Should You Launch a Fighter Brand Kelsey Smith

Should You Launch a Fighter Brand? Kelsey Smith, J. P. Coppersmith

• When contemplating a new product launch during the early years of the 21 st century, managers would focus on “premiumization” and “trading up”. • Current economic strains are causing consumers to trade down causing many premium and mid-tier brands to lose market share.

• Should managers tackle threat by reducing prices and destroying profit and in the short term and brand equity in the long term? • Should they hold the line and wait for better times to return? • Many companies are choosing a third strategy: launching a fighter brand

• “Fighter brands are designed to combat low price alternatives while protecting an organization’s premium price offerings” • There are 5 major strategic hazards that a manager must consider

1. Cannibalization • Example: Kodak • Kodak lost market share when customers switched to Fujicolor priced 20% lower • Kodak manufactured Funtime using a less effective formula making it inferior to their Gold Plus and the same price as Fujicolor • The fighter brand ended up taking Gold Plus sales more than Fuji’s • Gold Plus was withdrawn after two years

2. Failure to Bury the Competition • Example: Zocor MSD • Merck tried to prepare for the loss of patent protection on Zocor(a drug that lowers cholesterol) in Germany • Merck launched Zocor MSD months before patent was to expire in hopes of cannibalizing Zocor’s customers and keep their loyalty • Within 3 months of it’s launch Zocor MSD missed it’s sales goal by 50% • More than 30 generics divided the market share • Merck was unable to lower prices quickly enough and ended up withdrawing all Marketing support for Zocor MSD

3. Financial Losses • Example: Saturn • Saturn was conceived as a direct response to the fuel-efficient Japanese cars • When Saturn first hit the market, they met immediate success • By 1996 orders exceeded Saturn’s production capacity • Saturn ended up being a financial disaster • • Plant was 5 x more expensive to build Double the employees Used virtually no shared GM parts By 2000, Saturn lost $3000 dollars for every car sold

• GM decided to rethink how Saturn was being run • Eventually shared platforms, rebadged models, and GM promotions ended Saturn’s differentiation • Saturn ended up being cannibalized by sister brands and the Asian cars gained market share

4. Missing the Mark with Customers • Example: Ted • United launched Ted to compete with other low cost rivals like Frontier and Southwest • Ted’s “new features” were long established features of rival airlines • The team made the mistake of benchmarking Ted against their premium brand, United • Compared with United, Ted was a discount airline • Ted’s prices were around 15% higher than low budget competition • Ted ceased operations in 2009

5. Management Distraction • “Launching a fighter brand while selling a premium brand is like fighting a war on two fronts”

Questions?