It has been said that something as small as the flutter of a butterfly’s wing can ultimately cause a typhoon halfway around the world.

P.S.G. Brinkhoff s1062271

B

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B

January 2005 P.S.G. Brinkhoff

Address: mortel 10, 6585 XG Mook, The Netherlands E-mail: pepijn_b@hotmail.com

Telephone: 0031655957774 Student number: 1062271

University of Groningen

Faculty of Management and Organisation Master of Science Marketing Management Supervisors Reckitt Benckiser Belgium;

I. Heyman

Supervisors University of Groningen;

Drs. N. Campbell Drs. M. E. Boon

The author is responsible for the contents of the thesis: all rights regarding this thesis are reserved for the author.

The Butterfly Effect

It has been said that something as small as the flutter of a butterfly’s wing can ultimately cause a typhoon halfway around the world.

-Chaos theory-

PREFACE

This research is conducted in cooperation with Reckitt Benckiser Belgium and the University of Groningen. The research explores if companies like Reckitt Benckiser can enhance their marketing management by looking more at what customers think about their products. It is about finding out if measuring brand equity can be useful for them especially in the product deletion process. Finding out what “butterflies” have a big and direct effect on the sales of the brand.

Special thanks go to Nicola Campbell and Martin Boon who helped me graduate after it became clear graduating in Belgium was not possible. My parents who gave me the working space and support without whom this thesis could not have been written. My girlfriend Daniëlle who was also a big support in times things were going tough and who was good companion during my stay in Brussels.

Then last but not least RB Belgium and especially Ignace Heyman, who helped me with the data collection and questionnaire. The working experience gave me a good view on the marketing work, but even more on my own personal competences and characteristics.

Allen bedankt!

Mook, The Netherlands January 2005

MANAGEMENT SUMMARY

Product deletion caused by a focus strategy is something that is very common in fast moving consumer goods companies these days. Products are deleted because company resources are needed for other brands and/or the company develops a variety reduction program so its managers can focus on fewer brands. Problem is, how do you measure what products can be deleted and what influence does this have on the other products that exist within the brand. The majority of the brands, which are on the deletion list, are mostly the small ones that do not have much money available for their marketing spendings.

Brand equity is the value of a brand beyond its functional purpose, based on the extent to which it commands brand loyalty (expressed as repeat buying), name awareness, perceived quality, and strong brand associations, as well as other assets, such as patents, trademarks, and channel relationships. Market share and profit margins can be greater as a result of the goodwill associated with the brand equity (Keller, 2003:59). Brand equity means measuring brand awareness and image. Awareness can be explained by looking at the quantitative sales data and GfK figures, like penetration, but image is something that has to be measured in a qualitative manner.

Because most of the times not whole brands are deleted but only products that are within a brand the manager has to find out what influence the different products have on the other products within the brand and on the total brand itself. So next to brand equity, relationships that exist between products within a brand need to be measured. This can be done with the help of the Kelly grid (Keller 2003:439). The research is based on RB Belgium and is done on one brand specific. This brand has different products in its portfolio and all products use the general brand name with a label, which makes clear what makes the product different from the others. The research explores if RB can make use of the brand equity approach in its product deletion decision-making process.

The brand value chain (Keller 2003:390) assesses in a clear way what the sources and outcomes of brand equity are and the manner by which marketing events create brand value. It shows what the influence of consumer perceptions can be on the eventual sales and even on the stockholders. Not only the quality of the marketing program and the marketplace conditions are important for the eventual result of a marketing investment, but also the customer mindset. By looking at this chain and the outcomes of the questionnaire and the researchers own experience, it became clear RB was not looking at the customer mindset. RB Looks at the marketing investments and then to the market performance, it draws its conclusions on those two aspects. Program quality is directly linked to the market performance/sales. Good sales means good marketing investment, which on the long-term does not have to be the case, it can even be very harmful.

With the help of a questionnaire, which was send to all brand-managers at RB Belgium and the researchers own experience it became clear that RB does not make use of qualitative research methods to understand their brand’s image. All respondents said to know the image and most of them said to also know relationships that exist within brands. However they knew these brand equity aspects by looking at quantitative data like sales and penetration figures. This happened with all brands in all priority levels.

the brand manager for his deletion process. However RB in general is mainly using

quantitative sales data for all its marketing decisions, even for the high priority brands. Thus recommend is that it is wise if RB launches a try-out for one brand. The equity should be measured from one high priority brand. When this is done the brand-manager can see if his experience about the image of the brand is in line with the research findings. When the measurements are done RB can start to see the customers mindset and start to monitor changes after certain marketing events have been completed. In this way RB can look at what might happen to the brand in the future in a more secure way.

T

PREFACE 3

MANAGEMENT SUMMARY 4

PREVIEW 8

CHAPTER 1. RESEARCH DESIGN AND METHODOLOGY 9

1.1 RESEARCH SET-UP AND BACKGROUND 9 1.2 PROBLEM DEFINITION 11

1.2.1 THE RESEARCH OBJECTIVE 11

1.2.2 THE RESEARCH QUESTION: 11

1.2.3 SUB QUESTIONS 11

1.3 TYPE OF RESEARCH 12 1.4 RESEARCH CONSTRAINTS 12 1.5 RESEARCH DESIGN 14

1.5.1 EXPLANATION OF THE FRAMEWORK 14

1.6 CONCEPTUAL FRAMEWORK 16 1.7 MANAGERIAL AND SCIENTIFIC RELEVANCE 18 1.8 DATA GATHERING 19

1.8.1 METHODS OF DATA COLLECTION 19

1.8.2 DATA SOURCES 20

1.8.3 DATA GATHERING 21

CHAPTER 2. RECKITT BENCKISER 22

2.1 COMPANY HISTORY 22 2.2 RB’S FINANCIALS 2003 23 2.3 COMPANY STRUCTURE 24 2.4 INTERNAL ANALYSIS 25 2.5 CORPORATE STRATEGY 27 2.6 EXTERNAL ANALYSIS 28

