Brand repositioning is a high-risk, high-reward strategy. But when brands reposition to solve customer acquisition issues, the result is often disastrous.
This was originally published in the No Best Practices newsletter on 4.10.2022.
This is part three of the “How To Destroy Your eCom Business” series, aka what not to do to build a healthy customer file. This series covers common business decisions that have unexpected consequences. These decisions appear to pay off in the short term, but they make it harder for your business to succeed in the future.
Reminder: a healthy customer file enables a business to succeed today, but it also sets a business up for success in the future.
By now I’m hoping you recognize the value in studying “what not to do”. And if you ever ask yourself where I get all these ideas about eCom and marketing, that’s your answer: I think a lot about the wins and losses I’ve seen throughout the course of my career.
The next two parts of this series are going to cover two sides of the same coin: how businesses choose to respond when their core business stops growing. The slowdown in growth may be due to changing consumer behavior, core audience attrition, or a number of other factors. But the result is the same: sales flatten out and growth is harder to come by.
To solve this problem, a brand must walk a tightrope between optimizing the core business/cash cow and generating new sources of revenue with future growth potential. It’s very hard to do this well.
Viacom has gone from winner to loser over the past eight years because they bungled consumers’ shift from linear cable to streaming. Kraft Heinz’s ongoing stock slide is a result of the company’s failure to successfully respond to changing consumer preferences. And Meta (fka Facebook) is attempting to “own” the metaverse while managing major headwinds in their advertising business.
Companies usually approach this challenge in one of two ways:
- Reposition the brand to appeal to a new, growing audience
- Cut costs and drive “growth” to the bottom line via retention
This newsletter will cover brand repositioning (#1), and why it’s so difficult to pull off. The next newsletter will cover “growth” via retention (#2).
What Is Brand Repositioning & Why Is It Misused?
Let’s get on the same page: brand repositioning is the process of changing your product offering, price, art direction and/or branding to appeal to a new target customer.
You can already see the issues with this strategy. In order to do it right, a brand needs to know who their current core customer(s) is/are. And very few brands have a fact-based understanding of their customers. Instead, they rely on internal mythology (“she’s a downtown diva with an uptown trust fund”).
Another issue: there are a ton of variables in a repositioning effort. If you change your logo but not your product, is it really a new brand? If you change product, price, and promotion but sell in the same places, will your new target audience reject you? And if you change absolutely everything, why not simply start a new brand from scratch? What’s the advantage of remaking an existing brand?
Repositioning can also involve launching a new product offering, along with a new marketing strategy intended to appeal to a different target market. Streaming services launched by cable networks fall into this bucket–some have been more successful than others.
Table stakes for a successful brand repositioning:
- The product you’re offering has to resonate with your new target market. That means the product has to be both good and relevant.
- The target market needs to be aware that you exist. If you build it, they won’t come.
#1 is a challenge for all brands and marketers, while #2 is especially challenging for smaller brands. Repositioning success stories typically highlight brands with global reach, giving casual observers the impression that the right product and branding will draw in the intended audience on its own.
A Real Life Case Of Brand Repositioning Gone Wrong
Here is the way brand repositioning attempt went down at one former employer:
- Sales growth had plateaued, and full price sales had been declining for a few years. Management wanted to do something.
- My team did a customer insights project, which proved out that our core customer hadn’t changed much from the time the brand was founded. This was despite an earlier attempt at repositioning. Management was not happy.
- The owners decided to double down on their efforts to attract a younger customer. The product (apparel) became more fashion-forward, we redesigned the website, and our art direction and brand voice were updated.
- The price of the products also increased by an average of $100-200. Popular styles and fabrics were discontinued. The raw materials were upgraded, but that wasn’t always apparent, especially in eCom photography.
Can you guess what happened the day this new positioning was rolled out online and in our advertising?
- Our advertising efficiency dropped off dramatically. Fewer people were clicking on our paid social prospecting campaigns, and fewer were converting.
- Our email campaign performance tanked. Collection launch emails usually drove last click revenue in the low five figures. This launch barely cracked $3k.
- Conversion rate dropped off sitewide, and we hadn’t even launched our site redesign yet.
- Most of our daily revenue came from purchases of product from the season right before the repositioning effort launched.
- We were soon told to hide the old product on site and in feed-based ads because it was no longer “on brand”. Conversion rate declined even more.
The situation got worse as time went on, especially after all the product from before the repositioning sold out. There was a day when we didn’t see a single eCom order come through until 4pm.
So what was happening? We hadn’t stopped marketing. We were still running Facebook prospecting ads and doing PR. Our marketing strategy was working just fine before the rebranding effort.
What Brand Repositioning Does To The Customer File
Remember that each day’s sales come from two places: new customers and returning customers. And there is a segment of your returning customer base that drives disproportionate revenue, especially for established brands: your biggest fans.
These are customers who have made 5+ purchases with you over multiple years. They’re the top 5-10% of your customer base, and they often drive 25-40% of each year’s revenue…or more.
One of the biggest misconceptions that brands have about their biggest fans: unconditional love. It’s still a brand/consumer relationship. They’re coming back because they love something about the product. Take that thing away, and most of your biggest fans go away.
Your more recently acquired customers are even more product-sensitive. They may try you again, but they won’t come back consistently either.
That leaves you with customer acquisition to fill the gap, and we all know that customer acquisition is usually expensive. Acquisition programs based on lookalike models (Facebook ads, direct mail prospecting) will still be targeting your old customer base, reducing efficiency.
So you need to be confident that your repositioning strategy will land with your new target customer. You need a real life, BS-free go to market strategy–something that is outside of the core competencies of many brands.
Some of your existing customers will purchase from you despite the updated positioning. In fact, some of them might like the brand new you even more, and their LTV will increase. But the act of switching up your positioning won’t draw in the new audience you seek automatically. If you build it, they won’t come…unless you spend big to get the word out.
That’s why brand repositioning isn’t a low cost or low risk growth strategy.
In the case of my former employer, we bungled product positioning and go to market. The product was too expensive for most young people to afford. And there was also no real strategy for getting in front of Gen Z and Millenials–we used the same marketing channels we always did.
Evaluating The Risk Of A Repositioning Effort
Here are a few quantitative and qualitative questions and analyses you can use to determine if a repositioning makes sense for your brand:
- Compare assortment architecture between new and old positioning. This is the number of SKUs per price band & per category (ex. Shoes under $150, Tops $50-100). Less overlap between the two assortments = higher risk.
- Analyze the purchase behavior of the top 10% of customers who bought from you in the last 12 months. What are their preferred price points, products and product categories? If these are going away in the repositioning it will increase your risk.
- Use surveys and customer interviews to learn more about your best customers: their demographics, their values, and why they love your brand. Your best customer may not be who you expect.
- Pull sales for the prior three to five years, broken down by new and returning customers. Then forecast sales for your first year post-repositioning. Will you need to depend more on customer acquisition? Are you able to fund the marketing required? If not, are you comfortable operating from a lower revenue base for a few years?
- Create a “board of advisors” composed of members of your new target market and soft launch your new product with them. Gather feedback to determine if your new product will resonate with the intended audience. Iterate accordingly.
This may be controversial, but if your brand is doing less than $100M per year, has fewer than 10 physical stores, and has niche awareness, repositioning the brand is probably not worthwhile.
If your sales are plateauing, there is probably another reason. By repositioning you are taking on all the risk of starting a new brand from scratch with additional baggage weighing you down.