HRCP Case Study:
Growing revenues by expanding the market

Situation

While this brand was popular among young children, the relatively small size of the audience dampened client growth expectations. Line extensions aimed at expanding the audience had failed.

Challenge

Henry Rak Consulting Partners was engaged to look at the broader category in which this brand competed and identify opportunities for growth. Initially, client management believed growth would have to come via a different brand.

HRCP Advantage

Based on our growth strategy development work, Henry Rak Consulting Partners:

• Developed a complete behavioral view of consumer usage and purchase that indicated that the brand was not limited to a core of young children.
• Identified a new market opportunity and recommended against additional line extensions, believing the expanded target could be reached with the same product format. However, higher levels of advertising spending were indicated by the optimal spending results. These levels were well beyond those thought possible when advertising to children alone.

Results

The results were immediate and spectacular. The previously stagnant brand grew more than 20% in revenue and more than 15% in volume for two consecutive years after the growth plan was put in place. After the second year of 20%+ growth, the brand took a 10% increase in its list price and continued outpacing category growth rates.

• Simulating the business results of higher advertising spending levels against a broader target, we determined the brand could achieve significant volume and profit growth through markedly higher advertising spending. The brand tested higher advertising in heavy-up markets and validated our simulations. Over the past three years, the brand has significantly and steadily increased advertising spending.
• While plans for the launch of expensive brand or line extensions were put on hold, other innovations were introduced. For example, new package types and sizes, and new flavors ensured all key consumer needs of the category were met. Consumers did not have a reason to switch to another brand because their favorite size or flavor was not offered.
• The brand has sustained growth throughout the current economic downturn in spite of being in a highly elastic, non-essential category. The brand had been locked into the same price point for years. Its unique consumer loyalty suggested the brand had the ability to increase price, which was confirmed by subsequent pricing analyses, resulting in a 10% list price increase. In the year following the price increase, the brand grew 4% in dollar sales while the rest of its category grew only 0.5%.