In a world of homogeneity, marketers that focus on delivering customer value via the ‘product P’ in the four P’s’ will win in the end.
The age of cost cutting the minutiae to drop a fraction more to the bottom line is over. As Zig Ziglar once said ‘when the crowd is zigging, you should zag’.
Years ago, as product manager for Fountain tomato sauce Management constantly pressured me to reduce costs. At the time Fountain was runaway market leader at premium prices In New South Wales and had solid share in Queensland and Victoria. The challenge to reduce costs came down to replacing the tomato content with something else that was cheaper. To reach the arbitrary reduction goals, we had to skip on tomatoes which represented about 60% of the ingredient cost, and 35% of Cost of Gods Sold.
We were skimming those tomato ingredient costs, compromising the product quality for what amounted to a few cents.
Over the years, cost-cutting had reduced Fountain to the point that it was no better and little different to the alternative products on the market. Fountain had maintained the ‘Rich Red Fountain Tomato sauce’ advertising position for 40 years, although it had become progressively untrue.
No ‘richer’, no more ‘red’ than any other tomato sauce on the market.
It had seemed to cost-cutters over the years that a slice off a cut loaf was never missed. Until, suddenly, the loaf was no longer of any differentiated value.
In frustration I asked the lab to make up a sample from the original recipe and put it into the latest taste-testing. The difference between the original recipe and the current one, before any further cuts, was dramatic. The panel, which included the MD chose the old recipe as being by far the best option.
While the planned round of cuts was shelved, no further move was made to restore the original recipe, and for being a smart-arse, my career opportunities were suddenly limited. Subsequently the combination of an ordinary product, and an eroding brand position resulted in Fountain becoming just another commodity product in a market it used to dominate.
That erosion of market position and long-term profitability could have been avoided by a very modest reinvestment in the product, and associated brand equity.
