Citgroup and the Concept of Relevance

Today I'm going to really briefly touch on Citigroup and move forward into the concept of relevance.

The Citigroup example in the book highlights how a portfolio has to constantly evolve in a managed fashion. In 1998, Citicorp and Travelers Group merged. At the time of the merger, the key brand assets included Citibank, Travelers Insurance, Salomon Smit Barney, Primerica Financial Services and Commercial Credit. However, post merger the new organization was faced with complex decisions as to how best manage a combined and diverse brand portfolio.

The result? Citigroup employed a hybrid portfolio aimed at their three main financial service areas: consumer brands (branded Citi with the red umbrella stylized to fit over the bold "citi" prefix - Citibank, Citifinancial, Citimortgage), institutional brands (branded Citigroup with the red umbrella - Citigroup Corporate and Investment Bank, Citigroup Private Bank, Citigroup Asset Management), and specialty brands that retained their own branding (SmithBarney, Travelers, Primerica, Banamex).

What's essential here with the Citigroup example is the method it handled the merger, the use of the merger as a catalyst to take inventory of the brand assets and the resulting organization and management of the new portfolio.

Now, let's shift gears and take a look at this quote in 1977 from the CEO of Digital, the leader of minicomputers back during the 60's and 70's.

"There is no reason to believe anyone would want a computer in his or her home."

Obviously, this quote was so very wrong but what it does is introduce to us is the concept of relevance. What is relevance? Relevance occurs when there is a perceived need for a product category and when a brand is among the set considered by the consumer to relevant to a product category.

The book provides a great example in taking a look at Powerbar and the dynamic evolution of the energy bar industry. Powerbar entered the snack bar market dominated by Snickers in 1986 and created a whole new category - the energy bar. The energy bar was positioned as athletic, energy food. Out of Powerbar's success, competitors like Clif Bar and Balance entered the market and pushed entirely new sub categories of energy bars - those that actually tasted good, those for women, diet bars, etc. As a result, Powerbar was forced to keep pace and maintain its relevance in an ever changing yet growing industry. To put the growth of the industry in perspective, in 1996 the energy bar industry generated about $100 million and by 2001 the industry had exploded to a $700 million a year industry.

An important aspect to understand about relevance is that relevance has as much to do about the category as it does the product or service. For instance, simply take a look at minivans. You can be the best and most well known minivan maker in the world but if consumer demands have shifted to SUVs, you are no longer relevant to the market. Or, for a more exact example, take a look at AOL. AOL dominated dial up internet services. However, dial up is largely a thing of the past thanks to DSL and high speed cable. As a result, AOL is struggling to find its relevance in the market of today.