy that clearly positioned their brands.
Research Required to Address the Need
In order to make these recommendations, QDI needed to develop a “picture of the market” that provided insight about the market structure, buyer behavior and the attitudes of customers and distributors toward our client’s brands. The structural research required that QDI build a market flow model that would identify the sales of our client’s product and product categories across the various channels he used.
To develop the behavior and attitude understanding required, QDI needed to speak with a variety of people within the client’s organization, but more importantly speak with both distributors and end-users. QDI first spent time gathering internal data from the client’s management team, sales directors and product managers. These discussions were followed by interviews of approximately 5 rep firms to gather their perceptions of the brand and feedback on the current organization of the sales team and their specific territories.
Next, QDI developed an in-depth survey targeting a variety of distributors. Distributors were segmented by type, including catalogs, machine tool distributors, and industrial supply distributors. The first set of surveys was conducted with distributors across each category, all of which were customers of the client. A second set of surveys was conducted with a random set of distributors who were not customers of the client. A second interview was also developed targeted to end-users. We talked to a variety of types of end-users including job shops and industrial plants.
The distributor survey covered in detail, topics such as which products and brands they sold, the sales volume and market share. We also discussed what types of customers bought products from them, end-user buying behavior, advertising, marketing, and programs. The main section of the survey, however, queried about the perception of our clients two brands, both independently of each other and relative to each other. We probed to understand the reasons behind those perceptions and asked for feedback about areas for improvement.
The end-user survey addressed the same brand issues as the distributor survey but asked for additional data about the how they research, shop and buy products, plus feedback on the importance of different services offered by distributors and manufacturers.
Scope of Work
The development of a brand strategy was the original scope, however, as QDI gained insight into the issues from the client and the market, the scope increased to include channel strategy and marketing strategy.
We committed to 75 surveys that would be conducted, organized and analyzed to develop recommendations for each key strategy area. We documented our survey work with hard copies of our notes, spreadsheets (with quantitative results) and electronic documents (with qualitative answers). At the mid-point of the project, we met with the client to review our interim results, gather the client’s feedback, and integrate the feedback into our remaining surveys and strategy development. Our final presentation included an executive summary, a review of our research and findings, conclusions and recommendations.
Development of Conclusions
Based on all of our primary and secondary research, we concluded that the distributors controlled the market for our client’s products. These products, particularly the low-end portion of the line – products less than $5,000, did not have strong brand loyalty and the distributor sold the customer what the distributor stocked. Thus, the marketing goal became maximizing market presence. This led us to conclude that the client could keep two brands, as long as they were more distinctly positioned to specific product segments and channels. We also suggested a sub-brand and additional product line to be developed for an opportunity in the high-end of the market that was not previously addressed by the client. The high end of the market required a level of exclusivity that our client could not deliver with his present brands and channel strategy.
QDI Recommendations
Key recommendations included:
- Specific positioning for the two original brands, and a third sub-brand
- Select changes to the product lines within each brand to align the brands by channel
- A reorganization of the sales group (internal sales management and independent reps) to gain coverage and serve the varying distributor needs appropriately
- Segmentation of the sales channels to include a new strategy to reach the high-end channels
- A set of marketing ideas to appeal more to distributors and end-users through advertising and promotion.
Implementation and Results
Following our project, the client integrated our recommendations into their strategic plans for his division. However, our client was one of only five, inter-related divisions, which shared the same brands, and many of the same rep firms. While our work was to focus on just one division, our recommendations raised questions for the other divisions as well. Thus, we have expanded the study to include brand, channel and sales organization issues for all the divisions.
Post-Mortem Lessons
There were multiple challenges with this project, including a scope of work that turned out to be much broader than the task we were originally brought in to solve. In retrospect, the client needed to address the overall brand and channel problem as part of their acquisition plan. Not having done so has resulted in high levels of confusion and great difficulty in integrating the two groups. The net effect has been a substantial reduction in sales as the market grapples with the confusion and competition for the rep’s sales time.