developing sub-brands
DESCRIPTION
This presentation focuses on the issue marketing managers face when profit margins begin to shrink beyond desire in their current markets. Should the marketing managers take their brand to where the action is or will that hinder the brand's perception? This brings up the issue of rather to reposition the entire brand to match the image of the new Value Market or Premium Market you are trying to enter. While the other option is to develop a sub-brand of the main product brand that won't risk the equity that has been built with the main product brand. This incase brings up the question will the sub-brand be endorsed by the main brand or be a co-driver meaning the choice of why to buy the product is indifferent or is this a situation where you are bringing class to mass and the main product brand's image and equity is the reason the consumer buys the product. Example, Mercedes C-Class.TRANSCRIPT
Should You Take Your Brand To Where The Action Is?
Case Study by David A. AakerPresented by Chelsea Holland and
Anthony W. Tucker
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Executive Summary
• When markets turn hostile and profit margins begin to shrink it is no surprise that marketing managers look to take their brand to other profitable markets.
• But the big question is should they? Will their current brand image and perceived value transition well into Value markets or Premium markets?
• Should they transition up or down the vertical market scale?
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DownscaleOpportunity usually arise through a brand’s current distribution channel. A boom in the value segment of any given product category. Increased volume and economies of scales are results of downscale vertical extension.
Is it worth the risk of the brand loosing its stature as a higher-priced brand. Consumers perceive higher prices to be higher quality.
Upscale Motivation for moving a brand from mainstream market into an upscale market is clear: high end markets enjoy much higher margins than mainstream markets.
Does your brand have the credibility to move upscale? Are the bulk of your brand’s customers willing to pay a premium price?
Revitalize tired products that have been
commoditized.
Example: Water
Vertical Extensions Which way should you go? If any?
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HOW TO ACCOMPLISH YOUR MOVE
Vertical Extension
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How did Toyota reach the value and premium markets?
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Reposition or Sub-brandReposition The Entire Brand
Managers can reposition an entirebrand in a new downscale market by dropping its price, but beware ofthat move. Invest in a brand when the price drops. Marlboro.
A price cut can have enormous financial implications. Including cutting profit margins for the entire industry. Inciting a price war making weaker companies to match or exceed any permanent price decrease.
Tarnish the brand? Or strategize and launch an everyday –low-price program. Cost leadership. Retailers and consumers understand.
Sub-brands
Sub-brands vary in the extent to which they influence consumers’ purchase decisions and their experience using the offering.
When consumers buy a car such as the Ford Taurus, are they purchasing a Ford, a Taurus, or a combination of the two?
Maintain the parent brands’ credibility and prestige regardless of how the sub-brand performs to protect from cannibalization.
How to keep the negative impact to a minimum.
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Market Development
• New Markets • Existing Products
Product Development• New
Products• Existing
Markets
Market Penetration•Existing Markets•Existing Products
Diversification•New Products•New Markets
Non-Price Oriented Strategies
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Endorser•Minimize damage and reduce threat of cannibalization
Co-Drivers
•Roughly equal influence on consumers
Drivers•The brand is vulnerable to cannibalization very little distinguishes one brand from the other.
Three Brands At Work1. Parent Brand splits
into two: product brand and an organizational brand.
2. Organizational brand endorses the sub brand.
3. Product brand remains premium brand.
Being the best the brand can be in a different target market. Down, middle, and upscale markets. Different expectations and positioning of the product.
Descriptor sub-brands are risky because it signifies lower-quality offering.
Integrated with core brand’s repositioning. Descriptor does not drive consumers to purchase. Different target market. Class to mass. The parent brand’s name retains the power of the consumer’s decision to purchase.
Three Types of Relationships Between Parent and Sub-brands
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Global Brands
• Confusing positioning and pricing for people who conduct international business.
Too Many Markets
• Under one brand name image can be negatively effected by each position of brand in each different market.
• Sony purchased Loews movie theatre chain. Old and didn’t deliver service compatible with Sony brand.
• Walk-Man prices $25-$500
Minimize Risk and Sub-brand
• Rationalize and control a portfolio of brands for price, value, and maintaining premium brand value/image/worth.
• Purchase a new brand
How Much Can One Brand Take
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Review
UpscaleCustomers has specific expectations.
MainstreamValue or upscale offer most profit and won’t hurt the parent brand.
Value (Downscale)Differentiate a value offering from its parent brand with physical differences.
Lower-End UpscaleClass to mass. Can’t afford high-end offerings. Upscale sub-brand descriptor
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References
Aaker, David (1997). Should You Take Your Brand To Where The Action Is: Boston, MA: Harvard Business School Publishing