Loving the low end

I've had a bee in my bonnet for some time now about the challenges facing established brands in targeting low end markets. Scott D. Anthony's recent article on the Harvard Business site therefore (literally) struck a chord. In it he notes how a premium brand guitar maker - C.F. Martin & Co. - responded to the recessionary environment by cutting production costs and introducing a cheaper model. This wins applause from Anthony who believes every business should have a “love the low end” model. The argument is that it’s better to own budget conscious consumers than ceding this ground to low cost competitors.

Traditionally, marketers are trained to aim their sites on the higher end of the market whether it be blue chip clients in B2B environments or deeper-pocketed consumers in B2C. After all it makes sense to go where the money is. However, the airline industry has amply demonstrated how difficult it can be for incumbents to respond to low cost competition (cf. BA vs Ryanair, et al).

This suggests that even if you’re lucky enough to be playing in the high end of the market you do need that low end offering. Assuming that your business has the capability to deliver a cheaper product profitably then one of the key questions for marketers is how do you stop yourself competing with yourself? This can be both existing customers who perceive they can get the same product for less or prospects that might otherwise have invested more.

The answer, or course, is in effective differentiation and segmentation. Customers need to be clear what the differences are between the high and low end offerings and then the appropriate target groups directed towards purchasing the right one for their needs.

A low end offering can be a great way for customers you would never have had to develop a relationship with your brand. Tread with care however as the path is littered with examples where brands have got it all wrong. First of all cutting cost to create a low end offering mustn’t mean cheap as it can damage the entire brand (e.g. Mercedes A class circa. 2000). Secondly, if your offering is all about exclusivity you can't credibly offer a slice to everyone.

I know in business we like to focus on success but it would be informative and fun (in a morbid way) to gather people's examples of brand over stretch for a future discussion...