6 Common Causes of Brand Failures

Image Credit:  Nicholas Eckhart on Flickr

The news earlier in 2015 that Mexx is closing all its Canadian stores came as a huge disappointment for my family.

Disappointment because The Dutch retail chain was our favorite place to shop for clothes: the quality was good, and prices reasonable.

Surprise because Mexx stores were some of the busiest places at the malls around us.

The Mexx brand is just one of the few that are struggling, or have disappeared completely. Sony also announced the closing of all its Canadian stores, while US retail giant Target completely exited the Canadian market, less than 2 years after launch.

It’s hard to believe that brands that once defined a category have now vanished or struggle mightily: Nortel, Blockbuster, Nokia (cellphone business), Blackberry.

It’s like saying that Apple will not be around in the next five years.

The first question we ask ourselves as marketers is: what happened? How can a brand that was once so strong and dominant, become so irrelevant?

A closer look reveals some common causes of brand failures. Here are some of the most “popular”, ranked in the order of “fix-ability”, starting with situations that can be easily corrected, and ending with the ones that are almost impossible to recover from.

Building a Product, Not a Brand

There are many companies that offer an exceptional product but fail to build the brand around it. The Management team that runs these companies invariably believes in the “we offer a great product at the right price” selling strategy.

Reality has proven the best product doesn’t always win.

From a product perspective, Fage qualifies as the authentic Greek yogurt on the US market: the brand is owned by the same company that enjoys the leading market position in Greece. However the undisputed US market leader is Chobani, a brand launched 9 years after the Fage brand.

Lack of Brand Communication

This is another common scenario: the marketing budget for building the brand is not nearly enough to achieve anything meaningful. In reality, management believes, just like in the above scenario, that marketing is purely ego-building and a waste of money, and what really sells is product and price.

Consistent communication of the brand message is key to getting into the minds of consumers. Brands that are not on the radar do not exist. In order to become a player, the brand communication budget has to be on par with the competitive brands you are trying to displace.

Being Stuck in the Middle

A brand is “stuck in the middle” when it holds no defined positioning in the marketplace. These brands usually struggle to remain profitable and eventually die.

Gap was launched in 1969 and quickly became synonym with cool, affordable American-style apparel.

In recent years Gap is struggling to define its identity, both internally (stuck between Old Navy and Banana Republic), and externally, facing competition from more focused brands such as H & M and Zara.

Brand Cannibalization

Changes in the marketplace require bold strategic moves that affect a company’s brand portfolio. Such moves include launching new brands to fight newly emerged competition, or meant to capture a new market segment.

These strategic moves have to be carefully planned in order to avoid cannibalization of the existing brand(s).

Consider a common scenario: an established premium brand decides to launch a lower cost alternative to capture a new market segment consisting of consumers who currently cannot afford it. Many companies choose the shortest way to market: strip the existing product of some of its premium features, and market it under a very similar brand name, that would create an obvious connection with the premium brand.

Great strategy, at least on paper. In reality, these companies run the risk of alienating their core customers who currently pay a premium for the premium brand.

In order to avoid cannibalization, enough separation has to exist between the two brands in order to keep them both relevant to appealing to different consumer groups.

Not Keeping Up With The Competition

Competitive advantages are very difficult to preserve.

In her excellent book “Different: Escaping the Competitive Heard“, Harvard Business School Professor  Youngme Moon talks about “augmentation-by-addition”: differentiated features are quickly copied by competition and become points of parity, something all consumers expect to get.

Brand survival requires constant innovation.

The first mistake companies such as Blackberry, and Blockbuster made is not acknowledging that the market is changing. Blackberry believed for a long time that the touchscreen phone is just a marketing fad. Management also failed to see the evolution of the smartphone from a communication device to a full entertainment hub.

Not being able to keep up with the competition (even if you invented the category) invariably leads to brand failure, especially in fast chancing categories, where it’s almost impossible to catch up.

Purposely Deceiving Customers

At the time of writing this article (September 2015) the news just broke that Volkswagen has installed software in its cars equipped with TDI engines that activated emission controls only when being tested. Otherwise, the cars were exceeding the pollution levels by as much as 35 times.

Many car brands managed to survive crises caused by manufacturing defects. However, choosing to deceive your customers on purpose in order to gain market share causes irreparable damage.

No amount of money and PR can save a brand that has lost that much of its reputation. I just don’t see how Volkswagen, a brand with a tiny 2% market share in the highly competitive auto market can maintain its North American presence.

There are usually a combination of factors that lead to brand failures. The situations above highlight the challenges and responsibilities brand managers have in making sure that brand survives and stays relevant long-term.

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