2.6.1 CUSTOMER ANALYSIS 28

2.6.2 SECTOR OF INDUSTRY ANALYSIS 29

2.6.3 COMPETITOR ANALYSIS 31

2.6.4 DISTRIBUTION – SUPPLIER ANALYSIS 32

CHAPTER 3. LITERATURE REVIEW 33

3.1 BRAND EQUITY 33

3.1.1 DEFINITION OF BRAND EQUITY 33

3.1.2 ADVANTAGES OF BRAND EQUITY 36

3.3.2 MEASURING BRAND EQUITY 43 3.4 DECISIONS ON PRODUCT DELETION 46

3.5 SUCCESS AND PROBLEMS RESULTING FROM PRODUCT DELETION 48 CHAPTER 4. RESEARCH FINDINGS AND ANALYSIS 50

4.1 BRAND EQUITY AND RECKITT BENCKISER 50

4.1.1 BRAND IMAGE 50

4.1.2 RELATIONSHIPS BETWEEN PRODUCTS WITHIN A BRAND 52

4.1.3 MARKETING MANAGEMENT 54

4.1.4 MARKETING BUDGET 56

4.2 THE COMPANY’S STRATEGY AND DELETION OF PRODUCTS 57 4.3 RB’S DECISION-MAKING PROCESS ON PRODUCT DELETION 58 CHAPTER 5. CONCLUSIONS 61 CHAPTER 6. RECOMMENDATIONS 65

6.1RECOMMENDATIONS FOR RB 65

6.2RECOMMENDATIONS FOR FURTHER SCIENTIFIC RESEARCH 66 CHAPTER 7. REFLECTION 68 BIBLIOGRAPHY 70 LIST OF DEFENITIONS 71 APPENDICES ERROR! BOOKMARK NOT DEFINED.

APPENDIX 1 THE PRODUCT DELETION SYSTEM ERROR!BOOKMARK NOT DEFINED. APPENDIX 2EXAMPLES OF QUANTITATIVE AWARENESS MEASURES ERROR!BOOKMARK NOT DEFINED.

APPENDIX 3EXAMPLES OF SCALING OF QUESTIONNAIRES. ERROR!BOOKMARK NOT DEFINED. APPENDIX 4EXAMPLES OF OPEN ENDED QUESTIONS ERROR!BOOKMARK NOT DEFINED. APPENDIX 5EXAMPLES OF BRAND RESPONSE/ INTENTIONS ERROR!BOOKMARK NOT DEFINED. APPENDIX 6EXAMPLES OF BRAND RELATIONSHIP MEASURES ERROR!BOOKMARK NOT DEFINED.

APPENDIX 7STAIRS OF AGONY ERROR!BOOKMARK NOT DEFINED. APPENDIX 8MEASUREMENT OF BRAND ASSOCIATIONS, THE FORD TAURUS STORY ERROR! BOOKMARK NOT DEFINED.

APPENDIX 9HOW TO AVOID CRIPPLING PRICE COMPETITION ERROR!BOOKMARK NOT DEFINED.

APPENDIX 10OUTCOMES QUESTIONNAIRE ERROR!BOOKMARK NOT DEFINED. APPENDIX 11QUESTIONNAIRE INTRODUCTION LETTER ERROR!BOOKMARK NOT DEFINED. APPENDIX 12QUESTIONNAIRE ERROR!BOOKMARK NOT DEFINED.

PREVIEW

During my time at university a lot of theories like system approaches, HRM guidelines and others came to mind and had to be learned. This continued during my specialisation years of marketing. The books all told about beautiful ways to use marketing and especially how to implement it in the businesses and on the consumers. With the theories came many very nice examples, which were really fun to read and gave a better understanding about the way the theories could be implemented and how they should be used.

But then came my final graduation internship at Reckitt Benckiser, a multinational that is specialised at selling all sorts of cleaning detergents and air fresheners. Recent years they have had growth far greater than the average FMCG companies had like Unilever, Procter and Gamble, Henkel and Johnson & Johnson. They are keeping the marketing very basic: do something, look at the sales, learn from it, adapt and do it again but a little different and better. Or look at what other countries did and what happened there. If, for instance, turkey had a commercial for a toilet cleaner which boosted sales, other countries would adapt it a little and start to use it. All marketing knowledge is in the brand-manager’s mind.

So this meant a big gap between what I had learned during my marketing specialisation years and the environment I worked in during my internship at Reckitt Benckiser (RB). The question arose to me if RB was managing their brands in a better way than was described in the literature, or could I improve their management by implementing some new models from my academic literature study.

Eventually this thesis is about the question if consumer based brand equity can be used as a tool for the deletion of products that exist within brands. The first chapter explains why and how this research is done. §1.3 shows the research questions and sub-questions, followed by the explanation of the research type and its constraints. §1.7 shows the framework the research is about to explore, 1.8 and 1.9 show why and how this exploration is done.

Chapter two is all about the general characteristics of Reckitt Benckiser. It starts with the companies history and structure after which an internal and external analysis is done to understand why RB is making its deletion decisions.

Section three is all about the basis of this research, the literature. Especially Aaker and Keller have explored the consumer based brand equity and are supported with some other authors.

§3.1, 3.2 and 3.3 are about what brand equity stands for what it exists of and how it can be measured. The other paragraphs, in chapter three, are about deletion decision-making and its consequences.

Chapter four shows the collision of literature and RB’s practice. Findings from the

researchers own experience during his stay at RB Belgium and conclusions from the send questionnaire are shown.

Conclusions are shown in chapter five and show what the answer is to the question how important brand equity can be for RB’s decision-making on product deletion. This chapter will combine the literature with the findings that came from the researchers own experience and the questionnaire.

Eventually reflection on the research and recommendations for further research are given in chapter six. It especially will discuss what RB can do with the brand equity for its deletion

CHAPTER 1. RESEARCH DESIGN AND METHODOLOGY

In this chapter the line out is given of this research, which explores the usefulness of consumer based brand equity. First a bit of background is given to understand why this topic is chosen. Then §1.2 shows the problem definition with the main objective and sub-

questions. §1.3 shows what type of research is done. §1.4 till 1.7 show how the research is set up and how the data is sought and gathered.

1.1 R

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Reckitt Benckiser (RB) and many other fast moving consumer goods (FMCG) manufacturers are ceasing production of many product lines. For instance, due to falling sales on those lines. Very often a specific amount of sales is needed, which a product has to make to be safe for deletion. Many small products have already been stopped, but the trend to stop production of certain lines continues unabated. RB also has a main reason to cease

production of some of its products. It has a focus strategy that groups the products in three categories. Priorities, Maintenance and Soldiers (high, medium and low priority). The priority brands have, as the word itself already says, the priority, these are the brands that get almost all the marketing resources to grow. The products that are within the maintenance group are getting the right amount of marketing investments to be able to stay constant.

The soldiers are not getting any funds, they are still being made, but they have to survive on their own. The Soldiers are the brands that are on the list of being stopped most of the times. By using this focus strategy RB hopes to generate a bigger growth by focusing on the priority brands than it would have by using their resources for all existing brands.

