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

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Presentation on theme: "Should You Launch a Fighter Brand? Kelsey Smith, J.P. Coppersmith."— Presentation transcript:

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

2 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.

3 Should managers tackle the 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

4 “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

5 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Plus and the same price as Fujicolor The fighter brand ended up taking Gold Plus sales more than Fuji’s Gold Plus was withdrawn after two years

6 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

7 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 5x more expensive to build Double the employees Used virtually no shared GM parts By 2000, Saturn lost $3000 dollars for every car sold

8 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

9 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

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

11 Questions?

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