The Pros and Cons of Flanker Brands

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Table of Contents

Introduction
Flanker Brands
Intel
Failure of Flanker Brands
Critical Success Factors
Conclusion
Bibliography
Footnotes

Introduction

Principle products account for a sizeable percentage of a company’s profits. Companies use various strategies to improve the competitiveness of their products. Branding is one of the major strategies that companies use to improve the competitiveness of their products.

Brand recognition makes customers associate with the product.¹ Companies may employ several branding strategies. A company may use a certain line of products that uses a similar brand name. A bastion brand is the most profitable product in the product line. Competitors may try to undercut the bastion brand by offering other products that compete with it using price or quality.

This necessitates companies that own the bastion brands to formulate strategies that would help in tackling competition from rivals. Companies may use flanker brands to improve their competitiveness.²

The purpose of flanker brands is to pre-empt competition from rivals. In addition, flanker brands help in covering the market more efficiently. Intel is one of the companies that use flanker brands to tackle competition from rivals. Intel used the Celeron to overcome competition from AMD’s K6 chips.

Celeron was a cheaper version Pentium, which was the company’s premium brand. However, there is no guarantee that this strategy would be successful. GM’s Saturn is a clear illustration of how failure of flanker brands may affect a company. GM lost billions of dollars due to the failure of Saturn. Therefore, it is vital for companies to use an efficient strategy in launching flanker brands. Companies must ensure that flanker brands are profitable. This would guarantee the long-term stability of the company.

Flanker Brands

It is vital for companies to respond to attacks by competitors. Competitors may offer products that have unique attributes that may enable it to conquer the market. Therefore, failure to respond to the attacks would risk the company’s image and brand equity. Using flanker brands is one of the most efficient strategies that companies use to tackle threats from competitors. Flanker brands help in insulating the original brand from threats posed by rivals.³

A war metaphor is the source of the flanker brand name. A flanker brand helps in protecting a bastion brand from rival brands. The major aim of the flanker brand is to overcome competition from rivals. The major characteristic of flanker brands is the fact that they reduce the need for bastion brands to change their focus. This enables a company to maintain its customers.

Companies often use a flanker brand if rivals develop low-cost products that strive to weaken the market position of the bastion brand. Failure to respond to the rival products would reduce the profitability of the bastion brand.⁴ A flanker brand offers stiff resistance to the entry of rival products in the market. This helps in protecting the competitiveness and profitability of the bastion brand.

Intel

Intel is most dominant company in the computer chips market. Intel used a flanker brand to overcome low-cost products from rivals successfully. Pentium chips are the most successful products of the company. During the late 1990s, Intel faced competitors that threatened the company’s market dominance.

AMD is one of the companies that threatened Intel’s market dominance. AMD’s K6 chips were much cheaper than Intel’s computer chips. This enabled the chips to have a better chance of capturing the emerging low-cost PC market. Therefore, it was vital for Intel to devise a strategy that would counter the rival.

This would help in protecting Intel’s brand equity. Intel created the Celeron to counter competition from AMD. Celeron was a cheaper version of Intel’s Pentium chips, which had limited capabilities.

It enabled Intel to overcome competition from AMD.⁵ Celeron’s success led to the creation of a new market segment. Intel is the dominant player in this market segment. Celeron is currently one of the major brands of the company. It accounts for a sizeable percentage of the company’s revenue. Therefore, using a flanker brand enabled the company to increase its profitability.

Figure 1. Intel’s Pentium processor

Advantages of Flanker Brands

Flanker brands increase the number of products that a company offers. This increases the shelf space that a company gets in various retail outlets. Intel’s use of this strategy led to the creation of a new product. Celeron increased the product range of the company.

Using flanker brands enables a company to improve its brand equity. This is because flanker brands increase the product range of the company.⁶ Intel used the Celeron to improve Pentium’s brand awareness. This increased Pentium’s competitiveness.

Flanker brands enable a company to capture brand switchers. Brand switchers are customers who are not loyal to a particular brand. Therefore, they may alternate purchases between different brands. Flanker brands improve a company’s stability and profitability. Celeron increased Intel’s product range. In addition, the ability of Celeron to compete on different fronts enabled Intel to capture brand switchers.

Flanker brands enable a company to improve its profitability. In some instances, successful venture of the flanker brands into the market may lead to the creation of new bastion brands. Successful venture of Celeron into the market made the product become part of Intel’s profitable bastion brands. This increased the profitability of the company.

