The economic strains are causing your end-users to trade down, resulting in that the mid-tier and premium brands are losing share to low-price rivals.
You face a classic strategic conundrum:
- Do you tackle the threat head-on by reducing prices, knowing that will destroy profits in the short term and brand equity in the long term?
- Or do you hold the line, hope for better times to return, and in the meantime lose customers who might never come back?
Given how unpalatable both of those alternatives are, you now must make a decision of how to combat manufacturers and distributors of lower priced and inferior products, to avoid losing additional market share and eroding margins.
There are four ways to battle your competition.
- Launching a true fighter brand
- Launching an endorsed sub-brand
- Launching a co-driver sub-brand or
- Launching a driver sub-brand
The parent brand and the sub-brand act as co-drivers with roughly equal influence on consumers.
United Express (United Airlines)
The United Airlines brand provides United Express, a commuter line, with the convenience of connections to United flights and a reputation for safety. There is no cannibalization because the flights do not compete.
United Express is differentiated from its parent brand by its lower level of on-board service, its use of smaller planes, and its less formal personality.
Good News (Gillette)
Gillette Good News also illustrates a successful co-driver relationship. Gillette Good News disposable razors are a definite cut below ‘the best a man can get” that is the Gillette legacy in shaving. But disposable razors are qualitatively different from the upscale razors such as Sensor and Atra with which Gillette has long held a technological edge.
Gillette could provide a rationale for a disposable brand by being the best in the disposable category. But the Good News user’s personality – younger and more carefree than the traditionally masculine and sophisticated Gillette persona – plays a key role in distinguishing the disposable brand from the rest of the line.
Both brand names – Gillette and Good News – influence the customer’s decision to buy the product.