A few years ago, I had a great conversation about men's retail with my colleague Terence Smith and a client who cares about how he looks.
We were exploring the gap we saw between the upper end of the mainstream brands – such as Banana Republic – and the start of a premium category still accessible to a large portion of the consumer population, with Harry Rosen as one example. Since then, some brands have repositioned to fill the space (Ralph Lauren) and others have emerged (Ben Sherman). However, the discussion highlighted a growing trend: the introduction of premium brands within already narrow brands, to prevent "graduation."
I have written a lot in the past about affordable luxury and accessible premium positioning. This is another take on the creation of an accessible premium category to address a specific issue: customer churn due to life-stage and economic circumstances. As customers age and make more money, there is temptation to leave the familiar and to explore premium products. The creation of an accessible premium brand within an existing – likely accessible – brand is a retention play.
For example, many retailers have opted for a hybrid model, or 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, since there are no Monogram stores yet – but in this case it's more than that. It is a brand in-and-of-itself.
Among the reasons it was introduced is that retaining customers who may be ready to move to a premium brand is more appealing than continuing to find customers who align with the brand's core value proposition.
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 of which command higher price points than their Brooks Brothers-branded cousins, in the same stores. And Hudson's Bay Co. has essentially been moving upmarket – a very savvy move by Bonnie Brooks – by repositioning or acquiring brands, such as Top Shop, that serve the same purpose.
Retailers are no longer the only firms adopting the establishment of an accessible premium brand within an existing brand. The American Express black card is probably the most obvious non-retailer example, in a traditional and typically staid industry – though admittedly it is not super accessible. Quick-service restaurants are getting in on the act as well: McDonald's introduced McCafé to capture a piece of the market it didn't play in, but also as a way to offer higher-margin products in the same stores.
Even in-hand tool makers are going in this direction. Stanley introduced FatMax branded products a few years ago, which were meant to keep experienced do-it-yourselfers and contractors in the Stanley family.
Nov. 27: What are the signs or clues that introducing a new brand – with a previously narrowly defined brand – might make sense? Look for it on the Report on Small Business website.
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.
Join The Globe's Small Business LinkedIn group to network with other entrepreneurs and to discuss topical issues: http://linkd.in/jWWdzT
Our free weekly small-business newsletter is now available. Every Friday a team of editors selects the top picks from our blog posts, features, multimedia and columnists, and delivers them to your inbox. If you have registered for The Globe's website, you can sign up here. Click on the Small Business Briefing checkbox and hit 'save changes.' If you need to register for the site, click here.