Whole brands are always placed into one of these groups. It is not possible that one product of a brand falls in another group than another product within that same brand. A brand cannot be in two groups at the same time. An example of a product within a brand is the diet Coca Cola of Coca Cola, the cleaning wipes from Glassex, or the Glassex spray. The brand O’cedar, which is the reason of this research, has cleaning wipes, liquid, wax,

aerospray and oils. They all use the O’cedar brand, have the same ingredient, humming bee wax (except the oils), but are all slightly different in their appearance and usage. The wipes for example can be used for cleaning the dust from furniture and for giving your wooden furniture a nice shine. The liquid can be used to scrub the wooden floor or bigger wooden surfaces. The products within the brand have their own identity and can be stopped without getting problems with the production of the others.

Since RB is still looking for products to stop, but has arrived at the bigger brands, they want to know if their decision making is still done by a trustful mechanism. So they want to investigate if the mechanism, they use to validate their products, is still working for future brand/product portfolio decisions. Their main question is if there are other variables that have to be evaluated than the standard sales, profit and costs factors. This research will investigate the specific subject of relationships, between products within a brand and their influence on each other, when one of the products is deleted from the brands assortment.

For this research, a traditional problem definition as stated by De Leeuw (1996) will be used, because it is a classical research that searches for a solution of a possible problem; this research is done to know something for a specific group with a specific reason (De Leeuw 1996:90). This study can be seen as a pre research out of which a conclusion may be drawn

to start on investigating a possible redesign of their decision support system that helps the management in deleting the right products. This problem definition consists of a research objective, a central question and some research constraints. With the help of the “ballentent”

(fig. 1.1) model from De Leeuw (1996:88) the relationships between the main research activities are monitored. This model describes how the problem definition, data sources, used concepts, analysing methods and measuring- and observing methods must have, and can have a good bonding.

Figure 1.1 Ballentent from De Leeuw (1996:88)

1.2 P

This is the first part of the heart of the “Ballentent” (fig 1.1). The problem definition and the conceptual model are the hart of the Ballentent of De Leeuw (1996:89). All other decisions will be made having these two aspects in mind. It is the guiding centre of the research.

1.2.1 The research objective

The research objective as mentioned above results in the following central research question.

1.2.2 The research question:

Derived from the central question is a set of research sub questions. In order to answer the central research question, it has been split up in the following research sub questions.

1.2.3 Sub questions

To be able to find the final answer for the research question it is split into different, more specific, sub-questions. In this way the big problem is split into smaller problems, which can be investigated more easily and can be combined into the final conclusion/answer to the research question.

1. What is the role of Brand equity in making product deletion decisions?

a. What is brand equity?

b. How can it be measured?

c. What is the influence on the decision-making process?

2. Why does RB want to withdraw one of its products within a brand?

a. What is the overall company strategy? External and internal forces.

b. What is the connection between this strategy and the deletion of the products?

c. How are the deletion decisions made and how are they executed?

3. How can brand equity help the product deletion decision-making?

What can become the role of consumer-based brand equity in Reckitt Benckiser’s decision-making process when they are faced with deleting a product within a brand?

Advice Reckitt Benckiser on the importance of consumer-based brand equity in relations to making product deletion decisions within a brand.

1.3 T

Another aspect of the “ballentent” is the analysis method. This research is described as an explorative research, as the research is about exploring if the brand equity model can be used in the decision-making process on product deletion (Baarda and de Goede, 1997:79).

This type of research has its influence on the problem definition as it shows the direction the research wants to go; it wants to explore, in this case explore if the brand equity model can be used in practice at RB. This research is especially about exploring if the brand equity model of Keller (2003) and Aaker (1991) can be used when making product or brand deletion decisions.

Next to being an exploratory research the research must contribute to the scientific data and must be useful for management purposes, so it will also be a policy-relevant research as De Leeuw describes it (De Leeuw 1996:77). The investigation must be relevant for the company Reckitt Benckiser, but will also take a look at a research area that is not really explored yet.

1.4 R

In this paragraph, the constraints are mentioned which had to be taken into account when doing the research. These constraints set the boundaries the “ballentent” has in the usage of measure- and observing methods, use of concepts, data sources and analysing methods.

These constraints will finally have their influence on the problem definition.

First, as always, there is a time constraint; the research must be finished end of December 2004. The research will be descriptive and some aspects of the company’s strategy and especially operational parts will not be described in full detail. This full detail cannot be given because Reckitt Benckiser, for whom this research is made, has given some restrictions, as it might be sensitive information for the competition. All results will be a set of suggestions, recommendations and conclusions and different literature from different sciences are used to get the full literal picture.

Research is done on family brands: Brands that have different products under their umbrella.

(Keller, 2003:403) and the research will only talk about Reckitt Benckiser products that Franzen (1995:17) describes as variant 2 in his brand hierarchy. The Belgium brand for which the investigation specifically is done is called O’cedar. This brand uses Franzen’s variant 2, this means it has different sorts of products, but they all have the same purpose;

wooden furniture care. Most of the products have the same ingredient, humming bee wax, and they all wear the clear name O’cedar with a small label that shows the characteristics of the product. For example O’cedar wipes vanilla, O’cedar Liquid wax or O’cedar Teakoil.

The research is done on brands/products that are deleted for the reason that the company needs the resources for its priority brands. This is the main reason companies like RB, Unilever, Henkel and others FMCG-companies are ceasing some of their products within their brands. The products are not at their final product life stage because they are products that are already used for a long time and will be in the future unless they are eliminated. An example is the dishwashing liquid like Dreft. Dishwashing liquids have existed for a long time and will stay for a long time. Another example is the floor cleaning liquid from O’cedar, as long as people live on floors that are made of wood or stone, they will need the specific

Another constraint is that the investigated products are not replaced by new ones. This research is targeted on the events that occur around the withdrawal of a product, a replacement will have influence on the relationships within the brand and will eventually might give other outcomes. This research only looks at ceased products that have no replacements, because this is what happens at RB and with the brand O’cedar.

Leeflang (1998: 121) discusses the decision-making process regarding deleting a product. He talks about the identification of weak products. After this identification, the weak candidates need to be further analysed by: a) profit analysis and b) marketing analysis. Then the decision, to delete a product from a brand, has to be taken following the deletion strategy.

