Imagine this scenario: your company owns a premium brand with a lot of history, strong local manufacturing content and positive attributes behind it.
Back in the days when consumer had fewer choices your brand was shining and charging a price premium was not an issue. People loved your brand. But then the economy became global and your customer is bombarded with offers from your competitors for apparently similar products at a much more attractive price.
If this is happening to your brand, you are not alone.
The big question becomes: how do I protect my premium brand without going bankrupt?
My recommendation: launch a new brand to successfully compete in the newly created segment.
The biggest concern that most management teams have with this strategy is the danger of cannibalizing the existing premium brand. Based on our experience, in order to be successful a few tactics should be taking into account:
- Use a stand-alone brand name, with no obvious connection to the premium brand. Don’t go for brand extensions such as X Light, X International, X Global. Instead go slow, but safe: choose a stand alone name. The new brand takes more time and resources to build but your risk of cannibalization is much lower.
- Develop a positioning strategy based on attributes that are meaningful for the price sensitive segment, and not for the premium one. Usually premium brands are positioned on emotions and experiences, while value brand use a product-based positioning. Think of Toyota (reliability) versus Lexus (“The pursuit of perfection”).
- Leverage positive attributes associated with your company. If you are known for great service, speed of delivery, exceptional sales force, you can safely promote them when launching the value brand. These are attributes attached the your company, not the premium brand.
- Be patient. Stand alone brands are built in time, especially in today’s crowded environment.
These tactics should work in both a business to consumer and business to business environment and should greatly diminish the risk of brand cannibalization.
Do you currently manage a premium brand? What challenges do you experience?
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Just share my two cents 🙂
The questions will be, what is wrong for beeing premium ? look at Mercedez or what u just mentioned – Lexus, and other premium brands.
The question will be, which segmentation does ur product targeted, if your existing TA is the premium Customer, then do not to worry. Based on our experience the Premium Target group will find for reliability and great customer experience nor the Cheaper price.
Yes Indeed they would love to have cheaper price but the most important thing is the experience in using the brand and also how will the brand stands for the customer soul, does the brand quality will meet their expectation. I alywas believe in one Quote : “PRICE WILL NOT LIE (based on Premium Target Audience), CUSTOMER WILL FIND THE BEST QUALITY & EXPERIENCE 🙂
My Suggestion to you, just empower your brand value, maintain the customer experience, keep on giving “the promise” u sell to the target audience, the u will survive.
But if u want to change the target audience then the story will be changed. you have to start thinking on adjusting the price or creating a fighting brand that will need huge investment 🙂
My two cents 🙂
Cheers,
Tengku Ferdi
Hi Wenny,
Thank you for your comment. I agree with you that launching a secondary brand requires an important commitment (financial, human resources, time needed to build the new brand, etc). However lowering the price on the premium brand will lead to dissatisfaction and migration of the existing (premium) customer base to competitive brand(s). In other words this strategy will “cheapen” the premium brand, which will also impact of the company bottom line.
Yes Launch new brand will avoid cannibalization , but the investment will also higher … how long ROI of the investor will be expected …. Usually when it comes to this section …. not every investor would willing to wait and be patient …..
In my opinion …. Launching the same brand that position in the lower ses not always bad idea …..
The consumer already aware that those brand is so premium ( in quality and price ) that most all the time they cant afford to buy . But if we launch with Affordable products in the same brand , the lower ses consumer ( not existing )
would like to try and buy straight away ….. and if the products they think is good enough for their needs , they will retain .
In this strategy …… the ROI will be faster than launching the totally brand new products .
However we should creative to build the marketing strategy for the launching . 4 P has to setted it up really smart . For example : different distribution channel .