Vertical Brand Extension - Up/Down Market Leverage Daniel Filipsson, Ph.D Candidate – Brand Portfolio Strategy Stockholm, 25 th of January 2008
Nov 10, 2014
Vertical Brand Extension- Up/Down Market Leverage
Daniel Filipsson, Ph.D Candidate – Brand Portfolio StrategyStockholm, 25th of January 2008
© Essen International AB 2
Table of content
Essen and myself
Introduction
The logic of up-market moveRisks with up-market extension
The logic of down-market moveRisks with up-market extension
Cases: Absolut Vodka
Nokia
Porsche
Essen and myself
© Essen International AB 4
Essen – a introduction
– Established 1991 – Located in Stockholm– 30+ co-workers – brand consultants, designers, & layers– Independent company– Our customers are private, public and state owned companies,
authorities, public sector organizations and NGO's
© Essen International AB 5
Examples of customersAlectaAltia AndritzAtriaAbsolut CatellaCollectumSwedbankITT FlygtKarolinska InstitutetPfizerPreviaSave the ChildrenScribonaSveaskogSwedish museum of Natural historyTietoEnatorVattenfallVPCWM-data
© Essen International AB 6
• Brand consultant at Essen since 2006, prior that working as brand consultant at Differ (Sthlm) and Vivaldi Partners (Munich)
• Worked with strategic branding with brands such as Siemens mobile, Deutsche Telecom, Alliance, Hewlett Packard (HP), Gore Tex and Red Bull
• Today responsible for clients such as V&S, Johnson & Johnson, Sveaskog etc.
Daniel Filipsson
Introduction
© Essen International AB 8
Introduction - Brand Contract
BMW Houndstooth Collection
Traditional brand contract:
• One brand = one product = one promise
Today's brand contract:
• One brand = one promise = several products
• Today, companies often use their established
brands to introduce new products instead of
creating new ones.
© Essen International AB 9
Brand Leverage
Line ExtensionIn Existing Product
Class
Co-brandinge.g. Using Alliances To
New Categories
Vertical ExtensionIn Existing Product
Class
Brand ExtensionIn Different Product
Classes
StretchingDown
Stretching
UpCreating
Range Brand
AdhocBrand
Extension
Line ExtensionIn Existing Product
Class
Co-brandinge.g. Using Alliances To
New Categories
Vertical ExtensionIn Existing Product
Class
StretchingDown
Stretching
Up
Using an already known brand in new and creative forms, which usually ffollows 2 patterns:
• Extension of the brand
• Connections between brands
Introduction - Brand Leverage
© Essen International AB 10
Brand leverage examples
Brand ExtensionIn Different Product
Classes
Line ExtensionIn Existing Product
Class
Co-brandinge.g. Using Alliances To
New Categories
Vertical ExtensionIn Existing Product
Class
© Essen International AB 11
Extension tradition: East vs. West
East – branded house
• More recently a shift into house of brands though upscale vertical extension
• Infiniti (Nissan) and Lexus (Toyota)
West – house of brands
• 100-years tradition of product branding P&G, Unilever & Nestle
• Have started to reduce the numbers of brands in the portfolio - consolidating
© Essen International AB 12
Vertical extension is everywhere…
© Essen International AB 13
Vertical extension is everywhere…
© Essen International AB 14
Vertical extension is everywhere…
© Essen International AB 15
Three questions before vertical extension
• Customer trends• Competition• Margins
• Organisational cost structure, culture, system etc. –adaptations?
