Expert Voices n°2

EXPERT VOICES

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Personal connection: a key to luxury preferences - Barbara SLAVICH et Gwarlann DE KERVILER Promote routines to enhance team performance - Caroline SARGIS-ROUSSEL Leveraging television to improve eating habits- Karine CHARRY How can companies access poor consumers in rich markets? - Loïc PLÉ Changing brands without losing customers - Véronique PAUWELS-DELASSUS

PERSONAL CONNECTION: A KEY TO LUXURY PREFERENCES Based on an interview with IÉSEG’s Barbara SLAVICH and Gwarlann De KERVILER and on “Selfreferencing narratives to predict consumers’ preferences in the luxury industry: a longitudinal study”, by Caroline ARDELET (University of Paris Ouest Nanterre), Barbara SLAVICH, and Gwarlann De KERVILER (Journal of Business Research, 2015).

Predicting consumer preferences for luxury products may just have become easier. By listening to what people say when they test perfume — the quintessential luxury product — researchers have found that people who associate a scent with a personal experience are more likely to prefer it than those who react with generic commentary. This should apply to other luxury products as well.

them to comment on them in order to assess their genuine preferences.

The luxury market is fundamentally different from other markets. Consumers base buying decisions largely on symbolic and hedonic value rather than on products’ functional components. While subjective features like beauty and pleasure have been shown to weigh heavily in luxury purchasing decisions, they remain difficult to measure.

Now, however, Caroline ARDELET (University of Paris Ouest Nanterre) and IÉSEG faculty members Barbara SLAVICH and Gwarlann De KERVILER’s study is filling this gap.

The research data consisted of people’s spontaneous comments in reaction to the perfumes. As neutrally as possible, shoppers were asked, “What does this perfume make you think of?” In listening to their response, a difference was discovered between commentaries featuring a personal story, as opposed to comments like “It smells like grass.” The former was directly involved in greater product preference.

After the in-store interview, participants were free to bring home perfume samples, provided they agreed to be phoned a week later. The time-lapse enabled the researchers to see that initial affinity endures. “First impressions are also last impressions,” SLAVICH says. “People reconfirmed choices made in the store.”

By analyzing customers’ spontaneous comments when testing a luxury perfume, the researchers assessed how likely they were to use and keep the product. The study introduces a novel concept — the self-referencing narrative — and a new methodology for predicting customer preferences for luxury items.

The study was doubly grounded in reality through a partnership with premium fragrance manufacturer Firmenich, who created three scents that legitimately represented three established luxury brands (Nina Ricci, Chanel, Lancôme).

AN INNOVATIVE, REAL-LIFE METHODOLOGY Research team members Barbara SLAVICH and Gwarlann De KERVILER explain that consumer preferences are usually studied by presenting people with hypothetical situations, i.e., Would you buy X if Y or Z? “But we wanted to find out what really happens, so we went into a store to carry out our study.” The researchers presented women who had come to the store to shop with perfume samples and asked

DECISIVE PERSONAL CONNECTION Self-referencing narrative is a compelling new concept that has proven critical to understanding luxury purchase preferences. “Self-referencing narratives are personal accounts or descriptions of experiences,” De KERVILER explains. “After smelling a perfume, a person might say, ‘This scent is similar to the perfume my grandmother used to wear,’ or ‘The perfume reminds me of a day I spent with my friends last summer.’

In contrast, generic narratives are not specific to a person’s life or associated with particular events or experiences.”

When it comes to luxury products, it appears that what matters most is a link between a person’s own life and the product. In accordance with this finding, professionals should be able to better predict luxury purchases by looking at whether or not products trigger personal commentary or emotion. SLAVICH adds, “People who mentioned specific people, places, and events then wanted to take the product home. On the contrary, people who simply liked the smell but did not respond with a personal account were rarely interested in doing so.”

