Does the NFL Risk Oversaturation? The Pursuit of Growth vs. the Value of Scarcity & Exclusivity

Source: Fox Sports

Great luxury brands such as Brunello Cucinelli, Patek Philippe, Hermes, and Ferrari use deliberate scarcity and exclusivity to optimize brand equity, enhance willingness-to-pay, and distinguish themselves from the competition.  

Most people would not consider the National Football League (NFL) a luxury brand.  Yet, the NFL traditionally benefited from scarcity and exclusivity.  While Major League Baseball played 162 games per year, and the NBA teams competed 82 times per season, the NFL played only 14 games per season when I was a child.  All but one of the games took place on Sunday afternoon in a six-hour window, making that day an event that was highly anticipated each week.  One very special game took place on Monday night, with Howard Cosell, Frank Gifford, and Don Meredith serving as the star-studded announcing team.  Two networks split the games, and another (ABC) broadcast the very special Monday night event. 

Today, the NFL has expanded in numerous ways.  Revenues and profits have skyrocketed over the years.  Yesterday, the NFL announced the 2026 schedule.  The NFL now plays 17 games per season, with an 18th game anticipated soon.  Games will be played on Wednesday, Thursday, Friday, Saturday, and Sunday at different points during the season.  Games will be broadcast on streaming services, as well as major broadcast and cable networks.  Games will be played around the globe, meaning that on some Sundays, there will be games from early in the morning until nearly midnight on the east coast.  The growth is astonishing.  I love the sport. Yet, I keep asking myself: Is there a point at which the NFL will have gone too far in pursuit of growth?  Will the NFL lose some of the scarcity and exclusivity it enjoyed relative to other sports, and in so doing, erode its brand equity?  Perhaps not.  Americans cannot seem to get enough of football.  Still, it bears asking the question. 

Many successful companies face this challenge.  They want to grow, but they find themselves risking oversaturation and brand dilution. At various points, luxury brands such as Coach and Gucci severely harmed their brands because of their expansion strategies.  The best brands practice restraint. They grow with some caution and discipline.  Ferrari, for example, has grown its production volumes in recent years. Still, it makes less than 14,000 cars per year.  By comparison, Porsche produces roughly 300,000 vehicles per year.  Ferrari has expanded by producing ever-more-expensive vehicles, rather than moving down market to cater to a broader audience.  Hermes is very careful about the distribution of the famous Birkin bag.   Customers cannot just stroll into a store and purchase one.  You have to earn the right to purchase the bag!  

Will the NFL show any restraint in the years to come, or will they continue to expand aggressively?  How much football is too much, or are fans' appetites simply insatiable?  These are the questions the owners and their broadcast partners must grapple with in the years to come. 

Porsche vs. Ralph Lauren: The Danger of Diluting Brand Equity

Fortune reports this week on the contrasting situations at two iconic brands: Ralph Lauren and Porsche. At Ralph Lauren, revenues and margins are rising. CEO Patrice Louvet has executed a sustained campaign to "elevate" the brand.  Louvet rightfully came to be concerned that the company's growth strategy came with significant brand equity risks.  He recognized that the company needed to act forcefully to raise willingness to pay.    Fortune's Peter Vanham writes:

Before he arrived in 2017, Ralph Lauren “expanded in places where we probably shouldn’t have, which drove higher levels of promotional activity,” Louvet told me. “It was like the boiled frog phenomenon. I’m sure it was well-intended. Each year, we thought it was just marginal. But after a few years, you realize it’s not going to end well.”

Since then, he said, “we’ve had our eyes wide open on tough choices.” Joining Ralph Lauren after almost three decades at P&G, the native Frenchman took a page from his old employer’s turnaround book. To escape from the price race to the bottom, the company “took a one-year, painful hit” to reset consumer expectations. Then, during COVID, Louvet reset the distribution strategy, and closed two thirds of its wholesale presence.

