That’s the Way the Cookie Crumbles: How Better Marketing Trumps a “Better Product”
Sunshine Biscuit, Inc. introduced the Hydrox cookie in 1908. Nabisco copied the idea and introduced the Oreo cookie in 1912. Those that knew Hydrox preferred it to the Oreo. It tasted crisper, was a little less sweet, and was made with vegetable shortening rather than animal fat (Note: Due to health concerns, at some point, Nabisco stopped using animal fat). Nabisco’s superior distribution and promotion gave it a far greater fan base, and turned the Oreo into an American cultural icon. In fact, their pervasive marketing gave most the notion that Oreo was the original and Hydrox was the copy. How did Nabisco do better marketing?
Nabisco started in 1898 as the National Biscuit Company. A former member of Nabisco’s board, Joseph Loose, started Sunshine Biscuit, Inc. in 1902 with two others. From the start, Nabisco had the name advantage since it is sounds more descriptive and substantial.
Since the Hydrox cookie predates the Oreo, it had the advantage of being uniquely first to the position – a cookie sandwich formed by two chocolate biscuits and white icing in the middle. However, Sunshine lost this positioning advantage because Nabisco spent much more on promotion to get into the minds of the buyers. Research shows that even though Sunshine later reminded the marketplace they were first, buyers did not believe it because Nabisco got into their minds first with more pervasive and superior promotion and distribution. This is reminiscent of IBM and Univac. Univac made the first computer, but IBM was first to get into the minds of the greater public as “The Computer Company.”
Already with a weaker corporate name, Sunshine further eroded its first mover positioning advantage by creating a weaker product brand name. The founders came up with the name Hydrox using some flawed product-driven thinking. They wanted the product to evoke goodness and purity, and water was the purest substance that came to mind. So they combined the names of water components – hydrogen and oxygen – to form Hydrox. Many years later, when market research was used to test the name, most associated the name with a cleaning fluid rather than a cookie.
With both a lead in the Corporate Image and Positioning, Nabisco’s Oreo because such as successful brand that it is now given iconic status along with Coca Cola as part of the cultural fabric of America.
Once the brand is firmly implanted in the brain of a far greater number of buyers, the product is perceived to be better. For example, by 1998 sales of Oreo had grown to $374 million compared with only $16 million for Hydrox. In 1996, Keebler (the company whose mascot is a bunch of elves) acquired Sunshine, and in 1999, renamed Hydrox “Droxies.” Kellogg’s acquired Keebler in 2001, and took Droxies off the market in 2003. As a result of thousands of petitions and phone calls to bring the product back, Kellogg’s brought back Hydrox under the Sunshine label in 2008 for the product’s 100th anniversary (using a separation strategy since they did not want to risk any damage to their corporate image). Within a year, due to insufficient sales, Hydrox was removed from Kellogg’s product line.
Price and Distribution
Given the much smaller numbers, Hydrox did not have the economies of scale to enable any price advantage. Faced with much smaller demand, resellers in distribution channels with limited shelf space were less inclined to carry the brand that consumers believed to be the copy (even though it was the original). Therefore Hydrox and Droxy numbers slowly disappeared, and were eventually eliminated from even the Kellogg’s web site.
Without the scale and demand, it becomes harder and harder for both the manufacturer and resellers to justify large promotion budgets to reverse the decline. When companies don’t spend sufficient resources to promote the product, the sales and profit numbers erode further.
Marketing Information System
With dwindling numbers, both the manufacturer and resellers looked at their return on investment and eliminated the product even though those that know the product believe it to be superior to the market leader – Oreo.
What Marketers Can Learn
This is how the cookie crumbles and how a superior product (in the view of those that tried both) loses to the product that was better marketed. Inside-out, product-driven thinking can greatly limit the sales and profit potential of high-tech products. With consumer packaged goods, such as cookies, such thinking is usually devastating as it was with Hydrox. Other examples: Nike versus ASICS; Windows versus Mac; IBM versus Univac.
Ira Kalb is president of Kalb & Associates, an international consulting and training firm, and professor of marketing at the Marshall School of Business at University of Southern California (USC). He has won numerous awards for marketing and teaching, authored ten books and over 60 published articles, created marketing inventions that have made clients and students more successful. Various media frequently interview him for his expertise in branding, crisis management and strategic marketing. Follow him on Twitter.