Because self-referencing narratives are a type of storytelling, it is not surprising that luxury companies that are good storytellers tend to benefit from their skill. Consider the Guerlain campaign for Shalimar perfume, which involves a lengthy film that takes viewers to an exotic, magical world of princes and princesses. Since most people grew up with fairy tales, the film can be assumed to trigger a high percentage of personal, emotional associations that have helped boost sales even though the perfume itself is barely seen or mentioned.

“In luxury, as in most creative industries, to be understood and preferred, products should present two characteristics: familiarity and novelty. In movies, for example, familiarity is provided by a genre (i.e. western), and novelty by the uniqueness of a specific story,” SLAVICH adds. In this study, a scent’s ability to trigger personal memories or events provided the familiar component, while the original formula of the scent offered newness. The researchers had assumed there would be a strong link between self-referencing narratives and luxury product preferences, but now they have the proof. “We were able to produce objective measures for something whose value is symbolic (luxury) and fundamentally subjective (preference).”

PRACTICAL APPLICATIONS

RESEARCH METHOD

Gwarlann De KERVILER joined IÉSEG in 2013 and is an assistant professor of marketing. She was previously a CRM Manager at Staples and a marketing manager at Danone. She holds a PhD from University of Paris Dauphine.

Brands were ranked according to the strength of their heritage (strongest to weakest, in the order given above), and study participants were told which brand had made the scent they were testing. When customers perceived a given brand’s heritage as strong, the researchers saw that personal narratives had an even greater impact on product preferences. De KERVILER comments, “That is why Chanel is doing the right thing in keeping the myth of Coco alive.”

BRAND HERITAGE AS AN INTENSIFIER The third main finding from the study concerns brand heritage, which refers to a brand’s roots, founders, values, expertise, regional associations, and so on. Not only does a brand’s heritage create its uniqueness and provide a story, but it also acts as the glue that connects consumers’ personal narratives to a particular product and brand. Importantly,

BIOGRAPHIES Barbara SLAVICH joined IÉSEG in 2010 and is an associate professor of management. She previously worked at Bocconi University and SDA Bocconi School of Management. She holds a PhD from Italy’s ESADE School of Management and University of Ca’Foscari, Venice.

strong brand heritage was seen to intensify the impact of self-referencing narratives. Before going into stores, the researchers measured the perceived brand heritages of Chanel, Nina Ricci, and Lancôme, the brands that inspired the creation of the three perfumes used.

This empirical study was conducted in a perfume store in France. It involved 529 female customers aged 20 to 50 who received random assignments to test a supposed Nina Ricci, Lancôme, or Chanel perfume. Fragrances were created by Firmenich to fit each brand’s olfactory identity. All participants engaged in a free association test, and the 464 who reacted neutrally or positively then filled out a 5-dimension evaluation and were contacted by phone after one week.

Luxury marketers and companies can appreciate that the findings from this study should apply to any luxury product, not just perfume. “All creative industries must offer customers pleasure, distinction, and status,” say SLAVICH and De KERVILER. “But people are also looking for coherence with the brand identity and values.” Hence the need to get to know your customers intimately.

• Remember that first impressions are also final impressions.

• Offer consumers a blend of familiarity and novelty.

• Keep brand heritage alive. Convey authentic roots and demonstrate consistency with values.

• Create compelling stories and highlight links between the brand and customers’ personal experiences.

PROMOTE ROUTINES TO ENHANCE TEAM PERFORMANCE Based on an interview with Caroline SARGIS-ROUSSEL and the article “Routinisation et performance des équipes de travail - Une analyse par le capital social” by Cécile BELMONDO, François DELTOUR and Caroline SARGIS-ROUSSEL in Revue Française de Gestion No. 247/2015, pp. 11-25.

The routines developed by members of a team working in close contact with each other have an ambiguous effect on performance. Routines can boost efficiency by, for example, saving valuable time, but they may also hold performance back by restricting the capacity for innovation. Caroline SARGIS-ROUSSEL and her fellow researchers explain how routines emerge and influence performance by considering variables such as the nature of the relationships between individuals, the level of trust, and shared narratives and language. The authors illustrate their theoretical propositions with the example of the French men’s handball team, which has enjoyed unparalleled success and honors over the last 20 years.