Meanwhile, Fortune's Christiaan Hetzner reports on the recent challenges at Porsche. Hetzner writes that the Porsche CEO, Oliver Blume, has announced a second major round of cost reductions at the luxury automaker. Hetzner concludes that the company is "drifting deeper and deeper into its biggest crisis in decades."  Blume apparently attributes the troubles to a slowdown in EV demand, a tough price war in China, and the high new tariffs imposed by President Trump.  While these factors clearly have affected Porsche's business, I wonder if the troubles point to a deeper strategic challenge. Over the past two decades, Porsche has expanded beyond being the producer of its iconic super premium sports cars.  Porsche sells sedans and SUVs around the world.  Has that growth begun to impact the brand, and can the company continue to command the high willingness to pay that it generated in the past?  Will Porsche require the type of brand reset executed by Ralph Lauren?  

Will Rao's Thrive After Acquisition by Campbell's?

This week, Campbell's announced the $2.7 billion acquisition of Sovos Brands, a firm whose most famous and successful brand is Rao's.  If you aren't familiar with the brand, you should be.  It's simply the very best tomato sauce sold in the United States, and frankly, there shouldn't even be a moment of debate.  I should know.  As the son of Italian immigrants, I grew up never eating tomato sauce from a jar. We had a huge vegetable garden, and my parents grew tomatoes and made their own sauce. Still today, I grow my own tomatoes and store sauce for the winter, though I don't jar enough to last the entire year. When I have to purchase sauce, there's only one brand that I will purchase in a jar - Rao's marinara sauce. As a fan of the brand, I'm hardly alone. Ben Cohen of the Wall Street Journal writes, "Rao’s deliciousness is undeniable. Bon Appétit magazine called it “the best jarred pasta sauce there ever was.” When the Washington Post convened a panel of taste-testers, the judges tried a dozen brands and declared Rao’s their favorite."   Rao's is hardly a bargain though.  It's a premium brand.  A 32 ounce jar of Rao's currently sells for $10.29 at Stop & Shop.  You can purchase a 24 ounce jar of Ragu for $1.99.   Now you might think that I'm crazy to pay that kind of a premium for tomato sauce, but you would be wrong.  It's absolutely worth it! 

The Campbell's acquisition may be beneficial, but it understandably generates some concern.  Campbell's is known for selling a very affordable line of soups.  How will the premium brand Rao's fare within the Campbell's portfolio?  The company's track record of acquisitions is decidedly mixed.  In the late 1960s, it acquired Godiva's chocolates.  That brand thrived under Campbell's ownership for many years, but ultimately, the company divested Godiva because it didn't fit very well with the other products in the portfolio.  More recently, the company divested Bolthouse Farms at a steep discount to the price they had acquired the brand for just seven years earlier.  

The question remains whether valuable synergies exist between Campbell's and Rao's.  Why are these firms more valuable together than apart?  Can Campbell's manage the brand more successfully than it has already been managed?  That seems unlikely, given the parent company's lack of recent familiarity and success with super premium brands.  Moreover, they aren't buying a brand in distress; they are purchasing a brand that is already performing at a very high level.

Any attempt to drive synergies must be taken with caution as it may dilute the quality of the premium tomato sauce brand. For now, Campbell's has assured customers and investors that it won't change the taste and quality of the popular tomato sauce. Still,  we should expect some pressure to justify the acquisition premium by creating synergies.  That pressure can be counterproductive at times when mainstream companies acquire much more premium brands.  

Your Front-Line Employees are Your Brand!

Companies spend a great deal of time and money building advertising campaigns, social media strategies, and other promotional vehicles to build brand equity.   For many firms, though, their front-line employees represent the most significant way that customers experience the brand.  Those employees become crucial ambassadors for the brand.  

