Message from Henry

Today's tough times have affected us all. But, in the spirit of the season, give yourself the gift of understanding what can be understood, but often isn't.

Confusing? Well, companies sometimes over-react to a difficult economic environment. As a result, marketers need to have a fact-based and analytical understanding of how the economic environment actually affects their categories. For example, in the world of food marketing, some companies actually benefit because people eat more meals at home rather than going out to eat at restaurants. And brands often have more pricing power than they think.

So, every category needs to be understood and managed properly. Companies need to understand the role that economic variables have in terms of driving category demand. They will then understand the degree to which pricing and equity investments will be productive in driving demand and margin contribution. It's shocking how many manufacturers make a priori decisions based on conventional wisdom and high-level sales trends not specific to their business.

Also, companies need to understand the degree of leverage and power of equity that they have versus competitors. There are tools available to explain the role that pricing, advertising and other forms of investments can have both in terms of driving the category and market share.

Most importantly, companies need to understand which categories they compete with. In this edition of the Rak Report, Jim Gabriele explains that the competitive frame is that array of products – often from diverse categories – that consumers use as direct substitutes in a given situation. So, it's important to do two things: one, define the competitive frame much more broadly than traditional category definitions, and two, understand which of these competitors the brand will source volume from. Jim's essay focuses on positioning and optimal ad spending. To illustrate these points, we have included case studies on a major brand in Kids Crackers and the Tempur-Pedic mattress company as our gift to you.

Have a good holiday season!