In the two decades between 1995 and 2015, the French national handball team was twice crowned European champion, twice crowned Olympic champion and five times world champion. This level of repeated performance is highly unusual in the context of team sports, leading some commentators to view the team’s management methods as a “sustainable performance” model that could inspire the world of business. BELMONDO, DELTOUR and SARGIS-ROUSSEL set out to understand the model by studying the emergence of work routines.

IS ROUTINE GOOD OR BAD FOR PERFORMANCE? “A work routine is not just a procedure,” observes SARGISROUSSEL, “nor is it necessarily something that is designed deliberately”. Routine includes not just formalization (of what people do), which is not always part of the process, but also informal dimensions via the meaning we give to our actions and those of others or by internalizing the way in which actions should be carried out. A routine

never emerges in the same way from one team to another, because it depends on the three dimensions that SARGIS-ROUSSEL and her co-authors combine under the term social capital:

if they do not share the same vision, if they do not have enough mutual narratives, if they do not have enough confidence in each other, then they take considerably longer to cooperate and may not even manage to do so.

People need references, aspects of a common language, shared experiences and a joint vision of their goal if they are to be successful. However, if the link is too strong, if a team places blind trust in its leader, or if it operates too smoothly, it may not challenge itself when the time comes. A team that is too focused on itself may not see that its environment has changed.

a common language, the intensity of relations, the role of the leader, trust, identification, and so on. This will allow balanced routines to surface – neither too slowly nor too quickly – so that a higher level of performance may be achieved.

WORKING ON INFORMAL PARAMETERS TO MAXIMIZE TEAM PERFORMANCE The French handball team has only had two head coaches in 20 years and, although the composition of the team has inevitably evolved, the changes have been

•Intensity of relationships within a team and the role of the leader (the structural dimension of the social capital) •Shared narratives and language (the cognitive dimension) •Degree of trust, identification and reciprocity (the relational dimension) SARGIS-ROUSSEL argues that: “Using these three dimensions, we can understand the development of routines and the ambiguous role they may have on performance. It is then possible to define the point at which the routines increase or diminish.” While it is true that routines may help to save time and improve efficiency, they may also create inertia when they assume too much importance. For example, a team may continue to use a routine that is no longer suitable, and will then be less able to tackle the unexpected or seek out innovative solutions.

ACHIEVING THE RIGHT MIX OF INFORMAL PARAMETERS TO OPTIMIZE PERFORMANCE It is valuable, therefore, to find the levers that will generate enough social capital and the appropriate degree of routinization (not too slow, not too fast) to maximize performance. According to the coach of the French handball team, for instance, it is the frequency and regularity of players interactions (and not the duration - they spend the seasons with their clubs) that bond members and help develop a shared memory and implicit understanding. If the link between individuals is too weak,

BIOGRAPHY Caroline SARGIS-ROUSSEL is director of academic development and quality at IÉSEG School of Management, where she lectures in management control. A graduate of the ICN Business School, SARGIS-ROUSSEL has a PhD in management sciences and a DESCF higher degree in accountancy; she is also accredited to supervise research. SARGIS-ROUSSEL’s own research centers on knowledge management and integration and strategy-as-practice approaches and performance management tools.

gradual, with one player following another. Furthermore, the selectors have placed less emphasis on finding excessively talented individuals than on players with the capacity to build a strong group together. This is a logical choice in a sport that consists of very short sequences of play, and which is based on an ability to implement technical combinations and routines. It is a strategy that may well be entirely suitable in a corporate context. As the relationship between social capital, routines and performance is curvilinear (an inverted U), managers have every incentive to manage the make-up of their teams by playing on one or more of the above parameters, such as

METHODOLOGY BELMONDO, DELTOUR and SARGIS-ROUSSEL define an integrative model that reflects the links between a team’s social capital, the emergence of work routines and team performance. Social capital is analyzed from three different dimensions: the intensity of relations within a team and the role of the leader (the structural dimension); the shared language and narratives (the cognitive dimension); and the degree of trust, identification and reciprocity (the relational dimension). The researchers illustrate their theoretical propositions with the case of the French men’s handball team, examining its internal functioning and organization between 1995 and 2015.

