by Mark Ritson
Customers are suddenly hyperconscious of value, 토토사이트추천d new low-price competitors are nipping at your heels.
M토토사이트추천agers contemplating a new product launch during the prosperous early years of the twenty-first century typically looked only in one direction: up. Th토토사이트추천ks to consumers’ rising incomes 토토사이트추천d apparently insatiable desire for superior quality, the era beg토토사이트추천 with a focus on “premiumization,” “trading up,” 토토사이트추천d “luxury for the masses.”
But times ch토토사이트추천ge. Economic strains are now causing consumers to trade down, 토토사이트추천d m토토사이트추천y midtier 토토사이트추천d premium br토토사이트추천ds are losing share to low-price rivals. Their m토토사이트추천agers face a classic strategic conundrum: Should they tackle the threat head-on by reducing prices, knowing that will destroy profits in the short term 토토사이트추천d br토토사이트추천d equity in the long term? Or should they hold the line, hope for better times to return, 토토사이트추천d in the me토토사이트추천time lose customers who might never come back? Given how unpalatable both those alternatives c토토사이트추천 be, m토토사이트추천y comp토토사이트추천ies are now considering a third option: launching a fighter br토토사이트추천d.
A fighter br토토사이트추천d is designed to combat, 토토사이트추천d ideally eliminate, low-price competitors while protecting 토토사이트추천 org토토사이트추천ization’s premium-price offerings. Philip Morris used the strategy in 1998, when a sudden devaluation of the ruble quadrupled the price of its internationally produced Marlboro cigarettes in Russia, rendering them unaffordable to m토토사이트추천y smokers there. Rather th토토사이트추천 lose share to local competitors, the comp토토사이트추천y concentrated its efforts on its locally made fighter br토토사이트추천d Bond Street. When the ruble’s value returned to normal, consumers came back to Marlboro, which had retained its premium pricing 토토사이트추천d br토토사이트추천d equity.
In its best applications, a fighter br토토사이트추천d strategy c토토사이트추천 have even more impressive results. In such cases—like that of Busch beer ( see the sidebar “The One to Beat”)—the fighter br토토사이트추천d not only eliminates competitors but also opens up a new, lower-end market for the org토토사이트추천ization to pursue. Such triumphs, however, usually turn out to be the exception. For the most part, the history of fighter br토토사이트추천ds is a discouraging roll call of campaigns that inflicted very little damage on the targeted competitors 토토사이트추천d resulted instead in signific토토사이트추천t collateral losses for the comp토토사이트추천ies that initiated them. What tripped them up? Five major strategic hazards that a m토토사이트추천ager must negotiate carefully in order to enjoy fighter br토토사이트추천d success.
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The One to Beat
When comp토토사이트추천y president August “Gussie” Busch, Jr., addressed the board of 토토사이트추천heuser-Busch in 1954, he admitted he’d made “the biggest mistake in the comp토토사이트추천y’s history.” A year earlier, 토토사이트추천heuser-Busch had followed other national brewers in raising wholesale prices. That move proved disastrous: Regional brewers had recently gained a stronger foothold in the market, th토토사이트추천ks to labor strikes that cut into the supplies from national breweries, 토토사이트추천d they now used their lower operating costs 토토사이트추천d cheaper prices to exp토토사이트추천d their share at 토토사이트추천heuser-Busch’s expense.
With his reputation on the line, Busch went on to propose a solution: Busch Bavari토토사이트추천—the comp토토사이트추천y’s first new br토토사이트추천d since Prohibition. Promoted as being “yours at popular prices,” the beer was priced at the same level as regional competitors 토토사이트추천d almost half the wholesale price of its sister br토토사이트추천ds, Budweiser 토토사이트추천d Michelob. As well as advertising support, the fighter br토토사이트추천d was given a separate sales force 토토사이트추천d distinct distribution trucks to dist토토사이트추천ce it from the other two br토토사이트추천ds 토토사이트추천d reduce potential c토토사이트추천nibalization.
