Some brands were created just to expand the consumer base, but eventually turned into something more.
As is often the case, what is simple and understandable in theory may look completely different in practice. For example, companies often create sub-brands solely to support the main brand. And in the end, the aggressive newcomer literally devours his parent. For example, a company may create a new brand with affordable products to expand into new markets. As a result, consumers like the new brand so much that they begin to choose only it, forgetting about the main brand, which will end up in trouble.
Often a sub-brand is created with the expectation of attracting a young audience. The idea is that when she grows up and becomes more wealthy, she will switch to the main brand of the company. But life doesn't always work out as planned.
This phenomenon is most clearly demonstrated by history. Gap Inc. Millard Drexler, who turned Gap from a regional clothing brand into a powerhouse in the 1980s, launched Old Navy to defend against Target and other retailers who were pushing cheaper denim clothing. The new brand was more affordable, but less fashionable and of poorer quality. At first, everything went according to plan, but soon Old Navy began to dominate the company's earnings reports. With each quarter, the new brand showed ever-higher revenues, while The Gap brand was constantly sagging. It all ended with Old Navy becoming a direct competitor to the parent brand and Gap Inc. had to spin off the sub-brand into a separate company.
Gap Inc. is not the only company that is developing a cheaper business to attract new customers. Nordstrom followed the same path with its Rack sub-brand, Macy's with its Backstage sub-brand, and Victoria's Secret with Pink. Another famous example is Brand Hollister, created Abercrombie & Fitch Co..
And how can you not remember the history of Target. This brand was originally created by the Dayton Company to open a new type of store for everyone, as a complement to the more prestigious and specialized Dayton's department stores. As a result, the subsidiary brand became so powerful that it even led to the change of the company's name to Target Corporation.
Unfortunately, it is impossible to fully calculate the path of brand development. So, a brand can become part of a certain culture and consumers, instead of switching to a more “adult” brand, will cling to the one that has become a kind of symbol for them to the end. In addition, sadly, with age, a person does not necessarily become richer. He may start to earn more, but the costs are also growing.
However, one should not think that affordable price is the only thing that determines the success of a sub-brand. This is an important factor, but far from the only one. Finance is not an indicator at all. Someone can earn large amounts, but prefers to shop at Target. And someone with a small income, at least sometimes, but allows himself to buy Chanel. The problem is that marketers usually plan everything linearly, while real life does not follow any unambiguous rules.
Besides, a new brand is like a new toy. The company's management throws the best personnel on its development, while the old brand is left without attention. And this is an unforgivable mistake. A brand is like a tree that needs to be constantly looked after, no matter how tall and strong it may seem. Retailers sometimes make the mistake of relying on what they think is ingrained brand loyalty that young shoppers don't really share. This can lead to neglect in marketing and merchandising.
It is believed that it was because of this that Old Navy surpassed its parent. Under the new brand, new interesting models of clothing were created, while The Gap began to gradually become more predictable and boring. The subsidiary brand offered a new look at things that have already become familiar in the context of the parent brand. It seems that a similar situation awaits the J.Crew company, which is now actively developing the Madewell brand.
But what should companies do in such a situation? Unfortunately, there can be no universal answer here, everything is situational. However, when the situation has gone too far, you can simply accept the new realities and continue to develop the sub-brand, relegating the parent brand to the second position or completely abandoning it, as Target Corporation once did (often this step can be very painful). However, the appearance of an aggressive newcomer does not always lead to the death of the parent brand. Often, he still has every chance to return in all its glory, and it all depends on the actions of the company's management and its preferences.