Based on Leeflang’s (1998) description of the strategic products decisions the identification and analysis fase will the most important ones this research will discuss. The elimination process is done in four steps:

1. Identification of the weak products that can be eliminated 2. Analyse deletion candidates

3. Making the elimination decision 4. Implementing the elimination decision

1.5 R

The framework of the research gives a description of the research, which the central question of the research supports. This is represented in figure 1.7. This framework forms the hart of the “ballentent” (fig 1.1) together with the problem definition (De Leeuw 1996:89). All other decisions will be taken with these two aspects in mind. This framework will explain the problem in a clear and understandable way and it contributes to the researchability of this investigation.

1.5.1 Explanation of the framework

Nowadays RB works with a simple and standardised way of selecting products that have to be stopped. Products are stopped to decrease the complexity of the company and in that way it wants to make cost savings. RB wants to decrease its company’s complexity by downsizing its total product portfolio, so it has to look at lesser variables. The logistics department for example has to take care of lesser products and the marketing department can focus more easily on the more important brands when the number of total products is reduced. By decreasing the number of products and brands, RB Belgium gets more predictable because the number of market segments decreases. This causes that the need for information becomes lower; if a product has been withdrawn, the company does not need to look at it’s market info anymore, so spending on for example AC Nielsen data can be stopped as well. The sales department can focus on the important and better performing products and in that way can improve the total company sales. By decreasing the total company complexity it will be easier for the present workforce of RB Belgium to focus on the bigger products and eventually earn more profits on these high priority brands. By using the focus strategy, the company wants to reach its growth targets and become more

competitive. In this strategy there is very little place for products that are in the

“soldiers”(low priority) category.

Till now the company has stopped all of its smaller products, but it has now reached the bigger ones. Small in this case are products with sales below €80.000. The company thinks future selection cannot only be done by the simple measurements they are using nowadays.

In the decision making process RB looks at the total sales, market share, flexibility of production, gross margin and the priority of the product. When looking at these variables the products get a score for each variable. Each product that is above a certain score will be put on the deletion list. The brand managers will decide when and how the product will be ceased.

The problem with their measuring system is, that it only looks at the single products and does not look at any other relationships with other products that are within the same brand.

The literature of the brand equity model says that a brand has a value that exceeds the value of its functional purpose (Keller, 2003:59). Because the different products within a brand are giving the total value of that brand, management should also look at the total brand when deciding what product to cease production of. RB wants to know if removal of a product has any effect on the other products within that brand. The brand equity model looks at these variables and might give a totally different picture than the normal (standard) quantitative procedure does.

The INTENDED situation

RB tends to make better decisions on stopping the products that are not longer viable. In that way, it gets the ability to decrease the company’s complexity in a right way, without damaging the other remaining products within the brands and the brand themselves. This research will try to find out if it is useful and practically possible to start using the brand equity model, so brand image and interrelationships between the products within the brand and the brand it self can be measured as well.

1.6 C

Figure 1.6 Conceptual framework

The pink part in figure 1.6 shows the part of the decision-making process that is being added if the brand equity model is used. Product X is a product, which has a brand with more products and is build up like variant 2 from Franzen (1995:16). The arrows show in what sequence the different product deletion decision-making stages occur, as Leeflang describes them (Leeflang, 1998:121).

The model is based on the general system approach of de Leeuw (1997:60). The system approach will be used because the research wants to investigate if adding the measurement of qualitative data to the product deletion decision-making is useful. This would mean implementing the brand equity model in practice. The research wants to look at the given problem in a pluralistic and neutral manner.

Another characteristic is that the problem is a practical one and the system approach will be used to analyse it. A system is defined as a collection of objects that are related to each

shown. The part that this research will investigate is the usefulness of measuring qualitative information like the relationship between the products within a brand, the pink part in figure 1.6. De Leeuw (1990; 73) talks about a research on sub-aspect-system level. This means that the research will only look at a specific group of objects (products within the brand) and to a specific amount of relations in that group. The objects of the subsystem are defined by the products within a brand; this brand is defined by Franzen (1995:17) and is described as variant two. Franzen’s variant two means there is one main brand name for all the products within that brand, but the different products have labels that explain the differences. The aspects within the sub aspect system are defined as those relations between the products that will have an influence on the total sales and especially the brand equity of the brand.

There is no interest in knowing relationships that have influence on the possible deleted product, because they have influence on the product that will not exist in the future.

Investigating the usefulness and practical possibility of introducing the brand equity model to the decision- making system, to measure the effects on the other products within the brand that will remain in the market are the topics of interest.

1.7 M

The reason this research is done is that the company Reckitt Benckiser saw a possible problem in the decision making around ceasing certain product lines. For RB’s management it is important to know if they are making the right decisions for the company as a whole.

Some products look small at first sight but might be bigger than they look. The products may perhaps have relations with other products and could damage the remaining ones when being deleted.

Big FMCG companies are deleting more and more products because of their focus strategies.

For this they need to make the right decisions in stopping the correct products. It looks like the decision-making around products is very simple. Companies only look at the sales quantities, values, gross margins, market shares and total costs and decide what product has the worse figures, so that one can be stopped. What this research is about is finding out if the brand equity model can enhance product deletion decision-making, especially if the product is part of a bigger brand and the product has existed for a long time. This research specifically looks at the relations between products that have the same brand as can be seen in the conceptual model (fig 1.6).

This research also has a clear scientific relevance, as it discusses a rarely investigated subject. In most marketing researches the subject is about introducing new products and the effects on the brands. Subject like deleting/stopping a product are described but only for those products with a clear lack of sales, quality or performance issues. In this case however products are deleted because their resources are needed for other priority brands/products.

Eventually this research is done to find out if a next research is necessary for the

implementation of the brand equity model into RB’s decision support system. Knowing if the brand equity model can be used in practice and if products within a brand have strong enough relationships with each other is just a start of this bigger project. If there is a strong connection, a way to implement it must be sought. This however needs another

investigation, called the design research.

1.8 D

In this paragraph a proposition will be made on the methods of the data collection and data- sources. These are the two other balls from de Leeuw’s “ballentent” (de Leeuw, 1996:88)

1.8.1 Methods of data collection

Two methods will be used to get answers: field and desk research. The answers will be supported by scientific theories related to the subject of the research questions. Field research is a form of market research that involves collecting primary data (first hand information). Examples of field research are surveys, interviews, sampling, experiments and observations (Baarda en de Goede, 1998:25, 144). The field research for this research will be formed by a survey and observations the researcher did while working at RB Belgium.

