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Exploring Premium Brand Extension

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Exploring Premium Brand Extension

Branding Strategy Insider helps marketing oriented leaders and professionals like you build strong brands. BSI readers know, we regularly answer questions from marketers everywhere. Today we hear from Eugene, a marketer in London, England who writes…

“Dear Derrick and Brad, I really enjoy Branding Strategy Insider, thanks for the resource. My question is  how to measure the Halo effect a premium brand extension can have on the rest of the range, and the Halo effect mechanics.”  

Eugene, thanks for the compliment and your question. Regarding the Halo effect a premium brand extension can have on the rest of the range, following are things to consider:

  • One cannot add a significantly more premium or inexpensive product within a brand’s range without encountering credibility problems. This is especially true if one is trying to move a lower cost brand into a more premium market segment. This is why Toyota has the Lexus brand and Honda has the Acura brand. Even Marriott’s association with the Ritz Carlton brand (as its parent company, even though they are not linked in an identity system) could lead people to think less of Ritz Carlton compared to the (luxury only) Four Seasons brand, for instance.
  • Adding a more expensive product at the top of a brand’s price range may increase people’s propensity to buy a higher priced (but not necessarily the highest priced) product within the range. They may think, “I cannot afford the most expensive product, but I can afford the second most expensive one.” Adding a more expensive product to the top of a brand’s price range may also increase the average perceived value of products in the category. (Investigate reference pricing. I cover this concept in greater detail in my book Brand Aid.)
  • One should test the responses of current customers to adding a more premium product to a brand’s range of products before it is actually done. This is even more important if one is considering offering a lower end product to a luxury brand’s price range. Often, people who buy luxury products do so at least partially for the status that it confers on them. Adding lower priced products could potentially reduce that status.
  • Incrementally moving brands up the price and quality range over time has often proven to be effective in improving the perceived quality and value of those brands.
  • Consider creating a sub-brand for the new premium products within the brand’s range. Depending on the category, words and phrases such as “platinum,” “gold crown,” “sapphire,” “seven star,” “concierge,” “private,” “reserved,” “special selection,” “VIP,” “red carpet,” “club” and “elite” have been used to communicate the premium status. On the other hand, many of these words have been overused and are clichés. American Express actually invited competition when it created its Gold Card as American Express always stood for premium, but when it introduced its Gold Card, Visa and other credit card companies could offer what could be perceived to be comparable premium offerings with their own Gold Cards. Gold (and eventually Platinum) Cards, which are not legally protectable by American Express, became synonymous with premium positions within the category.

Overall, my advice to you is to move cautiously, informed by customer research. Be sure to explore credibility and impact on the rest of the range. If executed correctly, the addition of premium product(s) could improve the image of the brand overall. I wish you great success with your brand management efforts.

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