Ultimately, the best businesses in the industry are marked by the ability to manage the Product Life Cycle expertly; rejuvenating propositions or streamlining costs as required. In contrast, businesses that are less successful are often less good at paying attention to the requirements of each stage – entering decline without realising soon enough, or rolling out a brand before the proposition is ready.
With competition continuing to hot up and life cycles shortening, F&B businesses must pay more attention to their maturity than ever before. Constant innovation and customer/product obsession are key in helping businesses manage and extend these. But bravery too is required – knowing when to invest to rejuvenate a proposition, or when to wind down a once fabulous business, can be a gut-wrenching and often political decision.
We will discuss the two key strategies to tackle one of the biggest problems businesses face in managing these curves: returning to growth after reaching maturity.
The Product Life Cycle, popularised by Theodore Levitt in his 1965 Harvard Business Review article, ‘Exploit the Product Life Cycle’, remains an integral part of most businesses’ marketing and positioning strategies half a century later. It sets out a clear path for a product’s introduction, growth, maturity and decline, before they are ultimately overtaken by new, more innovative designs.
In the F&B industry, the customer experience or brand is the product. The interesting thing is that for restaurants, the average length of a life cycle has already seen a considerable reduction from 10-15 to 5-6 years; some even expect this to decrease to approximately 1-3 years in the future (Datassentials, 2014).
Whilst this may sound too aggressive it is not difficult to believe that life cycles will continue to shorten given the number of new disruptive brands and entrepreneurial ventures constantly emerging. Yet there are many brands which continue to buck this trend – what can we learn from how they have done so?
We often encounter businesses who have reached a greater level of maturity than they realised. They enter decline or stagnation before managers have had the time to react. By the time we are engaged - big decisions are needed, and not necessarily those they originally envisaged. These can be, for example, having to either invest heavily into rejuvenating the brand and proposition that is flailing, or to start slicing and dicing the estate by repurposing or selling restaurants. We will discuss the two key strategies to return to growth.
To re-enter the “growth” stage, Youngme Moon argues in her HBR article, “Break Free from the Product Life Cycle”, that there are two tried and tested strategies – what she calls ‘breakaway’ and ‘reverse’ positioning (see the figure below). Whilst Youngme Moon focused within the context of individual products, we believe that similar lessons can be used for whole F&B brands.
Source: ‘Break Free from the Product Life Cycle’ Y. Moon, 2005
Breakaway positioning involves combining different or new features together to position the product in a different market. This allows them to break free from consumer trends that would normally constrain them. The example Moon gives is Swatch. Prior to Swatch, Swiss watches were a luxury item - purchased infrequently and at great expense. Swatch introduced the idea of watches as ‘playful fashion accessories’ – with people buying multiple watches at a time and only for $40. With a very similar basic product – this enabled Swatch to enter a new and much faster growing market.
The best example in recent years in F&B has been the silent and very successful manoeuvring of McDonald’s.
Case study: McDonald’s
Having entered their 11th year of consecutive growth this year, McDonald’s in the UK is a fantastic example of successful breakaway positioning. They have evolved from a fast food chain into their own category: a digitally savvy, family friendly, fast food restaurant for any occasion. Whilst others have stood still, adding different variations of the same product, McDonald’s has fundamentally shifted its appeal for the modern day.
The way they have done so is through constant innovation, customer obsession and bold investment. The four areas they have worked on that have moved them into breakaway are…
Importantly, their success is reflected in the bottom line. McDonald’s relentless investment in innovation and its deep focus on the customer has paid dividends. This enables McDonald’s to continually rejuvenate their life-cycle; allowing them to remain in constant growth.
For most products, maintaining market share is all about evolving to meet changing consumer demands. However, businesses often take the same steps and the market becomes increasingly crowded. With many brands continually incorporating new attributes to meet these demands they often lose touch with their original purpose. The concept of reverse positioning involves ‘stripping back’ a product to its core before integrating one or two key new features. As a result, the company is able to change its position within the market and propel itself back into the growth phase.
For some chains that have expanded, and whose proposition has become tired or lost relevance, the right move can be to go back to basics and re-discover what made it popular in the first place.
Case study: Café Rouge
Café Rouge was established in 1989. Yet, this has not equated to 26 years of growth. In recent times the brand has faced considerable challenges. This has prompted several failed attempts to reinvigorate the brand.
However, the most recent one has been more successful – according to James Spragg, MD of Café Rouge.
So, why does he see this rejuvenation project as being successful? According to Spragg, it was all about returning to what made Café Rouge great in the first place. Great tasting and authentic French food. In previous iterations there had been numerous conflicting opinions that had led to an unclear direction. But in Spragg’s case the customer was put front and centre. After looking at a raft of consumer measures, Spragg and his team came to the conclusion that in order to move forward as a brand they had to look back, stripping it back to its core and reinstating what made it great. This was coupled with a huge investment into refurbishing all 90 restaurants by 2017.
Now, two years into the project, 70 restaurants have been refurbished and the company finds itself in a positive 5% growth in sales. Spragg is clear that to maintain this growth they have to keep the brand moving forward but states that the main focus is on ‘operating authentic French bistros that serve great tasting food, with engaging staff, in a warm and comfortable environment.’
This rejuvenation project is a great example of ‘reverse positioning’, with the brand stripped back to its most important attributes whilst carrying out large scale site refurbishments to eliminate any sort of ‘tiredness’ it may have obtained over the years.
Others can certainly learn lessons learned from this project. Without one clear and thought-out central plan and vision, it can be easy for a brand to lose focus and direction. But at the centre of this should always be the customer.
The very best, most successful businesses in the industry have learnt to manage this life cycle expertly. Those that do so are able to continually reinvigorate their natural life and buck the trend for shortening life-times. The trick to keeping their propositions up to date seems to be a relentless focus on the customer coupled with the bravery to do something different or new.
Even with constant innovation it is impossible to ride the growth wave forever without significant evolution or repositioning. Once an F&B business has reached maturity after 6-7 years there are two key strategies to return to growth.
You can either innovate your way into a new and more attractive category or return to your roots to understand what made you great in the first place.
With additional insight from Sophie Atkins, Analyst, EI | Stone & River.
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