Today’s economic landscape is harsh on the expensive, high-quality premium (or “luxury”) brands. With lower-priced alternatives readily available, companies selling premium products may find themselves losing customers or slashing prices (and profits). However, many companies are considering a third option: launching a fighter brand.
A fighter brand’s job is two-fold. It needs to provide fierce competition against low-price rival brands while protecting the sales of the company’s premium products. A successful fighter campaign may eliminate the competition and open a new, lower-end market for the company, but the consequences of a failed fighter brand can ruin its parent company. Mark Ritson’s article Should You Launch a Fighter Brand? (Harvard Business Review, October 2008) investigates five hazards most likely to knock out a fighter brand from the inside.
1. Friendly Fire
Companies launch fighter brands to attract consumers opting for lower-priced alternatives to their premium-priced offerings, but what happens when customers are buying a fighter brand instead of the parent company’s premium brand? In the mind of a consumer, if two products appear close enough alike (and produced by the same company, to boot!), it’s no surprise that they would choose the cheaper version. Thus, a fighter brand becomes the very problem it was created to combat.
How to avoid it: The key is perception. The parent company needs to ensure that their fighter brand’s low price is matched with equally low perceived quality. It must market the fighter brand as a lower-quality product in comparison to its premium sister brand, right from the start. Customers need to feel that the higher price of the premium brand is justified by its higher quality. Why would they pay more for a similar product?
2. Failure to Eliminate the Enemy
The most favorable result of a fighter brand campaign is the elimination of the enemy brand. However, the campaign cannot succeed in this if it’s weighed down by other considerations, like the protection of the premium brand. For example, the parent company may sacrifice the quality of the fighter brand to avoid losing premium customers. But if the product is clearly inferior even to the rival brand, consumers would choose the rival brand instead.
How to avoid it: The parent company has to be prepared to react quickly to customer response and recalibrate the price and performance of the fighter brand to ensure that it doesn’t jeopardize the premium brand or underperform against the rival brand. Overprotection of the premium brand would only make the fighter brand less effective against the enemy; the best way to protect the premium brand is to bury the competition.
3. Failure to Make a Profit
The price tag on a fighter brand needs to be competitive enough to keep customers away from rival brands, yet high enough so the parent company can to make a profit. One way to increase profit is to cut back on costs — but tread carefully! If a company tries to save on expenses and increase quality by using standardized parts and production lines, the end product may be indistinguishable from premium sister brands, resulting in friendly fire.
How to avoid it: Before launching a fighter brand (and during the campaign), the parent company needs to crunch the numbers and make sure it can match the price and value of the rival brand while attaining a sustainable level of profits. If the company is new to the low-end market, it may have to rethink what constitutes a strategic success and how to create a fighter brand that can achieve that success. Even if customers respond positively to a fighter brand and it sells well, the campaign has failed if it isn’t profitable, too.
4. Neglecting the Customers
This hazard may be especially hard for a fighter brand to overcome if only because its creation is in direct response to what the company has never focused on (thus allowing an enemy brand to meet previously unmet needs). The goal of a fighter brand campaign isn’t necessarily to develop a new, original product that is not already on the market though; the primary focus is to protect the premium brand by matching the rival brand. However, if all a fighter brand does is match the rival, the enemy brand — perhaps more innovative, more familiar with the low-tier market — can eventually outstrip the fighter brand if they have a better grasp of how to fulfill their customer’s needs.
How to avoid it: The parent company should turn their focus immediately to the new brand’s target consumers. Determine what potential customers want and develop a brand that would appeal to them. It isn’t enough to simply match the strengths of the rival; the fighter brand needs to surpass it. Performing market-tests can help the parent company figure out what their customers want.
5. Diverting Company Attention
A fighter brand becomes a liability when it distracts the parent company from its core business — the premium brand. The range of a fighter brand is fairly limited; it is mainly used to fend off low-priced rivals, but it can do little against other threats. Fighter brands can also leave premium brands more vulnerable by siphoning away vital funds and management attention and delaying important strategic decisions.
How to avoid it: The parent company needs to reinvest in the premium brand, making sure that its high price is justified by its quality. However, the company can’t neglect the fighter brand, either. If a fighter brand fails, it can drag the premium brand down with it. For both the premium and the fighter brands to succeed, the management attention allotted to each one must balance out to the benefit of both.