Background and challenge
A leading household brand was one of a few major manufacturers in the industry but was losing share to a competitor with a differentiated offering and deeper connection to the consumer. Additionally, the specialty retailers through which the products were traditionally sold were taking a significant share of distribution. These retailers owned the end-consumer relationship and were taking margin from the manufacturers, which had stopped direct marketing to the consumer.
The company enlisted L.E.K. Consulting to assist with a bold plan to change the value chain dynamic and create deeper consumer pull by developing a differentiated product offering, reinventing its marketing approach and fundamental message, and retooling its approach to channel management.
Approach and recommendations
The first part of the project was focused on product ideation and innovation. We conducted deep consumer research including shop-a-longs and focus groups to drive a 360-degree view of the consumer, including the consumer purchase path and consumer value drivers. We leveraged the full experience of the seasoned management team and combined that with consumer insights to develop a number of new, differentiated product concepts. Using a conjoint survey, we tested the various features creating deep insights into consumers’ preferences, which gave clear direction to both product development and marketing. Concurrent with this research, we acted as a strategic adviser in selecting an advertising agency to support the new line with innovative direct to consumer marketing programs.
However, getting the right product and consumer messaging was only half the answer. Convincing retailers to accept the product line on the client’s terms, rather than with the usual expensive trade subsidies and retailer-specific customization, was the key to changing the business model and owning the consumer relationship profitably. To achieve this, we created a model to assess profitability by key account and product line that allowed for scenario planning to understand the trade-offs and risks.
The client successfully launched the new product line and its corresponding direct-to-consumer messaging and received critical acclaim, with a leading industry publication calling it a “game changer” for the industry. The client leveraged our work to sell into top retailers, of which 90% began carrying the new line. As a result, our client saw double-digit sales growth, significantly outpacing the market, while the competitor’s share price lost 50% of its market cap.