that profit, then go for it. On the other hand, if your Bargain-brand is going to cannibalize your premium-brand profits then
reconsider your options.
It’s essential that your bargain-brand have a different perceived value, messaging, and pricing. Years
ago Kodak came out with a bargain-brand film that had little distinction from the premium brand. Customers went for the lower
price product cannibalizing profits from the premium-brand. On the other hand, when P&G purchased Luv’s Diapers brand, it repositioned
it as a bargain-brand. Their Pampers brand was given greater features and advertising thus creating a higher perceived value.
Must Develop a Difference in Perception and Value
If you offer a bargain-brand, then your goal is to offer two products with
much separation in value and messaging. You’ll want to consider using Neuromarketing research techniques. It is essential
that the premium product maintain its true value benefits while the lower-price brand act and look like a bargain-brand one. By acting like a bargain-brand, you’ll be able to cut costs on marketing, support, operations, and production and thereby creating
the gross margin to compete effectively on price. You may want to use a hot button here to connect people to your article on
Neuromarketing.
When Anheuser-Busch rolled out Busch Beer they created a whole new company and identity. They invested
in new distribution, new trucks, and new sales people to ensure that the Premium-brand and Bargain-brand were not confused but optimized.
Don’t recreate the wheel or build a new organization unless there’s a market for it
GM invested $15 Billion in Saturn and it
failed. Is your goal to market a Bargain-Brand or build a new company?
Consider your resources, sales volume, and gross
margins. Your goal is to make a profit. If your Premium-brand cannot serve another large market, then a new organization, such
as starting up a discount airline division or Busch Beer may be an answer. On the other hand, if your premium-brand can cover
the market then re-consider your options. As I mentioned earlier, GM spent $15 Billion on the new Saturn division, when their
existing product lines at Buick and Chevy reached the same target audience.
The Final Strategy to Consider: Innovate a new product category
A recent book called Blue Ocean Strategy stated that it is sometimes
better to innovate a new product than to compete in blood thirsty waters or Red Ocean. Look at the crowded fields of electronic
consumer products, automobiles and food. When you launch a new product in these categories how do you stand out?
Conversely,
companies will innovate new products developing a new category where there is no competition; hence Blue Ocean. Years ago Sony
launched the Walkman. Apple introduced the iPod and iPhone. An example in Blue Ocean Strategy was the Casella Winery from Australian
who wanted to launch a new wine in a very crowded and snooty category.
A strategy based on innovation will look
at different customers with shared commonalties. In the crowded wine business, more wineries did not think of looking for low
budget beer drinkers. The Casella winery saw things differently and believed beer drinkers would want wine if the purchase decision
was made simple and fun. Out came Yellow Tail wine in simple red and white versions.
A blue ocean is created when a company
achieves value innovation that creates value simultaneously for both the buyer and the company. The innovation (in product, service,
or delivery) must raise and create value for the market, while simultaneously reducing or eliminating features or services that are
less valued by the current or future market.
The lesson I learned in the potato sack race was easy, keep your eye on the goal
line not what your competition is always doing. John Wooden’s success was doing the best he could possibly do every day. As you consider your premium brand, think about the best you can do every day with it. As any typical SWOT (Strengths, Weaknesses,
Opportunities, Threats) and PESTEL analysis (Political, Economic, Social, Technology, Environmental, Legal) you should consider:
Are you an elephant or a cheetah organization?
Will your Bargain –Brand cannibalize your Premium –Brand profits?
Do you have the resources to run two brands simultaneously at a profit?
Are you able to clearly define and communicate the different
unique selling proposition for each brand?
Will the customer perceive the differences?
Will your current Premium-Brand cover this market?
Or is the Bargain-Brand a new demographic?
Lastly, do you innovate a new product to create a new category and target audience?
As
Jacqueline Kennedy once said, “I don’t react, I respond.” Panic and fear should not be part of your tactics, but a well thought out
response that optimizes your resources, strengths, and uniqueness in meeting the needs and wants of your customer.
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