• Sustainable point of differentiation
• Customer relevance
• Brand credibility• Existing brand• Sub-brand• Endorsed brand• New brand
Extending into higher or lower markets
Market opportunity
Firm competence & ability
Brand strategy
Up-market move
© Essen International AB 17
© Essen International AB 18
Drivers: up-market move
The motivation for a company to move up-market is not to obtain volume as it is in down-market move but rather…
Drivers:Attractive margins• Lower margins on the standard product - opportunity too
higher margins in the super-premium segment
Re-vitalize the brand (energy & interest)• Innovation and quality gets more noticed at the high end
and the high margins helps to pay for new innovations
Enhance the brand• Boost the brand with higher quality and more prestigious
associations e.g. credibility
© Essen International AB 19
Risks: up-market move
Brand is Inadequate:• Lacks credibility and the capability to
deliver a high-end experience
• Lacks self-expressive benefits
Offering is unsuccessful: • Falls short of expectations
• Damaging the core brand
© Essen International AB 20
Brand strategy options: up-market move
1. Position the brand to work vertically
2. Position the brand as a super-premium brand in -different products and/or different markets
3. Re-brand at the low end
4. Use a sub-brand
5. Develop a new brand
Let’s go through each of these 5 strategies
© Essen International AB 21
# 1: Position the brand to work vertically
• Create credibility for the whole product-class
• Avoid a value proposition focused on price
• Create a personality that can be effective at different price points
• Create a positioning/ pay-off that works at different price points
© Essen International AB 22
# 2: Different products / markets
• Use a different product class or market to create distance - make up-market move less transparent…
• …A strategy that also works well in a new geographical markets
© Essen International AB 23
# 2: Different products / markets
• Energizes the core brand long term through broader brand meaning
Find opportunity – solve with technology – wrap in art
© Essen International AB 24
# 3: Re-brand at the low end
• Remove driver of value from the low end • Increase psychological distance between
premium and value space
© Essen International AB 25
# 4: Use or create a sub-brand
• Create a silver bullet
© Essen International AB 26
# 4: Use or create a sub-brand
• Use an up-scale descriptor
© Essen International AB 27
# 4: Use or create a sub-brand
• Position as the value super- premium• Co-brand with a prestige brand
© Essen International AB 28
# 5: Develop a new brand
Down-market move
© Essen International AB 30
© Essen International AB 31
Drivers: down-market move
In maturing markets with weak growth or even decline, there is a need and search for growth – one way is the value market
Drivers:Price sensitive customers:• Perceived differentiation is reduced in favour for price
Value channels• New channels with different cost structure
New technology• New technology with lower cost structure
© Essen International AB 32
Risks: down-market move
Brand is damaged:• Perceived quality is compromised
• Self-expressive benefits are reduced
• Risk of cannibalization
Offering is unsuccessful: • Falls short of expectations
• Perceived as high priced
© Essen International AB 33
Brand strategy options: down-market move
1. Reposition a struggling premium brand down
2. Position the brand to work vertically
3. Separate the premium and value space
4. Develop a new brand
Let’s go through each of these 4 strategies
© Essen International AB 34
# 1: Reposition a struggling premium brand down
• Consider down market re-positioning if the brand is third or fourth player in the category with few prospects of moving up
• Reposition a outmoded premium brand into the value space
• Reposition premium brand after an image-setback
© Essen International AB 35
# 2: Position the brand to work vertically
• Avoid a value proposition focused on exclusivity and price
• Create a personality that can be effective at different price points
• Create a positioning/ pay-off that works at different price points
A mobile phone is something you wear
© Essen International AB 36
# 3: Separate the premium and value space
• Use the value brand on different products or markets• Use sub-brands• Use endorsed brands
Reduce image setback Reduce cannibalization & protect the premium position
Provides more separation
© Essen International AB 37
# 4: Create a new brand
• Different segment
• Different channel
• Different brand values
• Hidden brand links
© Essen International AB 38
# 4: Create a new brand
© Essen International AB 39
Summary
• Vertical extensions is one important brand strategy (brand portfolio strategy) in many mature market
• Up-market:
• Even though the customer base for super-premium brands is limited, almost all people search for self-expressive benefits, even in less exclusive categories -indulge at Starbucks
• Down-market:
• It is almost impossible for a company today to stay outside the value market, emerging powerful value channels
• A organisations existing brand architecture should be used in order to successfully conduct up-market and down-market moves
Case for discussion
© Essen International AB 41
Case #1: Absolut Vodka
How should any additional vertical extensions for the following brand look like and why do you recommend this strategy in comparison to other alternatives?
© Essen International AB 42
© Essen International AB 43
© Essen International AB 44
Case #2: Nokia
What is your opinion regarding Nokia’s up-market extensions using a second brand, Vertu, and what do you recommend as future extension strategy?
© Essen International AB 45
© Essen International AB 46
© Essen International AB 47
© Essen International AB 48
Case #3: Porsche
What is your opinion regarding Porsche’s extension into SUV and coming extensions into 4-door sedan? Is it correct to extend the brand away from only being a sport car or not?
© Essen International AB 49
© Essen International AB 50
© Essen International AB 52
Contact
Daniel Filipsson: [email protected]+46-70-184 01 51
Essen International ABKungsgatan 37SE-111 56 Stockholm, Sweden
Telephone +46 8 5030 01 00Fax +46 8 5030 01 01www.essen.se