This is an often debated topic in contemporary marketing discourse. Without doubt we are moving away from the era of big brand dominance. When I was in graduate school, we studied a principle called the “rule of the 3’s”. This theory proposed that a product category could only support three major brands and a few niche brands profitably. The “rule of 3″s” pattern is exhibited by McDonald’s, Burger King and Wendy’s; GM, Ford Chrysler; Coke, Pepsi, 7UP; NBC, ABC CBS and Visa, MasterCard and American Express.
What do these diverse industries have in common? There’s a market share leader, a market share challenger and a market follower that collectively comprise 80-90% of the category and a few niche brands each with 1-5%. The brand leader and brand challenger were constantly engaged in ongoing head to head combat competing for the same customer segment. Remember the burger wars? The cola wars? Rarely however did the challenger overtake the leader for two reasons:
1) the leader had greater economies of scale and
2) mass media was expensive and the leader had more marketing resources with which to fight.
That was the inherent advantage of size. Further, a brand’s size was highly correlated with order of entry. The first brand to create the category typically maintained the largest share of the category regardless of the number of other entrants. This is the inherent value of “being first”.
Follower brands (e.g. Wendy’s, 7UP, Chrysler) and niche brands (e.g. KFC) rarely engaged the brand leader or the brand challenger. Success for the follower brand was to stake out a smaller segment of customers who valued something different (the “uncola”, “where’s the beef”) and be content to grow as the segment grew. The follower brand remained relatively quiet and did nothing to further the rivalry between the leader and challenger. The ongoing fight between the leader and challenger rarely benefited the brand follower or niche brand. As we use to say in corporate marketing “when the elephant fight, it is the ant that get killed.”
For many reasons, the rules of the market have changed and big brands have loss the kind of clout described above. There are many more niche brands who survive profitably. New communication media such as the internet, have leveled the playing field so smaller brands can reach and serve a narrow customer segment without extensive resources. Brands can now segment customers on attitude, personal values, lifestyles and personality.
Even for small businesses, your brand is still your greatest economic asset. By definition, it is the sum of all information about your product or service that is communicated by its name. Strategically, your brand creates critical differentiation in the marketplace, provides the key platform for communication with customers and leverages the intellectual assets of your business. Creating brand value is still as important as ever.
Vanessa Besteda Jackson, MA, MBA has enjoyed a successful, 30-year career in corporate marketing. She has held senior marketing positions with Kraft General Foods, SBC Communications and Navistar. Vanessa is the author of The Art and Science of Getting More Customers, a small business Marketing Coach and operates the blog, Marketing Answers Fast.com.