As customers age and make more money, they might be tempted to leave familiar brands to explore higher-end products. The creation of an accessible premium brand within an existing one is a retention play, and retailers are no longer the only firms giving it a try.
Here are three signs or clues that introducing a new brand, within a narrowly defined brand, might make sense:
- A loss of customers, particularly higher price-point customers. A new brand introduction should not be the first line of defence – lost-customer interviews combined with a check on product or service quality and on any recent changes in the competitive landscape should be the initial step. When that’s been exhausted with no change in outcome, a brand-within-a-brand is a possibility.
- 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 bottom of the pricing spectrum. A branded product line introduction, or brand-within-a-brand play could make sense here.
- The introduction or rise in prominence of a competitive brand that is attacking at the flanks. More than a direct play for customers, the presence of the competitive brand can indicate an opportunity for a brand-within-a-brand play.
The brand-within-a-brand introduction strategy is an inexpensive alternative to a full brand introduction and its associated infrastructure and marketing costs. It's also a relatively safe way to experiment with price discrimination and margin increases.
After identifying the need, there are common tactics that can be borrowed from other accessible premium brand-within-a-brand introductions when creating your new line:
- The price point: Choose a price that is up to two times higher than the average priced product in your current line. A small increase is not sufficient to signal the upgrade justified by the new brand.
- The products or product line: Ensure the products are both visually different and measurably better than those in the brand’s current line. This can be achieved through better materials or ingredients, innovative design, tighter production tolerances, and higher quality control. The product will need to justify the higher price point, but that doesn’t mean the new design or inputs have to eat up all of the additional margin.
- Distribution: Limiting it will be tempting, since not all segments of customers will be attracted to or able to afford the new brand. But distribution should only be limited in numbers of current options – for example, sell in 50 per cent of current stores – since widespread distribution is still required for an accessible premium play, and the point is to leverage the assets of the current brand.
- Packaging: Introducing new or unique packaging is an important signal of the higher positioning and quality of the new brand. Labels, bags, boxes – even price tags – should be visibly more appealing and more durable than the packaging used for the current brand’s products.
- Promotion: This is where plans can deviate most from where the current brand plays. For new accessible premium brands filling the upper end of a category, niche events such as individual sports and industry parties in the business-to-consumer space, and invite-only demonstrations – rather than trade shows – in the business-to-business space can work well.
Mark Healy is a managing partner at Torque Consulting Group, a division of Satov Consultants, specializing in market entry, product launch and customer insight. Mark is a regular speaker and media contributor, and he is known as much for his penchant for loud socks and a healthy NFL football obsession as he is for his commitment to coaching and developing professionals early in their careers. He is a passionate Queen's Engineering and Ivey Business School grad, a past chair of the Ivey Alumni Association board of directors and currently an advisory board member for Holiday Helpers. Mark lives in Toronto with his wife Charlotte, his daughter Evangeline and their two bulldogs, McDuff and Duke.
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