Forecasting: Maximizing Demand for Your Brand

Here today, gone tomorrow: most brands fail to sustain a competitive advantage. They may have offered a benefit over existing products that consumers use to address a given need--perhaps a better quality product, more convenient package or better value--but merely achieved a niche position, rather than a broad market following. In order to engineer your brand for success and drive future purchasing behavior, it is essential to understand four critical factors: Impact, Differentiation, Quality, and Value (IDQV). IDQV analysis identifies the necessary characteristics for brand longevity and prosperity.

Critical Success Factors

Ipsos-Novaction has conducted thousands of product tests across over 250 categories in 55 countries. Analysis of the database has determined that there are four critical factors that can determine if a product has a high probability of success. We call these factors IDQV:

Impact: The ability of a brand to create strong identification among target consumers through its communication and message.

Differentiation: The degree to which a brand can truly separate itself from competition on a relevant sales driver within a category.

Quality: The degree to which a brand meets the critical needs and wants of consumers in a given category versus competitors.

Value: The quality that the brand delivers versus the relative price that consumers are asked to pay.

Brands that score high in these areas generally achieve higher penetration and higher repeat rates than their relevant competitors. For example, if a product scores high on Quality when measured against our database, then 87% of the time this product is successful, while if a product scores low on Quality it is only successful 2% of the time!

How to Beat the Market

Analysis of the database shows that when high or very high scores are achieved on one of the critical success factors, products achieve volume of anywhere from 25-50% greater than the average brand in the category. Even higher volumes (75-100% greater than average) can be attained by the synergistic effects of high or very high scores on two or more of the IDQV metrics.

More than 70 different combinations of these variables were analyzed, differentiating between strategies that will drive penetration versus strategies that would be more useful in generating repeat sales. The best combinations are summarized below:

These results make sense; the strength of the communication should have significant impact on trial. But what exactly should the message be? An analysis of the key drivers of preference in the category (Perceptor) reveals the relative importance of different benefits within the category. Without this analysis, the relationship between positioning and volume cannot be established. This analysis also reveals the greatest opportunity areas for the brand. It is just as important to understand the incremental volume opportunity of increasing the communication of a benefit as it is to understand the relative importance of that benefit.

Quality

Quality is a critical driver of repeat sales. Quality includes the importance of meeting expectations, of delivering on the benefits that were promised. But we also know that it is actually better to deliver on strong promises than to deliver without promising as much. Said another way, delivering on high expectations is better than delivering on low expectations. But with high expectations comes higher risk as not fulfilling expectations can have significant negative consequences.

Evaluating Product Ideas

There are three broad areas that a brand manager needs to consider when launching a new product:

1. The Market or Category Structure: Used to estimate the volume for the next new product launched in the category assuming average performance on the IDQV factors.
2. The Expected Performance of the Product: Used to calculate the expected volume based on how the product performed on the IDQV scales.
3. Marketing Support: The level and types of spending that will be used to drive sales of the product.

The greatest area of influence for a brand manager is a product's performance. It is usually not easy to change the structure of a category. And high levels of spending that generate a high year one forecast usually cannot be (and won't be) sustained.

Reducing the Risk

It is just as important for marketers to understand the possibilities of failure as the chances of success. An analysis of the database also showed that low or very low scores on any one of these variables typically generated volumes 25-50% below average. In these cases, a low score on any one of these factors mitigated the positive impact that we might have seen from positive impacts on one of the other factors. And low scores on two or more of these variables generated expected volumes at least 50% below average. This is true of strategies designed to increase penetration or strategies designed to impact repeat sales.

For example, the analysis revealed that a very low score on Differentiation had a significant negative impact on volume even at medium levels of Impact. Low Value scores were shown to be very risky, even at medium levels of Quality. This is a classic tenet for Value oriented brands that if a brand attempts to differentiate itself only on price, it will usually not succeed in the long term. And very low scores on After Use Quality had a significant negative impact on volume even at medium levels of Impact and Differentiation.

New Product Development

These ideas can also be applied to the new product development process. Every year, brand managers introduce a slew of new products into an already crowded marketplace with limited space. IDQV analysis can help you understand and identify the necessary characteristics for new products to achieve consumer acceptance. This reengineering process allows the true potential of a product to be estimated. Improvements in IDQV can then be simulated to understand the impact on volume. These optimization simulations are an integral part of new product evaluation, and the forecast is seen as part of the new product development process and not the finish line. Some of these simulations consist of competitive reaction. After all, the new product is not being introduced into a static market. Sometimes there is more work after the forecast than before!

Recommendations

1. Understand and identify the sustainable competitive advantages for your brand. Sustainable advantages can come from many sources - offering unique benefits, the relevance of your message, a better value proposition, and so on.
2. Take a long-term view. Even if your brand is small today, you can build its competitive advantage thru reengineering and investment over time.
3. Build on your brand's competitive advantage thru new product development. Introduce line extensions that reinforce the parent brand's strengths, and broaden its equity into new areas.