The surveys will be done with people who have expertise on the elements mentioned in the conceptual framework. A survey is used because the people whose opinions are needed are far away and are hard to get time from. As brand managers are known for their lack of time a survey was used to get their opinion about the research topic.

The sample of respondents is not taken at random but the whole Belgium RB population (all working brand- and business development–managers) is asked to fill the questionnaire. So the whole available population at RB Belgium is questioned about the topic. The

questionnaires were send by e-mail. The e-mail will explain the relevance of the research and has the questionnaire as an attachment. The mailing is done by a brand-manager from RB so all the other participants will see it is a RB focused research.

The observations were done during the researchers stay at RB Belgium situated in Brussels.

As the researcher worked with brand managers during his stay, he was part of the marketing decision process by working as assistant brand manager. During the six months stay deletion decisions were taken and informal and formal conversations about the topic were done.

These conversations were all made during the “normal” work process and were never done in the form of an interview. The big advantage of this observation opposed to an interview was that everybody shows his or her “normal” behaviour. During interviews participants can give socially wanted answers, which can be different from what really happens in practice.

The advantages of field research by questionnaire are (Baarda en de Goede, 1998:25, 147):

o If completed properly, the information collected can be more accurate than the information obtained from desk research.

o The information collected will be recent.

o It is anonymous o Easy to organise

o Easier to reach more people in a short time frame, compared to interviews

o Easier to get information if there is a big distance between researcher and participant The disadvantages of field research by questionnaire are:

o Field research is more time consuming than desk research

o More people are involved and it is hard to find them and get time from them, especially marketing managers who often have a very high work pressure.

o Unexpected answers that might have been given but are not in the possibilities of the questionnaire are lost. To compensate this multiple-choice questions are used with one open answer field as one of the possibilities.

o Takes a lot of preparation

o Can’t ask to many questions, otherwise it might get to long so the managers are not willing to fill them anymore.

Desk research is a form of market research, where the information is collected using secondary data (data collected by another person). Secondary data can be found from a variety of sources including the Internet and books but also from databases.

The advantages of desk research are (Baarda en de Goede, 1998:25):

o It's a quick method of collecting secondary information o The secondary data is often ready to use or process o The researcher often doesn't need to leave the office o It is often cheaper

The disadvantages of desk research are:

o The secondary data may not be recent o It might not be accurate

o Sometimes can be hard to find, depending on the subject

In this research, some data are collected through the perceptions of individuals. Due to the fact that in this research conclusions will be based on these data, it must be interpreted with some caution.

1.8.2 Data sources

Another ball of the “ballentent” is the data-source ball (De Leeuw 1996:99). The data used comes from primary, secondary and tertiary literature sources (Saunders et al. 2000:50).

The primary sources will be Theses, conference presentations (like MARUG Congress 2004) and company reports. Secondary sources will consist of books (from the different sciences like brand management, consumer behaviour and communications sciences), Journals and scientific articles/ publications. To be able to find the secondary sources, tertiary sources like google.com, EbscoHost and Elsevier.com on the inter- and intranet were used.

Another very important data source will be the researchers own experiences in reality.

Because he worked at the marketing office of RB in Brussels for six months he has

experienced their decision-making process himself. During this time the researcher was able to talk to some other managers on different management levels like the marketing director, senior brand and account managers and the overall director of RB Belgium. These

conversations were informal but relevant and deep enough to give a good and reliable picture of the company’s marketing and overall management. Next to the conversations meetings were joined, which discussed topics about product deletion and other marketing decisions.

These data sources are perfectly viable with the used concepts. The reality was used for observations, documents to assess relevant literature and a questionnaire to understand if the new model can be implemented in practice.

The sources are also reliable to answer the research question as they look at different angles towards the topic. The used literature data sources, the conversations, questionnaire and own experience together will give a clear picture about the present product deletion decision-making, especially the conversations and own experience. The possibilities of the implementation of the brand equity model will be thoroughly investigated by the survey.

1.8.3 Data gathering

Desk research in this investigation was mainly used to find literature and company reports.

For more support for the conclusions of the research questions, data from brand managers and business development managers was sought. Done

Selection of the people on the FMCG side is simple, as it will be all the managers working for RB Belgium, who manage brands that are build-up in the same way as O’cedar (Franzen’s (1995) variant 2) and making product deletion decisions.

Data gathering per sub research question as shown in paragraph 1.2.3:

1. A/B Desk research, finding literature in University library, Internet databases like EBSCO for articles. Literature review.

C: During a six months stay at RB’s office in Brussels, observations were done on how the decision-making process was done for the deletion of some products.

Observations were made by being attendant at several meetings that discussed the brands and by speaking to the person who had developed the SKU-scorecard. The company uses a scorecard, which mentions the variables that decide which products will be deleted.

The survey is used to find out if the brand equity model can be used for the different brands of RB Belgium, questions are asked about the brand image aspects, existence of relationships between their brands, marketing management and budget spending.

2. A: This is about the strategy of the company or companies in general. This question can be answered by literature about company strategies and by the observations that were done and informal conversations, which were done with different people (brand manager, marketing director, main company director, account managers, sales representatives and logistical managers) from the company at RB’s office in Brussels.

B: Desk research, finding literature in University library, Internet (EBSCO) for articles.

C: Observations at RB Belgium and by questionnaire, the decision-making process is analysed.

3. Combination of the findings of sub-questions 1. and 2. and with the help of the questionnaire which asked the participants about their decision-making and available budgets.

CHAPTER 2. RECKITT BENCKISER

This chapter will discuss and analyze the company Reckitt Benckiser situated in Belgium.

First a general picture will be drawn by showing in short the company’s history, financial situation and management structure. After this an internal and external analysis is made which will explain why RB has a focus strategy and why it deletes some of it products and brands.

2.1 C

Reckitt Benckiser is a fusion of three companies, namely Reckitt, Colman and Benckiser.

Reckitt and Colman were the first to join forces and in 1999 Reckitt & Colman fused with Benckiser and became Reckitt Benckiser. Below the history is shown in a chronological way.

1814 Jeremiah Colman begins milling flour and mustard in Norwich, UK. Diversifies mid- century into starch, wheat flour and laundry blue.

1923 Founding of Benckiser by Johann A. Benckiser. Core business derived from industrial chemicals.

1840 Isaac Reckitt rents, then subsequently (in 1848) buys a starch mill in Hull.

Diversifies into other household products; becomes renowned for starch, washing blue and black lead for polishing. His four sons take over after his death.