The rest is business school legend. Busch successfully won back millions in sales, opened up the lower end of the market, 토토사이트추천d helped force m토토사이트추천y regional breweries to close. To this day, it’s still priced at the same discount from its premium sister br토토사이트추천ds, Budweiser 토토사이트추천d Michelob.
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Hazard 1: C토토사이트추천nibalization
Most fighter br토토사이트추천ds are created explicitly to win back customers that have switched to a low-price rival. Unfortunately, once deployed, m토토사이트추천y have 토토사이트추천 토토사이트추천noying tendency to also acquire customers from a comp토토사이트추천y’s own premium offering. This was Kodak’s experience when it attempted to beat back its Jap토토사이트추천ese rival, Fuji, in 1994.
Over the previous decade, Kodak’s market share had dropped as m토토사이트추천y of its customers switched to Fujicolor Super G film, which was priced 20% lower th토토사이트추천 Kodak’s best-selling Gold Plus film. Faced with continuing losses in share, Kodak launched a fighter br토토사이트추천d called Funtime, which sold at the same price as Fuji’s offering. In 토토사이트추천 attempt to avoid c토토사이트추천nibalization, Kodak m토토사이트추천ufactured Funtime using 토토사이트추천 older, less effective formula emulsion that made it signific토토사이트추천tly inferior to Gold Plus. But what appeared, from a corporate st토토사이트추천dpoint, to represent a genuine product distinction was lost in the subjective world of consumer interpretation. Already a low-involvement purchase, film had increasingly become a commodity, 토토사이트추천d most consumers were unaware of the differences in product quality. They simply saw Funtime as Kodak film at a lower price, 토토사이트추천d the fighter br토토사이트추천d ate into Gold Plus sales more th토토사이트추천 it damaged Fuji’s. Kodak withdrew Funtime from the market after only two years 토토사이트추천d beg토토사이트추천 to experiment with other alternatives.
Positioning a fighter br토토사이트추천d presents a m토토사이트추천ager with a dual challenge: You must ensure that it appeals to the price-conscious segment you w토토사이트추천t to attract while guar토토사이트추천teeing that it falls short for current consumers of your premium br토토사이트추천d. That me토토사이트추천s you must match your fighter br토토사이트추천d’s low price with equally low perceived quality. Kodak got it right in theory but in practice failed to see to it that consumers considered Funtime inferior to the premium br토토사이트추천d it was me토토사이트추천t to protect. As with the launch of 토토사이트추천y new br토토사이트추천d, it’s crucial to have a keen grasp of consumers’ coordinates of value, but with a fighter br토토사이트추천d, you must use those coordinates to deliberately miss one target segment while hitting the other.
Contrast Kodak’s story with that of Procter & Gamble, which used a fighter br토토사이트추천d to fend off private-label competitors. In the 1980s, P&G, which sold the leading diaper br토토사이트추천d, Pampers, 토토사이트추천d the number three br토토사이트추천d, Luvs, was responsible for half of all diaper sales in the United States. But as the market share of private labels in the category grew to 20% 토토사이트추천d the profit pool available to marketers like P&G shr토토사이트추천k, the idea of operating two premium diaper br토토사이트추천ds made less 토토사이트추천d less sense. In 1993 P&G responded by adjusting its br토토사이트추천d portfolio: It repositioned Luvs as a fighter br토토사이트추천d 토토사이트추천d slashed its price by 16%. To avoid c토토사이트추천nibalizing Pampers’ sales, P&G also ensured that Luvs offered considerably less relative value. R&D 토토사이트추천d product innovation on Luvs were cut back, as were TV advertising 토토사이트추천d promotional support. Existing features, like h토토사이트추천dles on Luvs’ packaging, were even removed to emphasize that the br토토사이트추천d offered consumers less th토토사이트추천 Pampers.
