I recently had a great discussion about men's retail with a colleague and a client, over coffee in a grand hotel lobby in San Francisco.
If only that was the norm and not the exception (the locale, not the conversation).
I was exploring an idea about a gap in men's fashion between the Banana Republics and the Harry Rosens of the world. I still think there is real opportunity for a brand to overlap the top end and lower end price points of BR and HR, respectively, plus occupy the space in between. But the discussion highlighted a trend: the introduction of premium brands within already narrow brands, to prevent “graduation.”
How does a retailer grow? Clearly not a simple question.
New product introductions, including new product lines, are the likely first option since most of the operations are set – sell more items. Geographic expansion is probably next – sell the same items in more places. New brand introductions (Lexus, by Toyota – and Banana Republic, by Gap) are also possible – capture more segments, including higher-margin segments.
But then what? What happens when a retailer has blanketed its target geography with multiple brands, all with optimized product lines?
More of the same. But in a different way, and for different reasons.
Many retailers have opted for a hybrid model. A brand-within-a-brand play. This is different from Gap introducing Banana Republic. This is Banana Republic introducing Monogram – which you could argue is just another product line introduction, but in this case it is more than that.
It is a brand in-and-of-itself. And among the reasons for its introduction is the idea that retaining customers who may feel they are ready to move to a premium/designer brand is more appealing than simply continuing to find customers who align with the brand's core value proposition.
It is about providing customers with an appealing alternative to “graduation” to a new brand or retail experience. It is about trying to fill the void I was describing that morning on the west coast.
Banana Republic is not the only example of a retailer employing this strategy. Nine West introduced Boutique 9 for ostensibly the same reason. Brooks Brothers has not one but two brands-within-a-brand: Country Club and Black Fleece both command higher price points than their Brooks Brothers-branded cousins, in the same stores.
What are the signs or clues that introducing a new brand, with a previously narrowly defined brand, might make sense?
The first is a loss of customers, particularly higher price point customers. A new brand introduction should not be the first line of defence here – lost-customer interviews combined with a check on product/service quality and on any recent changes in competitive landscape should be the initial step. When those steps are exhausted and have not changed the outcome, a brand-within-a-brand is a possibility.
A second clue is changing customer demographics and behaviours. Segmenting the customer base should be a regular activity regardless, but it is particularly important at this juncture. The segmentation may reveal an at-risk segment, at either the top or the bottom of the pricing spectrum. A branded product line introduction, or a brand-within-a-brand play could make sense here.
Another warning sign is the introduction or rise in prominence of a competitor/competitive brand, which is attacking at the flanks. More than the direct play for customers, this presence of the competitive brand itself can indicate an opportunity for a brand-within-a-brand play.
A brand-within-a-brand introduction strategy is an inexpensive alternative to a full brand introduction, and its associated infrastructure and marketing costs. And a relatively safe way to experiment with price discrimination and margin increases.
Special to the Globe and Mail
Mark Healy (P.Eng, MBA) is a partner at Torque Customer Strategy, a boutique consultancy focused on go-to-market strategy. He is a regular speaker and media contributor on topics ranging from marketing to managing professional service firms, and he has completed more than 100 engagements in this space over the past five years. Mr. Healy is known as much for his aggressive sense of personal style as he is for intense and engaging conversations. He lives with his wife Charlotte and their bulldog McDuff in Toronto.
