In the past five years, the chocolate industry in Australia has seen revenue grow at an annual rate of 2.2% to more than $3 billion a year.
Yet Darrell Lea has suffered year-on-year sales declines and is now in administration. Eighty-five years of heritage doesn’t drive sales.
Forgetting the basics of marketing is a recipe for failure, as Darrell Lea’s predicament shows. The four Ps are from Marketing 101. Here they are one by one:
Product
Mega trends like multiculturalism, gourmet-tisation of food products, better-for-you choices and social issues like fair trade today shape what we choose to eat.
For the last couple of decades there’s been little in the way of new thinking at Darrell Lea beyond fruit-flavoured licorice and changing the shape of the logo from a triangle to a thought bubble.
Recently spending six figures on research that came up with a new tagline, “85 years of creating sweet magic”, simply reinforced a backward-looking management mindset at Darrell Lea.
As Max Brenner’s website proclaims, “Chocolate is not just about taste”, it’s also about fashion. From Mexican spicy chocolate and hot chocolate shots to chocolate soufflés and tiramisu, Australians are spending more money on chocolate than ever before as brands come up with new ways to tempt them.
Promotion
Having been absent from mass media marketing for several years, the new ad brief that was circulated just days before the announcement of going into administration was to spend six figures to celebrate 85 years of creating sweet magic and a special anniversary chocolate box.
Price
A four-for-$15 offer on Rocklea Road isn’t going to entice a new customer, it simply reduces the margin on a sale to an existing one.
Meanwhile, the once-niche special-occasion brand Lindt has become a significant player by offering a variety of balls across a range of pricepoints and product sizes. They still command a premium.
Place
Why own 63 shops when most chocolate sales are through Coles and Woolworths and convenience stores?
Darrell Lea’s new Perth concept store opened in March. Does this look new to you?
If you are going to have a retail outlet, it needs to have a good reason to justify the high overheads. Darrell Lea’s average over-the-counter sale is around $11 per customer. You’d need a lot of footfall to justify the rental on their King and George Street store. On the opposite corners are the eye candy Apple store and Louis Vuitton, where the products cost thousands (and are never discounted).
Just 100 metres up George Street at the Strand Arcade is Haigh’s one store in Sydney. It is a statement of exclusivity (attainable aspiration is their marketing approach) and always has queues. They also have a flagship store in Melbourne and the original Beehive Corner shop in Adelaide, each making a public statement of what the brand stands for. Challenger brands understand stores are the new 3D interactive ad medium. They are all about theatre and entertainment. Max Brenner has the theatre of their liquid chocolate Willy Wonka store fit outs.
Other retailers realise the store is simply the best way to gather new customers details for database-driven online sales. The objective of the shopfront is to entice prospects in and the brief to staff is to start a long-term relationship. Darrell Lea’s shops failed to make the most of potential marketing opportunities.
Staying competitive
Many market leaders are vulnerable to the threat that comes from failing to relook at their business models. Simply reviewing the four Ps is a good way for any business to refresh and stay relevant. Market leaders that fail to embrace change are increasingly less profitable than smaller challenger brands. The difficulty for Darrell Lea was they were neither big and powerful, nor innovative enough to challenge.
Boston Consulting has formally identified what savvy marketers know is the driver of business growth today:
“In a world of change, the spoils go to the nimble.”*
Glenn Mabbott
Creative Director
UNO
*Martin Reeves and Mike Deimler, Boston Consulting Group
Harvard Business Review July-August 2011