BUSINESS APPLICATIONS Recruiters and managers who create teams usually start by thinking about the skills needed to complete a project. They are less likely to have the overall composition of the team in mind, or the form it will take and the impact of the different social capital parameters that will necessarily influence the emergence of routines and, ultimately, performance. The study by BELMONDO, DELTOUR and SARGIS-ROUSSEL invites managers to consider adopting a more global outlook and approach, and to use the concept of a team’s social capital to understand the critical issues of collaborative work.

The research demonstrates that it is not in a manager’s best interests to maximize the social capital of his or team (the frequency of interactions, joint knowledge and bonds of trust).

Instead, managers should regulate the social capital according to whether they want to accentuate productivity or the quest for innovative solutions. As a consequence, managers may find it desirable to gradually reduce their team’s social capital – and recruit employees who are at a distance from the group’s habits – if circumstances so require.

LEVERAGING TELEVISION TO IMPROVE EATING HABITS Based on an interview with Karine CHARRY, associate professor of marketing, and on her article “Product placement and the promotion of healthy food to pre-adolescents” (International Journal of Advertising, no. 33, 2014)

A recent study shows that placing audio-visual examples of healthy food consumption in the TV shows that preadolescents watch can effectively lead to more positive attitudes toward such foods and healthier food choices. This overturns an assumption that pro-social placements are like their commercial counterparts, which are most persuasively promoted via solely visual placements.

children prefer what they choose themselves. In addition, kids fully understand the issue of image and are sensitive to how they are likely to be perceived in various situations. In this study, we were very interested in finding out whether placements could have a positive effect on children’s image of healthy eating and whether that could make a genuine difference in their food choices.”

Karine CHARRY has been studying obesity prevention since 2009, focusing on how to use known marketing techniques and practices to serve this pro-social objective.

“In this particular study, we looked at a very common practice: product placement,” she explains. The technique is increasingly popular and has been used especially heavily in the past 10 years. A study that CHARRY is familiar with demonstrates that when it comes to commercial placements of branded items, unimodal placements are more effective than bimodal. CHARRY wondered if this pattern would still apply to unbranded product placements, which are subtler.

She answers this question in a recently published study where she looked at whether unbranded product placements can effectively influence healthy food choices among pre-teens.

The study results confirm the power of product placements to influence pre-teens’ food choices. Seeing a well-liked character on a TV show eating healthy foods makes them more likely to choose similar foods themselves. Given the previously known effectiveness of product placements with both adults and children, CHARRY had expected an encouraging outcome, but she was surprised by the degree of impact. “The videos were short. They only lasted 90 seconds, featured just 2 embedded healthy food placements, and were watched only once.” Yet children were significantly more likely to select healthy foods afterward.

PRE-ADOLESCENCE: A CRITICAL PHASE FOR AUTONOMY, AWARENESS, AND CHOICES “Pre-adolescence is a pivotal point in development, because children are gaining autonomy,” CHARRY explains. “They are developing preferences, building attitudes, and yet they are still impressionable.”

In contrast, younger children’s tastes constantly change, and bona fide teenagers resist influence. “Concretely, 8-to-12 year olds are gaining significant autonomy. They have pocket money that they use to buy snacks, and we know that

CHARRY considers this potent finding to result from the combination of three factors: the fundamental advantage of non-branded placements, which people do not resist or analyze as they do traditional ads; the urge to copy the behavior of an appealing character, which is also why celebrity endorsements of branded products work well; and last but not least, the “mere exposure effect”. “When people have been exposed to something, even briefly, this creates familiarity, and people tend to prefer the familiar to the unfamiliar. When traveling abroad, for example, people are far more likely to buy a known brand of toothpaste or shampoo, for instance, than to purchase a local brand.”

