HRCP Case Study:
Turning a cash cow into a star
Although highly profitable, this brand had an aging audience, and was on a slow but steadily declining path. Believing the brand had lost relevance, the client had relegated it to a cash cow position with little or no investment behind it.
Henry Rak Consulting Partners was engaged to develop recommendations for maximizing long term Brand profitability. Initially, Company Management did not consider actual growth feasible; rather, the focus was placed on maintaining the Brand's strong profit generation over the longest term possible.
Based on the growth strategy HRCP developed, we recommended the following:
- Pursue a new market white space that could be owned by this brand by recognizing a critical consumer need for which the product solution was not widely recognized.
- Re-position the brand to intimately connect it to the critical consumer need.
- Optimize advertising spending levels to reach the broadened consumer target.
- Develop a new product platform required to build the partition, broaden the franchise even further, and insulate the trademark from competition.
Total trademark revenues have increased nearly 250% over the last five years, with improved margins.
- The original product responded almost immediately to the new positioning and spending, achieving actual growth in volume, revenue, and profit. Net sales were up 15% and volume more than 11%.
- The new product platform and an existing line extension, both of which are key to insulating the trademark from competition, are also growing and highly incremental to the base. The new product was still generating trial in year three--about 90% in incremental volume. The existing, formerly problematic line extension reversed years of decline, with sales growing last year at more than 6%.
- The positioning has also led to an expanded product portfolio opportunity that has rejuvenated product development and is expected to lead to many years of continued profitable growth.
- The brand is no longer a cash cow, but a star: an "invest for growth" opportunity in the division's portfolio.