How Yum Brands generates sales

How Yum Brands generates sales? Former CEO Greg Creed and CEO Ken Muench spoke at length to Marketing Dive about the R.E.D. strategy — also the subject of their new book — that has turned brands like Taco Bell into trendsetters in their category.

Marketers can no longer afford to excel in only one aspect of their business as the demands of technology and brand building converge in the digital age. Being able to intelligently leverage existing strengths-such as a recognizable mascot or tagline-while directing more energy toward addressing weaknesses, such as a lack of technical capabilities, is key to achieving growth in today’s marketplace. At least that’s the theory behind the Relevance, Ease, Distinctiveness (R.E.D.) marketing strategy, which has helped quick-service restaurant giant Yum Brands better embed Taco Bell, KFC and Pizza Hut into the culture while boosting sales.

Marketing is simple, but it’s not easy. And when you have three brands in 150 countries, trying to do great marketing around the world, across all those brands, really takes some structure,” Greg Creed, former Yum CEO and R.E.D. architect, said in an interview.

“I think we took something that wasn’t easy, made it simple, demonstrated that it worked, and then showed that it really worked,” he added later.

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R.E.D., whose original concept was developed back in 2011, is the subject of a new book called “R.E.D. Marketing: The Three Ingredients of Leading Brands,” authored by Creed and current Yum CEO Ken Muench, who also leads strategy at his own consulting firm Collider Labs, which was acquired in 2015. In recent years, R.E.D. marketing has defined such decisions as the resurrection of Colonel Sanders as KFC’s mascot – a successful attempt to bring relevance back to consumers – and Pizza Hut’s introduction of contactless curbside food delivery in the United States in 2020. As seen in the latter example, this action book served as a backbone for Yum during the COVID-19 pandemic, allowing the organization to respond quickly to changing consumer demands and technological needs.

Now, as renewal is underway and new mandates in areas such as data-driven marketing, digital and mobile ordering need to be addressed, R.E.D. continues to inform Yum’s messaging and, increasingly, strategic maneuvers, such as the recent series of technology acquisitions. The larger investment in technology comes as digital sales across Yum’s portfolio reach a record $17 billion in 2020, up about 45% from the previous year.

“COVID was a stress test for R.E.D., and R.E.D. passed the stress test,” said Creed, who retired from Yum in 2019. “As cultural norms will change, as social relevance will change, and even functional relevance and simplicity will improve, every brand will have to keep evolving. You can’t just take what you have and continue to be successful.”

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Changing the formula

In parsing the R.E.D. formula, Creed and Muench noted that one of the biggest blind spots for marketers is relevance, perhaps the most important factor in success. This quality is becoming increasingly elusive in a world oversaturated with digital content and budding disruptors, but some brands just aren’t keeping their finger on the pulse.

Creed pointed to Taco Bell as an example of where marketers can slip on the “R” aspect of R.E.D. marketing. In the late ’90s, the Mexican fast-food restaurant chain introduced an ad campaign featuring a talking Chihuahua pining for Taco Bell. The campaign, which ran for the rest of the decade, gained industry acclaim and became a memorable creative piece. But, according to Creed, it did not translate into increased productivity.

“Taco Bell was winning every known award… but in the same period, their transactions declined,” Creed said. “That happened because the brand was incredibly distinctive but completely irrelevant.”

Marketers who don’t study their environment can end up with what Muench called a “cultural anchor,” establishing a positioning that may be trendy or lively in a broad sense but not necessarily relevant to a particular category or market, resulting in a wasted effort. Closing gaps in relevance may also require taking big risks and a willingness to kill brand “favorites.”

“You have to have a culture where taking a swing at big, bold and daring things is encouraged and rewarded, not suppressed,” Creed says.

At Collider Labs in the early 2010s, Muench, the store’s co-founder, put forward the theory that fast food was transforming from a source of fuel to a source of experience in the minds of consumers. This insight led Muench and Creed to lobby Yum’s management to abandon Taco Bell’s “Think Outside the Bun” tagline, once a key differentiator from competitors like McDonald’s and Burger King, in favor of something more lifestyle-oriented. This is a telling example of how R.E.D. is trying to consider not only brand recognition, but also its practical and functional value to consumers.

Although the suggestion was initially met with rebuff from Yum’s senior management, Taco Bell changed its slogan to “Live Mas” in 2012, and with that began an era in which the chain has better leveraged its iconic followers through viral promotions, including a branded hotel and menu staples such as Doritos Locos tacos. In addition to engaging consumers more effectively, the company has become a sales juggernaut and continues to innovate in mobile ordering and loyalty, launching its first loyalty program in years last July.

“We’ve done everything related to social hype. That hadn’t happened at QSR before,” Muench says. “[Taco Bell] was, I would say, the first brand to do that.”

Emphasizing ease.

Yum’s marketing leadership is undergoing a change just as the economy is starting to reopen at scale. KFC lost its U.S. head of marketing, Andrea Zahumenski, in April, who helped bring the Colonel’s back to the center of marketing and provided a winning streak of growth. Pizza Hut also recently lost chief marketing officer George Felix, who moved to Tinder amid a reorganization of its marketing team. Lindsay Morgan, formerly brand communications director, is now chief operating officer.

A foundational strategy like R.E.D., in theory, allows Yum to take a modular approach to marketing, directing energy where it is most needed while maintaining a core strategic vision. Having asserted the relevance of brands like KFC and Taco Bell, Yum is now putting more effort into “ease,” as the category as a whole shifts to mobile and digital channels, which exploded during the COVID-19 crisis.

“Delivery, digital and e-commerce all existed before the pandemic, but there was very little use of them in most countries,” Muench says. “Suddenly the pandemic came, and it was immediately apparent … that this would be the biggest measure of success or failure for QSR after 2020.”

Yum has made three technology acquisitions this year to keep up: the artificial intelligence (AI) division of Kvantum (pronounced “quantum”), conversational commerce developer Tictuk and, most recently, Dragontail Systems, which provides AI-based order management and delivery technology. As QSR gains momentum in its technology transition, the R.E.D. mentality will play an increasing role in decision-making, executives said.

“All three [acquisitions] are really driven by the growing importance of simplicity and the changing dynamics of consumers around the world,” Muench said. “Anything you can do as a company to accelerate your leadership in this area will pay dividends.”

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