Zale’s, the king of middle-market jewelry, tried to sell more expensive jewelry. They had little success.
Wrangler, a brand that sells $15 dollar jeans at Wal-Mart, tried to sell $190 jeans at Barney’s. They had little success.
Wal-Mart launched a marketing effort to sell more higher-priced merchandise as a way to get business from Target. They will have little success.
What these companies fail to understand is that it is exceptionally difficult to take a well-established brand up in price or value. The automobile people have a long history of failure in this regard.
Years ago, Cadillac tried to take a $50,000 Allante against Mercedes. They had little success.
More recently, Volkswagen tried to sell a $60,000 Phaeton against Mercedes and BMW. They had no success.
Cadillac’s only hope of competing with the super-premium cars is with a different brand. If they had dusted off an old, classic brand, called it LaSalle, and reintroduced it as America’s first super-premium car, they might have had a better chance of success. But of course, they would have probably upset a large number of Cadillac dealers who want to continue to offer General Motor’s top-of-the-line automobile.
As for Volkswagen, they already own the Audi brand. So why try and compete with them?
What all these companies fail to understand is that it is not what you want to do, it is what your customers will let you do. But even more importantly, it’s what their perceptions will let you do.
Wal-Mart’s perceptions are all about low price, which is the opposite of higher quality. Target offers “mass with class.” People perceive them as offering department-store-quality, well-designed products for less. They will never trust fancier Wal-Mart products that cost more.
The classic success story about going upward was the Toyota Motors folks when they wanted to introduce a super-premium car. Unlike Cadillac and Volkswagen, they avoided the perception trap. The new car was called a Lexus. They set up a new breed of fancy dealerships and said at the outset that a Lexus dealer could not be closer than ten miles to a Toyota dealer. Today, the Lexus brand is the leading super-premium car in America, and I suspect that very few know that it is made by Toyota. Now that’s success.
Let me explain it another way. To cope with the product explosion, people have learned to rank products and brands in their mind. Perhaps this can best be visualized by imagining a series of mental ladders. On each step is a brand name. And each different ladder represents a different product category.
Some ladders have many steps. (Seven is the maximum.) Others have few, if any, because there is low interest in the category. (Caskets are examples of zero-rung ladders.)
A competitor that wants to increase its share of the business must either dislodge the brand above (a task that is usually impossible) or somehow relate its brand to the other company’s position.
Yet too many companies embark on marketing and advertising programs as if the competitor’s position did not exist. They advertise their products in a vacuum and are disappointed when their messages fail to get though.
Moving up the ladder in the mind can be extremely difficult if the brands above have a strong foothold and no leverage, or if positioning strategy is applied.
An advertiser who wants to introduce a new product category must carry in a new ladder.
What you cannot do is try and put your brand name on two different ladders at the same time. People just can’t keep things straight that way. So your only hope is to leave your existing brand on its ladder in the mind and take a new brand over to that upmarket ladder in your category.
What’s at play here is that once people establish those ladders, they are loath to change their minds or rearrange them. They say, “I know what you are, and I have you stored in the right place. Don’t confuse the issue.”
There’s also a flip-side to all this, as you can come down in price and value with a brand. Many years ago, Cadillac was successfully challenged by a car called a Packard. Then, one year, Packard decided to sell a cheaper Packard. It was a wild success for one year. But that was the game, as they never were able to sell expensive Packards again. There was no more “prestige” attached to the car, so the choice became Cadillac at the top of the market.
So it is with Mercedes as they move down to sell cheaper cars. While they will sell, have they begun to erode the prestige of Mercedes? I suspect so. And if that happens, those $60,000 Mercedes will become more difficult to sell.
About all this, you could say, “You can go down, but you can’t go up again.”
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4 comments
Wes Ball
May 7, 2008 at 11:13 am
You are absolutely right that it is VERY difficult to go up, however it is not impossible. It just takes a different model for getting there that all of these examples missed.
In my book, The Alpha Factor (Westlyn Publishing, 2008), I discuss many examples of brands that were able to “go up” by following a different model. They were able to cut discounting, raise prices, increase share, and create more customer loyalty in short periods of time by discovering how to use emotional decision factors in a more strategic way.
Here’s just one example: This model was able to turn around U.S. Savings Bonds (previously considered “the worst financial product in the U.S.”) and make their new inflation-indexed bond a highly-recommended and highly-regarded new savings product for both the wealthy and the middle-class. They went from being the product that only people who didn’t know anything about financial products purchased to one that “smart” and “upscale” investors use as an inflation hedge. It only happened by their discovering the value of addressing the “satisfaction” and “significance” factors described in The Alpha Factor.
Here’s another: Harley Davidson also was able to “go up” from being a leaky, unruly, unreliable ride for Hell’s Angels to one of the most desired items in the world at a price higher than any other competitor. And it was not their quality improvements that made this happen.
It’s not impossible to go up. It just takes a different way of looking at market opportunities.
robert john ed
May 7, 2008 at 11:46 am
Cadillac Catera. Eeesh.
You see it time and time again. Established brands rarely get better in position over time (though clothing brands occasionally become cyclically valued). They can get worse though.
Yet we still have Jacuzzi making toilets. Brand confusion anyone?
Drew DelloStritto
May 7, 2008 at 4:55 pm
I partially agree – rebranding is quite difficult, but not really impossible.
Perhaps it is more difficult in the US market, but in other, less developed markets, it isn’t all that difficult.
For an example, take Ripley – a Chilean ‘department’ store – who went from a low end brand years ago to a mid-high end brand today. Another example, again from Chile, is La Polar, which has recently begun it’s uphill battle; although in this case I think they’re uphill battle will be a little more difficult (now that the department store category is basically full). And then there’s SalcoBrand (a Chilean pharmacy) who has decided to take a whole strategy and positioning itself completely differently from its competitors – they’re still a pharmacy (same category), but now it’s a ‘cosmetic’ pharmacy – almost a niche positioning.
Adam Denison
May 8, 2008 at 9:37 am
This is an interesting post, but what you need to remember about Cadillac (warning: I work for GM!), is that they are in fact a luxury car brand. Ever hear someone refer to something as being the “Cadillac of…”? While they may face perception issues now, they are still a luxury brand and are working to reestablish themselves as such. This differs from Wal-Mart or Zales who have always been low price leaders in their respective markets.
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