Today’s consumer faces a bewildering choice of products on store shelves, and exponentially more online. Salad dressings and cereal brands as far as the eye can see. Cracker and cookie brands that could stretch across the Brooklyn Bridge. Add to that the unlimited varieties of deodorants, shampoos, cold medicines, sneakers, the list goes on infinitum. And so do the line extensions of each of these product categories. There seems to be no end to segmentation.
Exponential growth is impossible.
I had a college professor who spoke at length about the notion of exponential growth. Virtually every industry experiences a pattern of growth and expansion, that if left unheeded, creates havoc. For instance, what if the railroads were allowed to place tracks everywhere and anywhere throughout America to increase their distribution channels and transportation networks? It would be impossible. At some point in time, the professor argued, companies and industries must reach a “steady state.”
For decades General Motors manufactured the same chassis on 40 different car models with different brand names. It was only during the recession of 2008 that the company was forced to realize that they had too many brands with similar features, and today, with just Cadillac, Buick, Chevy and GMC, they have returned to a “steady state” of profitability.
Will hotels learn from General Motors?
Today’s traveler faces an outrageous choice of hotel brands with similar-sounding and confusing names. Want to stay at a Hyatt? There’s Hyatt Regency, Park Hyatt, Grand Hyatt, Hyatt House, Hyatt Place and, coming soon, Hyatt Centric.
The world’s 10 largest hotel chains now offer a combined 113 brands at various price points, 31 of which didn’t exist a decade ago. And hotel executives say more brands are on the way.
Yes. Thanks to high occupancy levels and cheap interest rates, developers are scrambling to build new properties, just like the railroad barons. With the opening of the West, railroad construction reached record proportions just after the Civil War and during the 1870’s and 1880’s. Railroad mileage rose from 35,000 miles in 1865 to over 163,000 in 1890, almost a fivefold increase.
And while the West has already been won, hotels are trying to win a new generation of travelers in search of authenticity by building a new batch of so-called “lifestyle hotels” designed to attract Millennials.
“The Internet has driven people to more niches. Everything is more segmented,” says Best Western CEO David Kong. “Our six brands are actually six different needs.”
Sounds like General Motors all over again.
It’s not a question of how many brands. It is a question of the right brands.
The last time the hotel industry saw so many new brands introduced was in 2006 and 2007, in the boom just before the Great Recession. Déjà vu?
Seriously, are there that many different customers out there that we need so many hotel brands, so many vodka brands, so many wines, so many watches, so many shampoos, so many fragrances and cosmetics? Will most of these brands still be around in five years? Ten years?
Surely, manufacturers strive to try new flavors, new formulas, new innovations, knowing full well that if the new products don’t capture a certain market share within a certain window of time, they’re eliminated. Unfortunately, with thousands of new products introduced every year, and an equal number eliminated every year, how long can America’s manufacturers continue to waste resources before they find happiness with a steady state? Should we blame Wall Street for this quest for more? Is the consumer really demanding more choices, more flavors, more varieties, or is the CEO, in his/her quest to show growth, the culprit? More ice cream flavors make way for the new Gelato line-up, more cereals make way for the Raisin Bran with Cranberries, more deodorants make way for the fresh scents, the spring scents, the summer scents, the desert scents, the nonsense!
Segmentation cannot be sustained anymore than exponential growth can. It makes no more sense than building railroad tracks into every city, town and hamlet. To me, and I suspect to many others, it makes little sense to build a hotel brand with just Millennials in mind anymore than creating a hotel chain with Boomers in mind. Segmentation for segmentation sake will not, and cannot, produce sustainable results. What’s next, JetBlue, American Airlines and Delta building planes for Boomers?
In a market filled with possibilities, there is power in constraint.
There’s a tendency in Corporate America (and Wall Street) to believe that more is better. For me, and I suspect millions upon millions of other consumers, it has reached a point of absurdity. Even overwhelming at times. All the talk of innovation and segmentation fuels product development and line extensions that have so little differences worthy of consideration. One brand of cough syrup makes 8 different kinds. Daytime, nighttime, 8 hour, 12 hour, with decongestant, without decongestant, for adults, for kids, in 4 flavors…why?
With so many brands, so many line extensions, products are introduced into the market so rapidly that they quickly outpace consumers’ ability to learn the subtle differences, or whether these differences even matter at all. Manufacturers must learn the power of focus and constraint. They must strive to keep brand ranges and extensions within confines that make sense. The challenge for brands is not in piling on layer upon layer of changes and new ideas. It is in finding a “steady state” with the right products that can take people with them.
STUART DORNFIELD is an award-winning freelance Creative Director/Copywriter who finds creative ways to grow businesses. He has worked with more than 200 clients in b2c and b2b industries across digital and traditional channels. www.stuartdornfield.com