business

Too many SKUs (or brands)

I saw this article recently:

http://hotelnewsnow.com/Articles/128455/Marriott-gathers-select-service-GMs-to-lay-out-vision

I’m about to be pretty critical of the company and topic in this article, so I need to start with a caveat: I am a hug fan of Marriott International, its management team and its brands. I think they have executed really well for many years, led by Arne Sorenson as CEO. The merger with Starwood seems to e the right strategic move and if anyone can execute a successful integration it’s this team.

So what don’t I like about what I see in the article.

Too many SKUs

I have believed since the Marriott-Starwood merger was announced that the one area the company (or both companies) weren’t thinking correctly about was the “brand menu” – their portfolio of brands. Frankly, both companies were already going down a path of having too many brands. Combined, they have upwards of 30 brands. And despite the “clear” explanations of how to differentiate the brands in the attached article, I believe customers are going to be confused (if they aren’t already).

This is a common problem in business. Fast food companies are the poster child in my mind, with ever-expanding menus. Usually either an extension of existing core competencies, like different versions of a burger; or worse getting into new product lines. Then inevitably, management (sometimes new management) goes through a process to simplify the menu, leading to better results, leading to management getting comfortable and looking for “growth” and expanding the menu again…round and round we go. And of course other businesses like retail also can suffer from this problem.

Hotel companies have gotten comfortable since recovering from the recession, and looking for growth, and positive results feeding their belief that one of their core competencies is building new brands.

Next recession, my prediction is these brands start getting chopped. Focus will be restored.

Inward Thinking

Another symptom has to accompany this problem, and that is building the skill of explaining all of this SKU creep. Management starts to sound like consultants, describing how new brands will leverage existing competencies in new markets. Or how scale is needed to compete in the current market environment. Or how the new SKU will fill a needed market niche.

In the meantime, management spends so much time describing the brands, it can’t actually execute on making money with those brands And by the way, all the work Marriott is putting in with its own leaders to explain the brands, most of it is not sinking in. And to the end consumer, almost none of it is sinking in. They don’t actually see themselves like this:

“So let’s take Four Points and Courtyard, for instance. Those are two brands that you could argue are in the same space, same price point, all of that, and we’ve purposely put Four Points into my group so we can work to keep them apart,” she [Janice Milham, SVP and global brand leader of Marriott’s classic select brands] said. “And we really believe that Four Points is … targeting a customer that is sort of more relaxed: Kick back, have a beer, everything you need, nothing you don’t. It’s just more simple, easy. … (Meanwhile) Courtyard is a little more high energy, a little more … active, more of that customer who’s an up-and-comer; they’re a little bit more type A.”

So I’m type A, guess when I’m booking that business hotel in Chicago for two nights I will have to go with the Courtyard…but Four Points is $10 cheaper, and gee I actually do like beer…come on, this is why consumers hate going to those fast food restaurants I mentioned. When you are picking the #35 value meal something is wrong.

And check out poor Janice’s title – that alone tells you we’ve taken this too far.

All one really has to do is check the science, there have been great studies done on how SKU variations can actually paralyze consumers with too many choices. For example:

http://www.bain.com/Images/BAIN_BRIEF_Growth_through_simplicity_.pdf

http://www.marketingprofs.com/opinions/2008/22029/when-less-is-more-in-consumer-choice/

The moral of the story is to keep it simple when branding and when thinking of your product offerings. It’s what you want as a consumer, so give your own customers that same respect.

 

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