BOOSTING HEALTHY EATING CHARRY’s most significant finding concerns the conditions that boost placement effectiveness. When it comes to promoting healthy food choices, using both video and audio (bimodal) placements — for example, a video with audio of an endearing bad boy who picks up a carrot stick and says, “I want a carrot too! (crunch)” — is far more effective than just visual placements for unbranded product placements.

CHARRY comments, “We questioned the children who saw the videos with bimodal placements about their attitudes toward people who were eating healthy food and compared their answers with those of the control group. We found that it is indeed helpful for children to see healthy eating in a positive way on TV. Children are sensitive to the image they project, so seeing a favorite character eating healthy foods makes their perception of how they will be seen when

IÉSEG associate professor of marketing Karine CHARRY teaches master’s level courses on consumer behavior, persuasion, and social marketing. She spent the first 10 years of her career in Belgian industry, holding positions in product, brand, and corporate responsibility management. She holds a PhD in applied economics and management from Louvain School of Management (Belgium).

When it comes to pro-social issues, persuasion is difficult, because the positive impact of the desired behavior is not necessarily visible for quite a while, if ever. People cannot immediately benefit from the lesser environmental harm that comes from using green cleaning products, for example, while eating healthy foods can mean not becoming obese or developing high cholesterol or heart disease. On the other hand, “There is no reason to believe the placement methods outlined in the study would not be equally effective when applied to issues like ecological products or smoking prevention. There are a few studies that produced similar findings with regard to smoking, albeit with an older target.”

This study was conducted in a French primary school, but CHARRY refutes assumptions that France is somehow protected from obesity by a culture of healthy eating.

“Obesity is a worldwide issue, even if it is currently more pronounced in certain countries. Ads for unhealthy foods need to be counter-balanced with initiatives that effectively promote healthy eating, because people everywhere consider what they see on TV basically to be representative of shared practices.”

engaging in the same behavior more ‘cool’.”

CHARRY stresses the importance of subtly, and not patronizingly, encouraging pre-teens to make positive food choices. As for the ethical question of whether children should be deliberately persuaded, she says, “Parents have been questioned, and they are willing to accept and even support persuasion when they consider the end goal to be worthwhile.” When it comes to healthy eating and obesity prevention, this is obviously the case.

BUSINESS APPLICATIONS This study offers valuable insight for business managers, public policy makers, and screenwriters. It encourages responsible management behavior that is compatible with business interests.

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METHODOLOGY

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PRO-SOCIAL VS. PRO-COMMERCIAL OBJECTIVES “I would not advise anyone to apply the findings from this study to brands, because we have uncovered a difference in appropriate modality for brands vs. unbranded products,” says CHARRY. In addition, the time frame for the two types of objectives is hardly compatible.

72 children between the ages of 8 and 11 were shown 90-second videos from a popular television series featuring 2 embedded placements of healthy foods. 37 children were exposed to solely visual (unimodal) placements; 35 were exposed to audio-visual (bimodal) placements, and all completed questionnaires that revealed the likelihood of their making healthy food choices. Participants exposed to bimodal placements were 71.4% more likely than the others to subsequently make healthy food choices.

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For business managers, the study clarifies a critical difference between branded vs. unbranded product placements. Prosocial issues or products are more effectively promoted via bimodal rather than unimodal placements.

Given the global threat of obesity, governments and businesses with a voice in the entertainment industry could request healthy product placements in sponsored programs geared toward pre-adolescent audiences.

Screenwriters can see how to subtly but deliberately introduce healthy foods in their scenarios in ways that are likely to have a positive impact.

HOW CAN COMPANIES ACCESS POOR CONSUMERS IN RICH MARKETS? Based on an interview with Loïc PLÉ and his paper “Serving poor people in rich countries: the bottomof-the-pyramid business model solution,” coauthored with Jaques ANGOT (Journal of Business Strategy, 2015) In developing nations, companies adopt “bottom-of-the-pyramid” strategies to create and sell products and services to impoverished communities. Loïc PLÉ argues that companies in wealthier nations could learn from their methods.