1886 Reckitt & Sons begins its expansion and opens businesses around the world - the first in Australia.

1888 Reckitt & Sons is launched on the London Stock Exchange.

1912 Lehn & Fink Products begins US production of Lysol - originally imported from Germany.

1913 Joint venture set up in South America between Reckitt & Sons and J&J Colman - Atlantis Ltd. So successful that it is extended, in 1921, to cover all trading outside U.K.

1913 In the UK, Reckitt & Sons join the Mason brothers in forming the Chiswick Polish Company. Diversification into other branded household products continues through the war years and the Twenties.

1933 A major breakthrough for Reckitt & Sons, with the decision to market a germicide, Dettol, endorsed by the medical profession.

1938 Reckitt & Sons merge with J&J Colman to become Reckitt & Colman Ltd 1954 The Chiswick Polish Company merges with Reckitt & Colman Ltd.

1956 Benckiser diversifies into consumer goods and industrial cleaning products. In the same year, Benckiser launches Calgon water softener

1964 Benckiser develops and launches Calgonit Automatic Dishwashing Detergent and Quanto Fabric Softener in 1966.

1982 Benckiser continues its expansion into consumer goods via acquisitions and divestitures and in 1985 acquires St. Marc S.A, France.

1985 Reckitt & Colman buys Airwick products.

1988 Benckiser purchases Mira Lanza Spa and Panigal Spa, Italy.

1989 Benckiser acquires S.A. Camp Group, Spain.

1990 Reckitt & Colman acquire Boyle-Midway, the American household products group with brands Woolite, Easy-Off, Sani-Flush, Wizard and Old English.

1990 Benckiser acquires worldwide branded business of Beecham Household Products in US and Canada.

1995 Reckitt & Colman sells the Colman’s food business.

1996 Benckiser continues its expansion into the Baltic countries, Belorussia, China, Israel.

1999 Reckitt & Colman plc and Benckiser N.V. merge to become Reckitt Benckiser plc – The world no.1 in household cleaning.

2000 In November, Reckitt Benckiser acquires Tiga Roda - an Indonesian pest control business.

2001 March - RB acquires Oxy, a leading household business in Korea, April - RB disposes of (non-core) firelighter business, August - RB disposes of Dr. Becher, a non-core business.

2002 Reckitt Benckiser acquires outstanding minority interest in India and Sri Lanka.

(www.reckittbenckiser.be)

2.2 RB’

2003

RB global net revenues grew by 7% (7% at constant exchange rates) to £3,713m. Net revenues from continuing operations rose by 8% (7% constant).

Operating profit increased 18% (15% constant) to £679m. Gross margins rose 190bps to 53.3% as a result of higher margin new products, favourable purchase prices on raw and packaging materials, and savings from the cost optimisation programmes Squeeze and X- trim.

Marketing investment increased substantially in the year with media investment increasing to 11.5% of net revenues (2002 10.9%). Operating margins increased by 160bps to 18.3%.

Net income grew by 20% (17% constant) to £489m. Net interest expense of £19m (2002

£32m) was lower due to the strong cash inflow over the past year, reducing the level of net borrowings. (Annual report Reckitt Benckiser 2003)

Western Europe: 47% of net revenues

Net revenues grew by 7% to £1,733m. This strong performance was due to the success of fabric treatment, automatic dishwashing, depilatories and health care. Fabric treatment grew behind the success of Vanish Oxi action. Dishwashing grew due to the success of

Finish/Calgonit 3in1 Brilliant and Protector. Depilatories grew as a result of the new initiatives, Express roll-on and Wax strips for sensitive skin. Health care grew behind the success of Gaviscon in a widening number of Western European markets. Full-year operating margins increased by 110bps to 23.5% due to substantial gross margin expansion, resulting from higher margin new products, lower input costs and cost optimisation initiatives, partially offset by substantial increases in marketing investment. Operating profits increased by 13%

to £408m. (www.reckittbenckiser.com, annual report 2003)

Unfortunately the financial information about RB Belgium is not available for public documentation and could not be showed in this research.

2.3 C

RB is split up in regional divisions under which some regional divisions fall under others.

Belgium for instance has to report to France and the Netherlands to Germany. Germany and France have to report to headquarters, which is situated in Hull, Great Britain.

When looked at divisional level in Belgium, RB has four departments (fig 2.1) with one director who is the general leader of the Belgium division. The marketing department has three management layers, bottom-up: assistant brand managers, brand managers and general marketing manager. The sales department has five layers in its structure, bottom- up: sales force who are on the road, sales force manager who reports to general account manager, junior account manager, account manager and general account manager.

The third department is the financial one. This section has four layers existing of:

bookkeepers, junior controllers, senior controllers and general finance manager.

Last but not least the fourth department is the logistical department, which has two layers existing of logistical employees and general logistics manager.

The company has two staff employees who support the sales and general management.

Fig 2.1 Company structure RB Belgium

2.4 I

To be able to know what the internal strengths and weaknesses are, an internal analysis has to be done. In this paragraph the theory of Day and Wensley (1988) (Alsem 2001:197) is used. They have made a model around the surge for a competitor’s advantage. Analysing the company’s own strengths and weaknesses by looking at their competitor’s advantages.

The model of Day and Wensley (DW) are specifically used for brands. As can be seen in the paragraphs (§2.6) of the external analysis the aggregation level is on the brand level, so the DW model will fit well. This paragraph is important for finding out why RB is deleting some of its products and in what way it does so. This part gives a part of the answer on the question why RB wants to withdraw one of its products within a brand (sub question 2) and on what basis the deletion decisions are made so it can be compared with the brand equity method which will be discussed later on (§3.1).

Reckitt Benckiser (RB) has a specific focus strategy when looking at brand level. One brand focuses on a specific part of the market. O’cedar for instance focuses on the wooden furniture cleaning and maintenance market. When looking at a higher aggregation level, at the company level, you can also see that there is a focus strategy. This time the focus strategy goes to two sides. The overall company wants to be the biggest house cleaning product seller of the world, so they focus on the house-cleaning segment. On the other side they focus on a few main brands within their brand portfolio. Especially this last focus gives the problem this research is facing. Because they focus on some main brands, the others will decline and eventually die, since they get no funding for marketing and sales support. Only brands like O’cedar that are in the market for a very long time have the advantage that they have a certain amount of loyal consumers. Because of this loyalty, there might be a problem if some old products are getting deleted. Consumers that are very loyal to a product within a specific brand will more easily start to use the other products within that brand (Jacoby, 1978). But is this also the other way around? Will the brand be extra hurt if one of the products is stopped? Will the total sales go down more than only the ceased product? To be able to answer these questions the company should know how the brand equity is build;

what the associations with the brand are and what relationships exist between the products within a brand. For example: might an association like “loyal product” lose its strength if one of the brand’s long existing high quality product is stopped?

