Organizations planning new product launches during the early part of the 21st century had a unidirectional approach i.e. just to look up the price ladder due to increasing income levels of consumers and their never-ending desire for better quality products, that era began with a focus on high-end, premium and luxury product launches. But that period changed to a more stressful economic era causing consumers to rationalize their spend hence brands forced to come down the price ladder. This change in consumer behavior caused many mid-tier and premium brands losing their market shares to low-end price brands in the market. These organizations are facing an uphill strategic task ahead. Should they counter this threat upfront by decreasing the offering prices, which will result in destroying their profits and brand equity? Or should they try and hold the path with the hope that it will correct itself and in the process losing customers who may not come back to them after experiencing a low-cost brand? Given how big the damage could be in the longer run, quite a few organizations are now contemplating to launch a Fighter Brand. What is a fighter brand?
A fighter brand is launched to kill, low-price competition to protect a brand’s premium product and price offerings. A brand called Philip Morris had applied this strategy in the later part of the ‘90s when there was a sudden devaluation of the Russian Currency caused the increase in the price of its internationally produced Marlboro cigarettes, and the product went beyond the buying reach of smokers. There was a big threat of losing share from the market. To protect its premium brand Marlboro; the organization Philip Morris started making efforts to establish its local produced fighter brand Bond Street. When the currency recovered its value to normal, buyers started to consume Marlboro again, which helped the brand retain its high-end pricing and equity.
If applied well, a strategy to launch a fighter brand can have far more lucrative results. In such cases—like that of Wrist Watch Brand Sonata by Tata Group in India, which already has a Semi-Premium brand Titan, Sonata, the fighter brand was launched in early ‘2000 not only helped them eliminate considerable numbers of competitors but also opened up a new, low-end market for the company to explore. Although Success like this is quite rare but still no harm applying them with a cautious application of strategy. Historically if we see there are more cases of fighter brands that could do very less harm to the competition and instead resulted in significant collateral damages for organizations that launched them. What caused these damages?
In Order to get a successful fighter brand, Companies must avoid and negotiate some key strategic mistakes while launching them:-
DON’T LET THE FIGHTER BRAND EAT INTO EXISTING BRAND’s MARKET SHARE
The fighter brands are launched to gain back buyers who have gone to low-priced competitors. It has been researched that, once launched, these brands quite often tend to also snatch the customers away from its own company’s premium offerings. In the early part of the ’90s, this happened with famous brand KODAK in their attempt to beat its Japanese rival, Fuji, when Customers switched to Fuji as they dropped their price to 20% below the top-selling Kodak. To counter this, Kodak launched Fun Time which priced at the similar level as Fuji but due to no distinct product differentiation communicated in the market people started looking at Fun Time as a low cost offering from Kodak even the quality of Fun Time was lower which led to huge cannibalization for their Premium Films like GOLD PLUS. They damaged themselves with their fighter brand than to the competition. They had to withdraw the brand.
It is strategically important for a company to position their fighter brand distinctly from their premium brands and hit different target groups of consumers with their well-planned communication strategy. It also has to work towards reducing the value, appeal and reach for of the fighter brand for its premium brand buyers while improving the features of premium brands to make it more premium with continuous up- gradation.
2. DON’T OVERPROTECT PREMIUM BRAND, GO TOO LOW ON FIGHTER BRAND
Some Companies goes little overboard to protect their premium brands from cannibalization at the cost of minimizing the fighting potential of their fighter brand. For example, In the late 90s, the PC market had reached to the point that much of the market growth was around $1,000 price points. Intel a brand who made chips/processors for PCs had been selling their chips for the expensive PCs hence their chips were on the premium side of the price ladder. Their Competitor AMD understood that Intel was not yet ready to serve the growing low-cost segment of the market and launch their fighter brand at $260. In response to that Intel Launched a low-cost chip called Celeron but the quality of this chip was sub-standard and was not even a match to AMD. It failed miserably. Although they could come back with an improved version of fighter brand which later worked also for them. But in a bid to protect their premium brand they went little too low the quality ladder which took away even the bare minimum beyond a commodity kind of feature to be even called a brand
3: PROFITABILITY SHOULD NOT BE ELUSIVE
To achieve the long-term success in fighter brand, unfortunately, Only Price match with competition is not enough it is important to achieve the profitability goals. Sometimes it gets difficult for brand operating in premium cost environment to transition their operational efficiency to low-cost models. To meet this challenge a premium company must devise their cost structure to match the low-end objective of a fighter brand.
4. CONSUMER FOCUS MUST NOT BE LOST
Usually, a successful brand is built on addressing a specific consumer need. The development and marketing of the product should stay focused on its target users. But the origin of a fighter brand comes from a very different background. It comes into existence with competition and their success, against your organization. The Very Existence of a Fighter brand is flawed as it comes from Premium company’s Lack of Low-Cost Vision and readiness and low-cost competition’s strengths, but not from a consumer focus environment.
Although a fighter brand is born from the identification of a low cost modeled competition and organization’s limitations to dilute the premium-ness of their existing brands, Company’s focus must be switched to its target consumer segment. That is the only way to achieve consumer orientation and avoid the unnecessary focus on low-cost competition.
5. MANAGEMENT FOCUS
The launch of a fighter brand is a mammoth task for an organization because they have two major objectives in hand one to counter the low-cost competitor, two to safeguard the share of their existing premium brand. This takes a lot of resources from the company. It must divide their team and various operational resources and both the team must be given clear objectives in hand.
So many fighter brands launched and flopped causing their parent organizations huge financial stress in the process. The finances involved in launching, managing, and then withdrawing a failed fighter brand can be huge. The resources that could have been used in a premium brand are often diverted towards a loss-making fighter brand that only helps the organization losing their focus from its core areas. Unfortunately, we tend to forget that even premium brands have to continuously operate in an environment where recurring challenges occur and continuous innovation is required to stay relevant and premium to their consumers. Fighter brands can’t help the organizations reduce those competitive threats. In fact, by taking away fund and management focus, they may make the premium offerings quite unguarded from various threats coming from their competitors.
While launching fighter brands, it is important to forget the great outcomes it may cause but focus first on avoiding the hazards that cause the failures of most fighter brands. We must think of cannibalization and ensure that a distinct positioning is in the offer for both the brands. Always research extensively before launching them so that it is competitive enough to give your competitors a run for their money and should be profitable enough in long term. Organizations must study the strategic implications of dividing the human and operational resources during a period when it is critical to stay focused on the existing brand, at the same time infuses a huge investment on a fighter brand.
Marketing and Brand Communication professional with over 20 years of experience with various brands.