Quadrant IV: Quantum Leap
Springboard 1: Identifying the Customer Strategy for Your Newly Combined Company
Springboard 1: Identifying the Customer Strategy
E x h i b i t 7 - 1
Questions to Ask when Formulating Customer Strategy for Your Newly Combined Company
䊐 What is the new customer franchise of our newly combined company? How is it different from the customer franchise we had before we acquired this new company? What new opportunities does this present for us?
䊐 Is there any merit in keeping the two franchises of our new company separate? If not, how will we segment our new customer franchise?
䊐 Given the configuration of our new customer franchise, how can we accelerate its growth with the acquisition of new customers?
䊐 What new approach, if any, do we need in order to deal with different customer segments?
䊐 How will we structure the portfolio of brands involved in our new company? Are the existing brands best kept separate? Is there any advantage in double branding?
䊐 How can we ensure that the combined capabilities of our new company are brought to bear to meet the needs of our customer segments?
䊐 What are the most profitable segments of our new combined franchise?
Is there any justification for dropping the less-profitable segments?
tomer needs that your company can meet most effectively. The brand promise defines the targeted customer experience. Although it is aspira- tional in nature, the brand is a manifestation of your company and your products and/or services.
You and other managers in your newly combined company face the challenge of determining how best to leverage the brands of the two legacy companies that have now become one. To meet that challenge,
Case Examples: How Hewlett-Packard, Best Buy, NationsBank, and Norwest Corporation Handled Brand Management
When HP acquired Compaq, it had to determine whether it would keep the Compaq brand. It chose to keep the Compaq brand as a separate identity and market it to different segments of its new customer base.
The company has maintained both of its consumer brands by differ- entiating the lines by giving them different designs and offering dif- ferent features and price ranges for each. HP Pavilion PCs aim for the high end of the market, competing with companies such as Apple Computer and Sony. Compaq Presarios are designed to compete on price with models from companies like eMachines and Dell Computer. By maintaining both brands, HP enjoys a huge retail presence, regularly claiming the No. 1 PC seller slot, according to research firm NPD Techworld.1
When the retailer Best Buy acquired the Future Shop chain in the Canadian market, it decided to maintain the two brands separately because this gave it access to two different consumer groups, and the dual strategy provided the opportunity for greater potential growth in the Canadian market. Best Buy did extensive research on the different needs of the tar- geted populations of each brand to find out how each brand could serve its customers best. It also worked to understand what kind of organizational structure and strategy were necessary so that the brands would not be on a collision course. It then developed brand themes that gave each brand a siz- able share of the market but also differentiated the brands based on their most distinctive strengths and cultures.
Best Buy went further to see where efficiencies could be realized by acting in common (e.g., through selecting a short list of shared vendors) and where the two brands would be best off working independently. Working the dual brand strategy has not, as some feared, resulted in cannibalization of a shared market, but rather led to a double-digit increases in sales for both brands in 2006 and 2007.2
On the other hand, both NationsBank and Norwest Corporation made a strategic choice to adopt the corporate name and identity of their smaller- sized acquisitions, based on the belief that these alternative brands had more powerful national brand recognition than their own. When NationsBank acquired Bank of America, it adopted the Bank of America brand to drop the vestiges of its regional banking past and be more readily perceived as a national banking force. Similarly, when Norwest acquired Wells Fargo and Co., the new company chose to keep the name Wells Fargo to capitalize on the long history of the nationally recognized Wells Fargo name and its trade- mark stagecoach slogan.
your company needs to rethink its strategy and determine what a new strategy for its brand(s) should be. An integration that does not aspire to a quantum leap will simply erase the brand(s) of the acquired company without an adequate strategic review, in which case your company will simply continue on the course that you had charted prior to acquiring the new company. Brand choices are often unwarrantedly influenced by the ego of the acquiring company. A poor choice does not leverage the oppor- tunity and power of the brands of the company you’re acquiring.
A quantum leap integration company asks, “How do we make use of the brands based on our customer strategy?” The new company needs to decide which brands it wants to continue to support. It is more costly to have multiple brands. However, it might be that as part of its customer strategy, the new company finds it useful to have a second brand for some things where that brand is better known or more appealing, or if it gives the company the ability to have a two-tier customer strategy. It could then use the two brands in ways that are more specialized and targeted.
Whatever you decide to do with your brands, don’t simply let your deci- sion take place by default—in other words, don’t let a brand just die off through neglect. If you don’t want to continue a brand, that’s fine, but you should make that decision with clarity of purpose.
Your customer strategy and brand decisions will determine what new products and/or services your newly combined company will offer.
Once you decide who your customers are, you have to determine how to bring together these new products or services and how to gain the most synergy in terms of these products or services. You need to decide which of your products or services are most attractive to your customer seg- ments. You also need to explore whether your company has the capabili- ties to reshape your products or services in order to obtain a distinctive advantage in your marketplace.
You also need to decide what distribution channel options you will use for any new products or services. You need to review the structure of your combined distribution channels and determine what your new dis- tribution approach will be. The challenge is to look at the two original distribution approaches and strategies and sort out how to optimize them not only in terms of costs, but also in terms of their effectiveness in reach- ing targeted customer segments.
Deciding what kind of relationship to have with suppliers is another element to consider when building for a quantum leap performance. As a newly combined company, you should review your supplier base and use your greater size and new configuration to leverage more advanta- geous terms with your suppliers. Also, not only can your enhanced sup- plier base lead to a better pricing structure for your customers, but a more actively worked relationship with your network of suppliers can also better leverage any unique capabilities of your suppliers, as well as those suppliers’ ideas and insights on market changes. As a newly combined company, you can realign your combined suppliers network to help you bring your customers targeted solutions that were not previously available to them, and you can deliver those solutions more innovatively, rapidly, and cost-competitively than you could before your acquisition.