Starbucks understands the crucial role that front-line employees (the baristas) play.  It has invested heavily in a program to inspire and motivate the baristas, and to help them bring the brand's values to life in each Starbucks location.   The company has created the "Starbucks Leadership Lab" to inculcate the core values of the brand in its workforce.  Here's an excerpt from a Fast Company article about this program:

Starbucks’s Leadership Lab is, as its name implies, part leadership training, with a station that walks store managers through a problem-solving framework. It’s also part trade show, with demonstrations of new products and signs with helpful sales suggestions, such as “tea has the highest profit margins.” The majority of experiences are meant to be educational, including several that give store managers access to top managers of the company’s roasting process, blend development, and customer service.  

But what makes the Leadership Lab different than a typical corporate trade show is the production surrounding all of this. The lights, the music, and the dramatic big screens all help Starbucks marinate its store managers in its brand and culture. It’s theater--a concept that Starbucks itself is built on.  “The merchant’s success depends on his or her ability to tell a story,” writes Schultz. “What people see or hear or smell or do when they enter a space guides their feelings, enticing them to celebrate whatever the seller has to offer.”

In this case, Starbucks is selling its employees the Starbucks brand. And it has given the Leadership Lab the same attention to detail as its store ambiance.  As Valerie O’Neil, Starbucks’ VP of global communications, puts it: “[The experiences] are wrapped in a very inspirational journey, so partners can walk away not only understanding and informed, but feeling it.”

Note that such programs cannot be efforts to simply dictate practices and policies to employees.  It cannot be an attempt to brainwash them regarding the company's goals and values.  It has to be a forum for two-way communication.   The messages and the values conveyed to employees must be authentic.  Store managers must "walk the talk" each and every day.  If not, then such programs will do more harm than good. Associates will feel that they have been misled.  They have to be part of the process, and there must be opportunities for them to express their ideas to management.  The photograph above demonstrates one of the ways in which the associates' ideas and thoughts are captured at the Starbucks Leadership Lab.

 

Reasserting your Brand

Author and consultant Nick Tasler has a good article on Business Week's website regarding how firms can reassert their brand after a rocky period.   He uses Starbucks' turnaround recently to illustrate his points.  Starbucks realized it had strayed from its coffee roots and diluted its brand equity.   It had to clarify the brand's positioning.  Starbucks did so by trying to reassert itself as the "coffee authority."  Tasler argues that firms must take three steps to reassert their brand.


1. Decide what your equivalent is to being “the coffee authority.”   What do you want to be known for in the market?  For what do you want to be known as a leader?

2. Decide what you should start doing more of to reassert your authority.  What innovations can you bring to market to burnish your reputation as a leader in a particular market space?   Where should you invest to rebuild your competitive advantage? 

3. Decide what you should stop doing in order to reassert your authority.   What activities should you stop doing because they dilute your brand, distract management attention, and make you far too similar to other players in the market?  

BMW, 4 cylinder engines, and new fuel efficiency standards

BMW has announced that it will be launching new vehicles with four-cylinder engines in the United States.  The decision represents a sharp reversal from past policy.   Twelve years ago, BMW stopped selling four-cylinder vehicles in the United States due to a lack of sufficient consumer demand.  Why are they reversing their strategy now?  CAFE: Corporate Average Fuel Economy standards.   The United States has implemented a sharp increase in those standards, and to avoid large fines, automakers will need to sell many more fuel efficient vehicles. 

What's the implication for BMW?   Regardless of whether you endorse the new government regulations or not, the business question is whether an effort to comply with the standards will lead to poor investments.  Will consumers buy four-cylinder BMWs?  Beyond that, though, one has to wonder about the potential damage to the brand if they offer four-cylinder vehicles which lack the power and performance that customers are accustomed to experiencing with BMW cars.  After all, this is the "ultimate driving machine" company.  They have done a terrific job of articulating that brand positioning over the years  and remaining completely consistent with it.  BMW insists that the engine technology has advanced sufficiently over the past twelve years so that consumers will not be dissatisfied with power and performance for the new four cylinder engines.  It will be interesting to watch consumer reaction.