There is a shift in the mind-set of companies that are looking to maintain their market position or to grow their businesses. Brand extensions are the key. While this is nothing new, many companies are launching what I’ll call economy-based brand extensions. Companies like “Mercedes”:http://www.mercedes-benz.ca/ are selling inexpensive versions of their luxury cars; the airlines “Delta”:http://www.delta.com, “United”:http://www.united.com, and “Air Canada”:http://www.aircanada.ca are running scaled-down versions of their premium flights; and new beers born from leading brands are battling for market share in the economy beer segment.
These companies are attempting to target the cost-conscious consumers. (Let’s face it, who isn’t looking for name brand products at reasonable prices?) There are many forces at work in this complex mind-shift, which can be attributed to the impact of the big-box retailers such as “Costco”:http://www.costco.com and “Walmart”:http://www.walmart.com, skyrocketing gas prices, and the changing attitudes of middle and upper-class shoppers who are now openly flaunting their bargain-hunting skills. These factors are having a significant impact on all brands.
There is nothing new about using price as a lure to attract cost-conscious consumers. Online and traditional coupons and point-of-sale promotions have been staples of the shopping experience for years. But, why is this change happening at such an increased rate?
This brings me to a recent trip to the States to visit some friends. Over drinks, we got to talking about consumer buying habits and newly-launched economy brand extensions. My friend Ann, and her large family, although well-heeled, are extremely cost-conscious. Ann has been aggressively reviewing all her household buying habits and is switching to lower-cost products. In fact, she makes many of her decisions while online at sites like “P&Gs Brandsaver”:http://www.brandsaver.com, and the various product review and couponing sites such as “DealUnion”:http://www.dealunion.com/coupons.php, “HotCoupons”:http://www.hotcoupons.com, and “FatWallet”:http://www.fatwallet.com. Ann is not alone; many women in her upscale community are also making the change and spreading the word at business get-togethers as well as soccer, ballet, baseball, and hockey gatherings with other mothers.
This is a trend that marketers must be aware of and be prepared to utilize. In many cases, smart marketers are using the economy-based brand extensions to gain-back market share and use this additional cash flow to fund their higher-value mainstream brands. To effectively introduce an economy-based brand extension, the premium brand must continue to innovate and add new features. This will allow both the premium and cheaper brands to coexist.
As a case in point, Ann has just started to buy the economy-branded Charmin Basic toilet tissue. P&G had recently launched this product in response to some of the market factors mentioned earlier. When I asked Ann about her decision to change to a less expensive brand, she said she wanted to stay with a trusted product that she had been buying for years but wanted a less expensive solution. She will continue to buy other Charmin products and is grateful for the free “Potty Training Kit”:http://www.charmin.com/en_us/pages/offers_pttraining.shtml, used by her twin boys, Jake and Nathan.
With Ann’s change to Charmin Basic, others in her family have noticed the absence of the Charmin Bears – Dylan, Amy, Molly, Leonard, and Bill. While the cute, fluffy bears are missed, Ann is happy with her decision and the money she is saving on a brand extension she now knows and trusts.