Looking at the brand management level, Aaker (1991:9) tells about a few indicators that can show an under emphasis on brand building, use of brand equity, and shows what the shortcomings on the marketing management area can be. The most important shortcomings Aaker (1991:9) found are:

• Managers cannot identify with confidence the brand associations and the strength of those associations of their brands. And there is very little knowledge about how those associations differ from the competition, between segments and through time.

• Knowledge of levels of brand awareness is lacking. There is no feeling for whether a recognition problem might occur among one of their brands and especially among the different products within the brands.

• There is no systematic, reliable, sensitive, and valid measure of customer satisfaction and loyalty, nor any diagnostic model that guides an ongoing understanding of why such measures might be changing.

• There are no indicators of the brand tied to long-term success of the business that are used to evaluate the brand’s marketing effort.

• There is no person in the firm really in charge of the protection of the brand equity.

Those in charge (brand managers) are evaluated on the basis of short-term measures.

• The measurements of performance associated with a brand and its managers are quarterly and yearly. There are no long-term objectives that are meaningful and managers do not realistically expect to stay long enough to think strategically.

• There is no mechanism to measure and evaluate the impact of elements of the marketing program upon the brand. Sales promotions, like coupons or second placements, for example, are selected without determining their associations and considering their impact upon the brand, they only look at the possible impact on the sales.

• There is no long-term strategy for the brand.

RB fits to most of Aakers shortcomings: as was seen during observations at RB in Brussels and was confirmed by the survey (chapter 4). Most of the problems come from the short- term vision of the company and its managers. Because the company is funded by the stockholders, who look at their stock prices every day, the company is forced to make profit on the short term. Aaker (1991:176) says top management of the company should have the oversight and able to “kill” those initiatives that are a threat for long term objectives.

However there are two major problems. First, top management is often also pressing for short-term financial results, and thus an aggressive brand-defence posture can undercut their motivational relationship with the brand-managers. It is of course very awkward first to press for improvements in sales, share, and profits, and then to stop a promotion on the basis of a judgement that might weaken some association. Second, oversight tends to be ad hoc: It offers no guarantee that al programs and plans will be reviewed in a timely manner.

Prof. Dr. Wittink from Yale University told some other interesting reasons why organisations are not customer oriented and don’t use something like the brand equity model. During the MARUG Congress 2004 (appendix 11) he told that managers are very competitor oriented instead of customer oriented because:

o It is a natural human reaction to feel competition and react on this.

o “Winning is everything” we humans want to win and especially from your direct competitors. It is hard to win from your consumers. Managers mostly do not see a consumer purchasing one of their products as winning but conquering some market share from their competitor is.

o It is easy to know competitor’s actions. It is easy to see what happens in the supermarkets and to react on that. Sales force can monitor package changes or coupons actions for the competition so the marketing manager can react on that.

o It is difficult to justify not to react on competitive actions. Because it is often so visible, especially in comparison with changes in the brand associations, managers tend to give an immediate reaction.

These four points from Wittink are also giving a part of the reason why RB is not really customer oriented as they are really looking at the competition. Share value which is reported monthly is one of the most important issues and the sales force is always looking for new actions/ changes that occur at the competitor’s side. After actions are reported management will try to react as soon as possible. The observations exposed this process and show that RB is very much focussing on its main competitors and not so much on the

it can be said that the competitor focus is a result from the under emphasis on brand building Aaker is talking about, it is a cause of short-term management.

Concluded can be that the internal reason for the product deletions is RB’s focus strategy.

That’s why healthy but small products are deleted. The way in which RB is managing the withdrawal of the products is not including the brand equity approach as was said by Aaker (1991:9). Further conclusions will be drawn in chapters 4, 5 and 6 where these finding will be combined with brand equity literature and further research conducted at RB.

2.5 C

These lines show that the brand focus strategy is set on corporate level and is being executed on business level at the different country divisions. This shows why RB Belgium is using its focus strategy and eventually why it is deleting some of its products and brands.

In the annual report of RB (2003) the corporate strategy is about two major things:

”Our strategy tries to achieve two things. First, it aims to generate net revenue growth ahead of the industry average. We do this by focusing on those Reckitt Benckiser brands, which have strong leadership positions in high growth categories (our Power-brands), and by driving them hard with innovation and strong marketing support”.

”Secondly, we try to leverage this strong growth into even higher profit and cash flow growth through margin expansion and tight financial controls. Profit margin expansion we get from our cost cutting efforts and an improving mix resulting from our higher margin new products.

We are quite obsessive about cutting waste and if costs are not needed to provide consumers the right product experience, they go. We are equally focused on turning profits into cash, as evidenced by our strong and improving net working capital position”.

(www.reckittbenckiser.be)

2.6 E

The external analysis exists of four different aspects; customer analysis, competitor analysis, distribution- supplier analysis and sector of industry analysis. (Alsem 2001: 18) This part will explain why RB is using its focus strategy and why it is deleting some of its products and brands. External factors have forced them into this strategic direction. Next to paragraph 2.5 it shows the other piece of the pie, which gives the answer on sub question 2.

2.6.1 Customer analysis

The direct customers of a fast moving consumer goods company are the retailers who are selling the products to the final consumer. In this case the retailers are the supermarkets of Belgium. There are three big integrated customers, which have a central purchase centre.

Carrefour; this is the second largest supermarket of the world after Wall-Mart. Its origin is France and it exploits very big hypermarkets, which sell almost everything: from apples to TV’s and from clothing to bleach. Carrefour also owns the super GB supermarkets, which are smaller in store size and more like the general Dutch supermarkets. This store is between the two extremes of price fighter and service store. Carrefour has the biggest stores and their prices are normal (average). Their convenience is that you can buy almost everything at one store.

The second supermarket of Belgium is Colruyt; this is a real price fighter. It is doing everything in its supermarkets to lower the costs. Shelves are like the Aldi, refrigerators are closed with pictures on top of them so the consumers can see what’s in them. In this way they want to save energy, so the prices can be lowered some more. Another example is that cashiers are specially trained how to hold their body when they move the grocery from one shopping caddy to another, because Colruyt does not use counters with electronic roller bands. Colruyt is different from the Aldi because it is selling A-brands like RB’s products. It is really a company that wants to be competitive by focussing on the price, there is no luxury in their stores, no special lightning or what so ever.

