Moving a brand into a value arena has exceptional risks not found in other brand extension contexts. But the decision is often based on business logic driven by the attractiveness of the value market and the ability of the firm to compete. As part of that business decision and its implementation, brand strategists should be able to identify the specific business rationale and the risks of the available brand options. .
A value market may be compelling for a premium brand faced with maturing markets that exhibit perceived product sameness. The value subcategory may exhibit growth and vitality as customers become more price sensitive, as value retailers like Target, Home Depot, and Office Depot become more important, or as some innovations like the Crest Spinbrush make a value offering more relevant. Further, there may be competitors in this space that are getting a foothold and have the potential to encroach on the mainstream markets. It can be strategically important to blunt their progress.
Moving an established premium brand into a value market risks tarnishing the brand. Brand perceptions can degrade the value entry or be perceived to lack the quality expected from the brand. A companion risk is that the brand’s ability to deliver self-expressive benefits may be reduced. There is unlikely to be any prestige or self-satisfaction to a value offering.
There are two other risks. A value entry can create a cannibalization problem as there have been many occasions when most of the buyers for the value entry came from existing customer of the premium brand. Finally, there is the ironic reality that the value offering may fail because customers expect that it may be relatively high priced, a problem when value is the driver.
These risks coupled with the brand tarnishing risk can be addressed using four brand options:
Abandon the premium market. If the premium brand is struggling in a competitive environment or if it has been tarnished because of a quality incident, a better use of its equity may be to compete only in the value market where its brand would be an asset. But when the premium brand is an ongoing player in a large market, walking from that position is not wise or even feasible.
Create or acquire an entirely new entirely new stand-alone brand. When Gap didn’t to develop a value chain to reach the lower end of the market, the proposed name “Gap Warehouse” was found to taint the Gap brand and spawn cannibalization. So, they decided to use the Old Navy brand. Samsonite used the acquired American Tourister brand to serve the discount and mass merchants. The problem is that few can afford to develop or buy a suitable new brand, particularly at the value end where cost considerations make it difficult to support a brand-buy strategy or a brand building effort. It is simply too difficult and too costly.
Use sub-brands. By distinguishing the downscale offering from the parent brand, sub-brands can reduce the risk of cannibalization and image damage. This job is more feasible when the value offering itself is distinctive and the sub-brand reinforces the difference. When the offering is difficult to distinguish, as in motor oil or detergents, the challenge is more severe. In contrast, Courtyard Marriott has a consistent, differentiated offering. Similarly, the Mini Cooper from BMW, the retro funky, tiny car, is visually and functionally so different from the mainstream BMW line that the risk is reduced. When the differences are less visible, it can be helpful to create different personalities supported by logos, color and brand building efforts to provide the necessary separation. The sub-brand could be the fun “kid” in the family in contrast to the “parent” brand.
A sub-brand can imply a qualitatively different offering or one that is designed for a different segment. Qualifiers like express, junior or mini denote that the offering is in the family but will be limited in some way. Pizza Hut uses the brand Pizza Hut Express for those outlets with limited menus and no table service. Sainsbury, the UK retailer, launched the Sainsbury’s savacentre format emphasizing the value position. Martha Stewart Everyday provides a separation for the K-Mart line of merchandise from the other Martha Stewart offerings and activities.
Use endorsed brands. An endorsed brand provides more separation from the parent brand than a sub-brand. Marriott was able to use an endorsed brand strategy to help it move into value arenas such as Courtyard Marriott or Marriott’s Fairfield Inn and Marriott’s SpringHill Suites. The brand is then used to provide credibility and visibility to the offering and sometimes some functional benefits, as well as a reservation and reward system. Thus, it brings significant value with minimal risk assuming that the offering delivers on its promise. But it still involves some risk to the brand, because it provides visibility to the connection between the parent brand and the value entry that can lead to both cannibalization and image erosion.
Before moving a brand down, be sure you consider whether the business rationale is truly compelling and the risks to the brand have been considered.