In particular, he emphasizes the significance of ‘frugal innovation’: a common sense strategy for finding new ways to use available resources to meet the specific needs of poorer consumers.

After years of economic crisis and global recession, the world’s economy is getting back on its feet. At least, that is what most politicians seem to claim as they cite a host of macroeconomic indicators that show a pickup in global economic activity. But Loïc PLÉ is quick to counter with statistics that reveal a far from rosy picture, especially for poorer people.

He highlights the drop in household income in the US and disposable income in several European countries.

Unemployment still remains high with weak employment growth. A recent paper written by PLÉ and his colleague Jaques ANGOT suggests that poorer communities should not be overlooked by private enterprise. He believes in a win-win situation where companies meet the needs of impoverished consumers while delivering social good.

FRUGAL INNOVATION AT THE BOTTOM-OF-THEPYRAMID In less developed countries, companies have long understood the need for ‘bottom-of-the-pyramid’ strategies to meet the demands of the poor. Here companies develop cheaper products and services around the very specific needs of the poor. Potentially low profit margins are compensated by high sales volumes for a viable business model. PLÉ has found that many of these companies follow an approach known as frugal innovation. “There are many different bottom-

of-the-pyramid strategies out there, and people have published a lot of research in this area,” he says.

“However, frugal innovation seems to be a dominant strategy among companies in developing countries.”

The idea is not just to do more with less, but to do things differently with what you have already. Characteristics of frugal innovation identified by the team include: •“Good enough”: simplified, functional products that do their intended job with no frills or enhanced functionality/design.

•Partnerships: teaming up to meld the intellectual property and resources of companies with the market access and consumer insights of not-for-profits, charities and local or small businesses.

•Affordability: cheap products without any loss of core functionality or quality.

•Quality and performance: products retain their quality and their core functionality comparable to higher end products.

•Usability: easy to use, necessitating no special knowledge to understand how it works. They also must be adapted to local use conditions (e.g. working with no electricity).

•Sustainable: products must be economically sustainable, but deliver social value.

WHY FRUGAL INNOVATION MAKES SENSE FOR MOST BUSINESSES With these features in mind, PLÉ argues that frugal innovation makes sense for most businesses, not just the ones trying to target less wealthy markets. “In many ways frugal innovation is just common sense,” he admits, “but although many businesses know what they ought to do, they don’t actually manage it well. Consciously embedding frugal innovation could be a big step towards becoming a better business.”

BIOGRAPHY Since joining IÉSEG School of Management in 2005, Professor Loïc PLÉ has participated in a wide range of research and teaching activities. In 2012, he founded the Center for Educational and Technological Innovation (CETI), which drives evidence-based initiatives and research to improve and support IÉSEG’s teaching and learning expertise.

Renault’s creation of the Logan is an example of frugal innovation at its best. The carmaker developed a no-frills vehicle using existing Renault parts and technologies.

The new model focused on the essentials, not the optional extras. And it brought the possibility of owning a new car to markets that would previously have only contemplated buying second hand.

The frugal engineering of the Logan focused on the core features of a car: four wheels, an engine and seats to get you and passengers from A to B. Renault used what it already knew and its existing assets to meet the demands of a new sort of customer. Since launching the Logan a decade ago, Renault has embraced the frugal approach to extend its low budget range. These models now account for more than a third of global sales volumes. In 2014 Renault reported that its New Logan model, marketed under the Dacia brand in Europe and Renault in the rest of the world, was its third most popular vehicle.

HOW TO APPLY FRUGAL INNOVATION PLÉ and ANGOT recommend that companies should apply a frugal approach in the three key areas of their business models: 1.Value proposition: frugal innovation can deliver social value as well as economic value, but companies will need to adopt deep ethnographic consumer studies to really understand what their customers need.

2.Resources and skills: how can companies use their knowledge, skills and resources in new ways to reach new customers? How can they change processes to reduce costs, for example of manufacturing and sales?