The third big customer is the Delhaize. This is a luxury store, like Albert Heijn (AH) in the Netherlands but with more special and exotic products. They distinguish themselves by focusing on the service to their customers by offering them a big and varied range of products, but it is more targeted on the food sector. Everything is nicely displayed with good lightning and atmosphere. Prices are mostly above average, but like AH in the Netherlands they also have to be competitive in price.

Other supermarket formulas in Belgium are much smaller than the four described above.

With Colruyt (price) and the Delhaize (service) as the two extremes the others are somewhere in the middle.

Because there are three major players they have a lot of power. Companies like Unilever, Reckitt Benckiser and Procter and Gamble have to fight for each cm of shelf space. Products must have proven themselves before they get the space and placing the manufacturers want. If you want to introduce a new product, you’re past introductions and new media plan must be very convincing to the supermarkets’ account managers.

Since there have been many fusions and takeovers between and by supermarkets, the supermarkets are getting more concentrated and is their bargaining power increased very rapidly. The power position shifted from the big manufacturer to the big supermarket chains

2.6.2 Sector of industry analysis

The products this research is about are in the fast moving consumer goods (FMCG) market.

This market is in a constant battle between the different multinationals, but also between the different supermarkets. Because of the power shift mentioned in the previous paragraph things have changed in the relationships between manufacturer and customer. This section will explain the forces that are pushing RB to the deletion of some of its products and brands (sub-question 2).

At first the FMCG manufacturers only had to convince the consumers in case of new product introductions. Because of the power they had, they could easily tell the supermarkets to put the new products in the shelves. Now however, the first thing a FMCG manufacturer needs to do is convince the big supermarkets, otherwise you can start a campaign with no products on the shelves. So, in the past the fast movers could focus mainly on the consumers by using the pull strategy, but now they have to focus on both consumers and supermarkets. In the present they have to cope with a pull and push strategy. Pull strategy by convincing the end consumers with the use of different sorts of media, like second placements, couponning actions and commercials. And a push strategy to convince the retailers to put their products in their shelves by giving them different kinds of offers and options.

Most of the so-called FMCG companies have been on a cost-cutting drive. In the past year, Procter & Gamble, Philip Morris and Unilever have all announced plans to close plants and sack thousands of workers and use a lot of squeeze projects to earn money by saving costs (Death of the brand manager. Economist, 4/9/94). “Yet the pains of FMCG manufacturers are also linked to two more permanent changes in the pattern of shopping. Neither trend is new. Indeed, FMCG firms have spent a decade busily denying that they matter. Only now have they begun to admit that the danger is real”.

There are a few trends that created a force, which pushed RB to its focus strategy and thus its product deletion habit. The second and third trends show what forces push RB towards its focus strategy (sub question 2). Next to this there are also trends that show why a company should know and monitor what the image of its brands are doing. For example: in what way are they changing and why. The first and fourth trends show why RB should look at what goes on in the consumer’s minds, tracking consumer-based brand equity (sub question 1c).

The first trend is that people increasingly buy goods on price, not because they carry a famous name. This was driven home to advertising men on April 2nd 1993, when Philip Morris announced that it would drop the price of Marlboro cigarettes to defend the much- advertised brand from cheap, generic rivals whose share of America's cigarette market had jumped to 36% from 28% in nine months. "Marlboro Friday" prompted some analysts to proclaim the death of brands, though it may be that Philip Morris had simply pushed up Marlboro's price too far (Death of the brand manager. Economist, 4/9/94). Marlboro's market share had recovered to 27% in December 1993, up from 22% in March 1993 (though Philip Morris's American tobacco profits fell by almost half that year). This price issue was also mentioned during the MARUG Congress 2004 by Prof. Dr. D. Wittink and the Chairman of the board of Ahold N.V. they both told price is, and still getting, more important as a sales driver. Although this was seen by Philip Morris in 1993, other FMCG detergent and food companies are seeming to just have been waken up.

The second trend, as was mentioned in the customer analysis, is the shift of power from manufacturers to retailers. Investment in new shops and information technology, and the weakening power of brands, have helped retailers to exploit their proximity to the consumer and dictate terms to their suppliers. Sales of private (own)-label goods continue to rise,

pushing branded goods from the shelves, especially if they are not leaders in their category (Death of the brand manager. Economist, 4/9/94).

Third, in Britain, private-label takes 36% of the grocery market. In America, where private- label brands still have a cheaper image, sales of private-label goods at supermarkets rose from 22% of their total grocery sales in 1990 to 23.5% last year (Death of the brand manager. Economist, 4/9/94). By 2000, the figure will be 27%, according to a study by J.P.

Morgan, a New York bank. Even mighty Coca-Cola is not immune. In the past three years, Cott Corporation, which bottles private-label colas, has grabbed about 20% of the cola market in Canada and 2% of America's. Coca-Cola's Canadian operation lost C$143m ($111m) in the year to January and closed half of its 16 plants. Cott is now discussing the launch of a private-label cola in Britain with J. Sainsbury, a supermarket chain. Now private label brands are also taking over in supermarkets in Belgium and the Netherlands, 30% of the total sales in a supermarket exist of private label brands (OC&C strategy consultants, Intermediair #47, 2004:9). One of the reasons, OC&C mentions, is the lack of innovation at the A-brand manufacturers side; they are busier copying each other then trying to find new products. OC&C even says private labels seem to be more innovative than the big A-brand manufacturers are.

The fourth danger¹ has to do with the first one but shows a more advanced danger. This is about what J. Meijer calls the ‘The stairs of Agony’ (appendix 7). Research by AC Nielsen shows that consumers are driven to the discount stores because of the price wars that happen between the different supermarkets and by the offers done by the FMCG companies.

This push from supermarket A-brand buyer to discount shopper happens in a smooth but steady way. By lowering the prices, more and more consumers are getting used to them.

When the prices go back to normal consumers will find it to high and see the private label as a good option when this step is taken (and it is taken more and more) the next step to a discounter with its own private labels with even lower prices is not that big anymore. The problem is that discount stores do not sell A-brands like O’cedar so if consumers go to discount stores instead of the normal supermarkets, FMCG companies will loose sales as well. In Belgium Colruyt might be a big danger and driver for this shift to discounter stores as it is a big price fighter and already looks like a discounter. To be able to see this shift towards the discounters FMCG companies should monitor what goes on in the consumers head; they should know their consumer based brands equity.