In a rapidly changing and competitive business environment, it is not easy to predict:
- future trends in consumer tastes and preferences
- competitors' actions
- market conditions.
Creating new products or making changes to existing brands can be expensive. It involves making investment decisions now, in the hope of making a return later. Weighing up future returns against an investment is a crucial part of a manager's job.
It always involves an element of risk, because the future is never certain. Managers' previous experience, together with market research information helps them to predict future events and outcomes. However, all business activities involve some element of risk. There is often said to be a link between risk and return. The more you risk, the higher the likely returns (or profits). However, a balance must be struck.
It follows from this that decisions about a brand, (e.g. whether to develop it, maintain it, allow it to decline, or even kill it off) involve much discussion. In deciding to develop a brand, managers have to decide how much investment to make and to forecast the likelihood of a successful outcome.
Brand managers aim to develop a long-term strategy to meet a range of objectives such as:
- growing market share
- developing a unique market position
- creating consumer or brand loyalty
- generating a targeted level of profit.
This case study describes a major investment in Kellogg's Special K. It illustrates how the company's investment in new product development served to strengthen a global brand.