When manufacturers weaken brand loyalty through their own actions, they fall prey to the retailer’s desire to gain greater power in negotiations over shelf space. The power shift means greater opportunity for retailers to demand higher slotting fees and gain a larger share of profit margins. This shift will ultimately damage the egos and finances of many senior managers.
As long as manufacturers focus on the short term, profits will decline. However, guided by long-term planning, managers will make decisions that build brand loyalty and, ultimately, the power, money, and ego of those daring enough to take the long view.
Power, of course, makes managers feel more in control. Manufacturers feel that the “increasingly powerful retailers” (as Quelch and Kenny put it) are to blame for their low margins and shifting market shares. Yet these symptoms are just another consequence of avoiding long-range brand issues. Quelch and Kenny need to identify the power struggle that is being waged today between manufacturers and retailers.