3.Organizational: frugal innovation is more of an ethos than a set of procedures. Companies will have to alter the way they work, for example embracing partnerships and creating flatter management structures to foster employee participation and the dissemination of ideas and knowledge through the business.

OBSTACLES TO WIDESPREAD ADOPTION OF FRUGAL INNOVATION Despite its clear benefits and common sense, the researchers admit that frugal innovation is unlikely to become mainstream any time soon. “Stripping products down to their functional minimum doesn’t look attractive or ground breaking or even innovative, especially given that innovation has historically been engineers’ reserved area” explains PLÉ.

“Companies also fear that cheaper products could cannibalize their high-end sales,” he adds. “It is certainly a risk, but one that can be avoided or managed if products are well differentiated with distinct value propositions that target the different needs of market segments.”

Get it right, though, and you could get customers for life, as the French bank Credit Agricole discovered.

When customers finished with its Passerelle service – a service that aims to help lower-income individuals facing financial difficulties learn how to manage better their personal finances - the bank helped them to transition to its mainstream brand. These Passerelle customers remain loyal, which is perhaps a mark of gratitude for the bank’s support during their hard times.

“Frugal innovation can have huge benefits across a business,” PLÉ concludes, “but when it creates products and services for bottom-of-the-pyramid consumers it’s extra-special: this creates new markets and growth for the business and, at the same time, real social value, because these often-ignored consumers can buy affordable products that really answer their specific needs.”

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METHODOLOGY

According to PLÉ, companies that adopt frugal innovation and develop strategies for bottom-of-the-pyramid segments in top-of-thepyramid countries will be ahead of the learning curve and should gain significant competitive advantage. “This is a great untapped consumer market,” he says.

The researchers carried out an extensive review of academic literature, books and online sources encompassing theory, conceptual models, outcomes and illustrative case studies of frugal innovation, both as part of bottom-of-the-pyramid strategies in less developed countries and as an approach to business development in affluent nations.

“By embedding frugal innovation, companies can develop targeted products and services that meet the distinct needs and price points of poorer consumers, hence growing their customer base, expanding sales and improving the bottom line, while delivering social value at the same time. That’s a great story to tell and a real motivation for employees.”

DEFINITION OF FRUGAL INNOVATION Frugal innovation is a process that attempts to “do more and differently with less”.

As a first foray down the frugal path, PLÉ advises companies to team up with non-profit partners or more local businesses, who can provide insights on target audiences and offer in-roads into the new markets.

CHANGING BRANDS WITHOUT LOSING CUSTOMERS Based on an interview with Véronique PAUWELS-DELASSUS and the article “The impact of consumer resistance to brand substitution on brand relationship” co-written with Raluca MOGOS DESCOTES (Journal of Consumer Marketing, Vol. 32 No. 1 pp. 34-42, January 2015).

When a company decides to change the name of one of its brands, the principles of resistance to change used in management also apply to consumers. Limiting resistance is the decisive factor for transferring trust from the old brand to the substitute brand. How can you evolve your brand while minimizing the risks?

Véronique PAUWELS-DELASSUS explains the way forward.

Danone’s Bio is now called Activia; France Télécom has become Orange; and Champion changed its name to Carrefour Market. The reasons behind name changes are numerous, from the purchase of companies or brands, to changes in legislation to economies of scale to market globalization. While there are gains to be made, companies also have a lot to lose. Although brand change is becoming increasingly commonplace, it is a risky strategy that can reverse years of marketing investment. How can you limit the dangers?

LEVERAGE AN UMBRELLA BRAND As the brand is, by definition, the “marker” or symbol for a range of products, any change of name weakens the relationship with customers. It inevitably leads (at least

temporarily) to the loss of a familiar landmark, which then generates confusion and resistance to change. With consumers not yet trusting the new brand, they may turn to an alternative product. This is all the more likely to be the case if the new brand is not associated closely enough with the original brand in the mind of consumers, who may think that a new range of products is replacing the old.

