Crisis, austerity, declining purchasing power… what if brands also had to adapt themselves to this new context by offering less prestigious products? The question of brand downward extension is particularly relevant nowadays for the attraction of new customers. Peugeot 301, Paul & Joe Sister, Marc by Marc Jacobs or Levi Strauss Signature are all examples of down-market and less expensive products or lines. Companies are going crazy about vertical downward line extension strategy, because it allows to reach new customers and increase sales. It is easier, faster and less expensive to implement this strategy than to create new brands (e.g. use of the Dacia brand to market the Logan in France). Nevertheless, it is often considered as being particularly dangerous because of the risk to bring down the brand image.
In a study published in Research and Applications in Marketing journal (January 2016), Fanny Magnoni shows the effects of brand downward extension strategy through the examination of its effects on the customer-brand relationship in two sectors: automobile and ready-to-wear.
The downward extension pulls down if…
Following a downward extension, the deterioration of the brand relationship is greater when the downward extension is perceived as deviant, transgressive act (“the brand is doing something wrong”) and the consumer identifies with the brand representing a strong basis for identity construction. This negative effect comes from a deterioration of brand trust which in turn leads to deterioration of brand attachment (relational chain).
The brand-consumer relationship is deteriorating only for brand customers (on the contrary, for non-customers, the brand attachment is improving) and in case of prestigious brands (the non-prestigious brand of the study is not affected by this strategy). Therefore, it seems that this strategy does not systematically emerge as a strategy to be avoided and brands may ultimately be less vulnerable than might be feared following an extension strategy. A non-prestigious brand would not have to fear of negative repercussions.
Brand downward extension: an exercise for an equilibrist!
In deploying a downward line extension strategy, companies should, however, at the same time reassure their customers about the brand’s capacity, intention, and motivation to respect the rules of the relationship. The launch of an upward extension can, for example, enhance the perceived quality of the partner by showing that the brand has a high level of competence in its area. Thus, the Giorgio Armani Privé haute couture line was introduced in 2005 following the Armani Jeans and Armani Exchange launches.
Furthermore, it is necessary to maintain the main benefits that brands bring to consumers in the downward extension in order not to undermine the initial positioning of the brand. The challenge for the manager is to minimize all the signals that give an impression of reduced quality by highlighting the fact that the brand products serve another function, that their use is different (e.g. clothes with a more urban or sporting style, or a small car for city use) and that they are not at all directed at the same target (e.g. younger consumers). The key to success is to ensure that the product is perceived as the best at that level and that it is linked as high value, although it is positioned at a lower level.
A balance that may seem hard to find!