Fighter Brands

Brands & Branding

It is usually when new companies try to take a share from the well-established brands by targeting price-sensitive customers through low-priced products/ services “Fighter Brands” are then introduced by the big brands to win their lost customers back and potentially kill the small copy-cats.

A fighter brand is designed to combat, and ideally eliminate, low-price competitors while protecting an organization’s premium-price offerings.

A fighter brand’s objective is to increase overall profits by profitably winning back customers from the low-priced entrant while minimizing the negative impact.

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Value Segment X Price Segment

Customer segments can be categories as value or price segment, depending on their purchasing power and behaviour. Consequently, diffrent industries find themselves with ongoing threats that require their imediate attention to retain their customers and profits.

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Airlines x Low-cost carriers

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Luxury Goods x Copycatting

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Pharmaceuticals x Expiration of patent

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To have a clearer idea, below are examples of fighter brands introduced by airline and food grocery retailing industries.

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Decision-making Framework

1. Clarify objectives of fighter brand

• Increase profit by winning back customers from the low-priced entrant

  
  

• Minimize negative impact (cannibalization) - profits earned from the company’s flagship product

Fighter brand should never try to eliminate the enrant at the expense of profits

2. Verify that the company is serving two customer segments

• Making sure to have a clear distinction in segments in terms of price sensitivity; value segment and price segment

• Making sure the new entrant is attracting a sizable number of price segment with a lower price and no-frills offering

3. Decide which differentiating features, should be removed or added to the Fighter Brand

• Minimum requirement of a product or service for a particular customer, that is, a condition that the product or service must meet for that customer to even consider buying it.

• Can any differentiating must-have for the value segment be identified that is not a must-have for the price segment?

  
  

Identifiable must have(s) for the value segment, yet not a must have for price segment

To avoid cannibalization, we remove at least one must-have for the value segment from the fighter brand so that the value customer wouldn’t consider buying the fighter brand.

Case Study: StrongCo Selling Portland cement to retailers in strong bags with the StrongCo brand printed on the bag. It had also obtained the right to put a quality mark on its bags.

StrongCo found itself being attacked by a low-priced entrant that sold Portland cement at 36% lower price, using unbranded low-quality bags that tore apart easily and did not have the quality mark, adding to the much less reliable delivery time.

StrongCo identified two market segments: uninformed home owners x better informed small business professionals a: Value Segment: cared about the logo and quality stamp b: Price Segment: didn’t care about the logo and only cared about the cement Differentiating the fighter brand from the new entrants other than quality mark and brand name:

• Making the bag stronger than the entrant’s.

• Slight Increase to the price/ bag.

• Being slightly higher priced has the benefit of not tempting the new entrant to lower prices relative to the fighter brand.

Unidentifiable must have(s) for the value segment, yet not a must have for price segment

Removing a differentiating must-have for the value segment from the fighter brand is not an option, while differentiating the fighter brand from the new entrants and from the flagship product without incremental losses.

Here we need to ask the question: Are the incremental profits gained from attracting customers back from the low-priced entrant greater than the incremental losses suffered from existing customers in the value segment switching to the fighter brand?

Identify those differentiating features that are most likely highly valued by the value segment and much less by the price segment.

These features should then be removed from the fighter brand so that the value gap between the fighter brand and the flagship product increases significantly.

Identify those differentiating features that are most likely highly valued by the price segment and much less by the value segment

The new entrant did not replace torn bags. As a consequence, StrongCo’s guarantees of torn bags replacement could be an attractive feature to buyers in the price segment but not to buyers in the value segment.

4. Other dimensions of the marketing mix

Here we need to think about the actual brand name to use, the price to charge and the sales channels and promotion to use.

Choosing the name of the fighter brand:

Are we going to refer to the umbrella brand of the company’s flagship product? 

As the example of Whole Foods did with “365 by Whole Foods Market” – or not – as 3M did with HighlandTM sticky notes, which has no brand association with Post-itVR or 3M.

Choosing the Price to charge relative to the low-priced entrant’s product:

The game-theory indicates, price-cutting should be the last resort. Unless there is room for differentiation, one should charge exactly the same price for the product as the new entrant.

Choosing the sales channels and promotion to use:

There is of course a trade-off between the benefits of using different sales channels or people and the cost of doing so. If the cost is too high, one could consider training the sales force in multi-level selling.

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Lessons learned

• identify at least one unique must-have feature for the value segment with high certainty

• remove it from the fighter brand targeted at the price segment → the risk of cannibalization is minimal

• But when there is uncertainty about these must-haves → companies can play safe and just nudge the price-sensitive buyer towards the fighter brand

• differentiating along lines that are likely to have minimal or no effect on the buyer in the value segment

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Authors: Daniel Farah & Yoshij Zentara

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