In this context, an umbrella brand* is a first key factor for success, and the discontinued brand may temporarily fulfill this role. This approach minimizes perceived risks by providing a quality guarantee across the entire product range. It is not enough in itself, however, to ensure the success of the rebranding.

PAUWELS-DELASSUS recommends that companies be transparent and keep consumers informed, providing an explanation for the change in brand. Companies should also show how the rebranding benefits consumers. Thanks to social networks, it is relatively easy to involve customers in the process; for example, a company could unveil the plans for new packaging and then take consumer opinions into account before moving ahead in order to preserve the relationship and trust while optimizing products.

or she will trust it and loyalty will increase. * An umbrella brand (or family brand) enables a range of different products to benefit from its reputation and image. An umbrella brand can be used at the level of a company (like Samsung) or product range (like LU or Haribo).

SUCCESSFUL REBRANDING Within this framework of informing and involving, PAUWELS-DELASSUS adds that it is essential to observe a transition period by linking the two brands. The change, in other words, must be gradual. But be warned: this phase should not be too long, otherwise consumers will end up assimilating the two brands, as was the case with Gemey Maybelline in France.

For example, when Kraft Foods acquired Danone’s LU biscuit division, it was obliged to give up the Taillefine branding on some cookies because the Taillefine brand name still belonged to Danone (used for its yogurts in particular). The product and the umbrella brand LU remained the same; only the name and packaging changed, with Taillefine giving way to Belvita. In spite of numerous communication efforts to publicize the Belvita brand, the change was such a failure that Kraft decided to drop this original line of biscuits. What strategy should be deployed in such circumstances?

MINIMIZE THE RESISTANCE TO CHANGE According to organizational change theory, resistance decreases if change is gradual, and if employees are kept informed and see a benefit to it. The study by PAUWELSDELASSUS and MOGOS DESCOTES shows that these ideas also hold true for consumers. Trust — a mixture of credibility, integrity and goodwill — must be transferred from one brand to another. Once consumers have trust in a brand, they will also be loyal. It is, therefore, a question of doing everything possible to ensure that consumers adopt a positive attitude and opinion towards the new brand.

Finally, for the rebranding to be successful, other changes should be kept to a minimum; a brand change is not the time to start innovating on the packaging or product quality! And, as the first purchase is decisive, it may be helpful to offer encouragement by using promotional activities. It is then a matter of finding the best way to prove to consumers that the quality has not changed. Subsequently, the more often a consumer buys products from the new brand, the more he

BUSINESS APPLICATIONS MÉTHODOLOGY

BIOGRAPHY Véronique PAUWELS-DELASSUS (PhD) is associate professor of marketing at the IÉSEG School of Management - Université Catholique de Lille (LEM - CNRS). Before entering the world of academia, Dr PAUWELS-DELASSUS worked as marketing director for an international food group. Her research focuses on strategic brand management, creating brand value, and consumer resistance to change. Dr PAUWELS-DELASSUS is author of the Handbook of Brand Management Scales (Routledge, August 2015).

Véronique PAUWELS-DELASSUS and Raluca MOGOS DESCOTES (University of Lorraine, CEREFIGE) conducted a preliminary qualitative study among 18 customers to test the factors that promote transfer of trust and loyalty from an old brand to a substitute brand. The two researchers were particularly interested in the renaming of the Taillefine and Petit Déjeuner brands, which became Belvita and Belvita Petit Déjeuner respectively after Kraft Foods (Mondelez International) took over LU, the biscuits division of Danone. A second quantitative study was then conducted among 313 consumers.

A brand change is never neutral. It inevitably weakens the consumer relationship, at least temporarily. It is a long, risky and expensive process, and it requires substantial investment in communication.

It is important, therefore, to examine the overall budget of the rebranding carefully before embarking on the adventure. Although economies of scale are not always reliable, success is possible, provided that the change is gradual and carried out properly to help consumers with the transition to the new brand. This highly practical study by PAUWELS-DELASSUS and MOGOS DESCOTES will help marketers who want to carry out rebranding gain maximum benefit.

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