The practice of brand management started with the classic memo by Harvard-trained Neil McElroy of Procter and Gamble (P&G) in 1931 while he was working on the advertising of the Camay brand. Eventually, he became the president of P&G and was also known to have served as a Secretary of Defense of U.S. President Dwight Eisenhower.
Brand management was created so brands will be treated as if they are separate businesses. The brand manager is accountable for anything related to the brand – differentiating it from competitors, creating marketing plans, as well as coordinating with other departments. It became a training ground for future general managers. Not long after, new graduates vied for a spot to be in the brand department of prestigious companies.
But that was close to nine decades ago, when manufacturers had the bargaining power over their trade customers. The power balance eventually shifted when retail stores started expanding and gaining access to bigger business data. The industry profit pool (the total profit earned at all points of the value chain of an industry) shifted in favor of key retail chains, as they earned a significant part, if not majority, of the industry’s margins. In contrast, the percentage of each manufacturer’s sales, as a percent to key retailers’ purchase, steadily went down. If brand loyalty is weak, key retail chains can simply buy from an enlarged set of competing brands or even from substitutes.
Brand loyalty became imperative, but key retailers shifted their focus to establishing store loyalty. They started hiring experienced consumer brand marketers to help them with their marketing plan, as they competed with other stores. On the other hand, manufacturers participated in their year-round promotional activities as a gesture of goodwill. But as they supported many retail activities, store switching was very likely to happen. There were only a few manufacturers which were progressive enough to push for category growth — an output of market-driving strategy focusing on more new users from underserved or untapped markets.
Around two or three decades ago, key retail chains also started to renegotiate payment terms for some categories. The definition of cash became 7 days or more to the powerful. Some of them deliberately delayed payment to least important suppliers. As these retail chains tried to exploit discounts offered to them, manufacturers became helpless to the point that they had to reward inventory loading! Additional margins were then offered based on sell-in, and again for sell-out.
While the motivations and behaviors of the consumers were studied deeply by brand managers, a strong collaboration with R&D was necessary to create relevant products, but a new challenge came to them when key retailers started demanding better margins for lower-priced new products. Retailers believe this is a win-win proposition for manufacturers, as this will cannibalize margins from existing competing brands once consumers switch their buying preference. They even requested for exclusive promotions, thus, account-specific sales promotions were implemented. Manufacturers complied, as their goal is to be the preferred supplier. Working this out became part of the sales department’s scope of work. By this time, sales transitioned to being named as “customer development”.
As customers became more sophisticated, the distinction emerged between users and shoppers. New corporate positions were created, giving more focus at the points of sale and in interpreting the brand strategy at the so-called “First Moment of Truth” (FMOT). Therefore, the birth of trade marketing managers, category managers, shopper marketing managers— all of whom report to the sales / customer development department, and not to the marketing department.
In the beginning, only the “Place”, among the 4P’s of marketing mix, was not controlled by brand managers. Today, aside from place, and the newly added marketing positions reporting to customer development, most promotional campaigns are controlled by sales, with the exemption of national campaigns. Even pricing requires the nod of sales, as the needs of shoppers and channels have to be taken into consideration. What were left for brand managers are product, marketing communications and insighting. While these are a lot of work, their responsibility and power were actually cut in half. They did not even own a single relationship with the CEOs of key trade partners, when in fact, that is the most essential factor in making or breaking a brand during the era of category killers. Thus, relationship and goodwill became indispensable; alliances and partnership the norm; and the end goal changed into becoming the preferred supplier. It is increasingly likely that more and more future general managers will come from the ranks of customer development.
Some companies have also separated brand roles into two, adding innovation managers to look into the broader, strategic brand issues, further removing the original role of the brand manager. Since product, place, and price are often unchanged, many brand managers are no more than “promotions managers”.
Nowadays, companies are more critical of hiring fresh graduates to be trained as brand managers, knowing that without ample field experience in the marketplace, the new brand manager may resort to baseless opinions and assumptions. They might perform brand works focused on persuading superiors rather than their consumers. For example, changing their brand’s identity prematurely, solely because revolutionizing the status quo leads to a quicker promotion.
To solve the dilemma of lack-of-sales-experience, the more progressive manufacturers are assigning fresh graduates for six months in sales, sending them to distributors for booking operations and allowing them to observe other channels. A more thorough training allots a longer period of time in sales, cycling through different areas like trade marketing, shopper insighting, category management and online marketing. This will pave the way to transform brand managers who are well-rounded, more seasoned, less tactical-oriented who will be strategic contributor to their business.
Bestselling author Josiah Go is the Chairman and Chief Marketing Strategist of Mansmith and Fielders, Inc. (the leading marketing and sales training company in the Philippines), President and CEO of Waters Philippines (the market leader in the direct selling of premium health durable products in the Philippines) and President and CEO of PT Noah Health Indonesia. He is Chairman / Vice Chairman / Director of over a dozen companies.
Record Breaking in Launch Sales. Available at National Book Store