Flanker brands enable a company to protect its bastion brand. Companies usually assign a unique name to the flanker brands. This limits the risk that the bastion brand may face if the flanker brand fails.⁷ Celeron was the name of Intel’s flanker brand. Therefore, failure of Celeron would not have adverse effects on Pentium.

Flanker brands enable companies that have high quality products to introduce low quality products without diluting the brand name of the high quality products. The high quality products continue being the company’s principle products. Intel introduced Celeron without compromising Pentium’s brand name. Pentium was the high quality product of the company. Therefore, it enabled the company to compete with low quality products from rivals.

Disadvantages of Flanker Brands

Inefficiency of this branding strategy may increase the risks that bastion brands of a company may face. Failure of the bastion brands may have huge repercussion on the company. This is because the company may have taken many years to build the brand image of the bastion brand. Therefore, it is vital for a company to use an efficient flanker brand strategy.

Flanker brands lead to the creation of new products. This may distract the company from the values and associations of the bastion brand due to the wide variety of new products. This would ultimately reduce the competitiveness of the bastion brand.

Flanker brands may lead to loss of economies of scale. They may also increase the costs of brand management. This is because flanker brands increase the number of brands of a company. Competition between in-house brands may necessitate a company to offer sub-optimal prices for the products. This would reduce the competitiveness of the company.

Failure of Flanker Brands

In the business world, failure of business strategies is very common. For every successful flanker brand strategy, there are various cases of failure of the strategy. General Motors’ Saturn is one case that illustrates the failure of a flanker brand strategy. General Motors intended to use the Saturn to counter the entry of Japanese imports into the market.⁸ However, Saturn led to the loss billions of dollars, which helped in destroying GM.

GM launched Saturn in 1990. During the initial period, Saturn was very successful. By 1996, orders of Saturn had surpassed the company’s production capacities. This was testament to the success of the product in fighting cheap Japanese imports, which were more fuel-efficient.

However, Saturn’s success did not solve some of the problems that were inherent in the brand since its onset. The initial cost of setting up Saturn was $5 billion. However, GM offered Saturn at very low prices. The prices of the vehicle were unable to cater for the huge operational costs of its manufacturing plant. By 2000, GM was losing $3,000 on every sale of a Saturn vehicle. The huge losses necessitated the closure of the Saturn plant.⁹

Failure of Saturn had great repercussions to GM. The company lost valuable time in building a brand that strived to fight cheap Japanese imports. In so doing, GM made huge strategic shifts that affected the entire company.

In addition, Saturn made GM lose billions of dollars, which would have greatly benefited the company if it had invested the finances in other areas. Failure of Saturn tarnished GM’s brand image. Failure of Saturn provides an explanation to the current woes facing GM. GM has been unable to recapture its market share from the Japanese imports.

Figure 2. Logo of GM’s Saturn

Critical Success Factors

Companies should consider whether they need an additional brand to counter competition before launching a flanker brand. An additional brand reduces the investment and attention that a company offers to its existing products. This provides distractions to the company. Spending precious resources on a flanker brand may have detrimental effects on a company.

Adjusting the existing brands may help in solving some of the problems that a company faces due to the entry of rivals into the market. Therefore, a company should use a flanker brand as a last resort. Failure of flanker brands may necessitate a company to implement cost-cutting or re-pricing strategies on its bastion brands. Flanker brands delay the crucial strategic transformations. During this period, the competitors may have already gained a stronghold of the market. Having fewer brands reduces a company’s distractions.

Companies should also consider the effects of cannibalisation prior to launching flanker brands. Most companies use flanker brands to capture brand switchers. However, flanker brands also acquire customers from the company’s bastion brands.¹⁰ Therefore, it is vital for a company to consider the number of customers of customers that the flanker brand will acquire from the bastion brand before launching it.¹¹

A company should ensure that the flanker brand focuses on the customers. However, companies do not create flanker brands using a process that is similar to that of other products. Companies create flanker brands due to their own deficiencies or strengths of the competitors.

Therefore, flanker brands do not target the customers. This corrupts the DNA of the flanker brand from its onset. Therefore, it is vital for a company to focus on the needs of customers prior to the launch of flanker brands. This would help in targeting a specific segment of consumers. This would guarantee the ultimate success the flanker brand.

A company should consider the profitability of flanker brands prior to their launch. Despite the fact that flanker brands target rivals, they should do so profitably. Having sustainable profits ensures the long-term stability of flanker brands.¹² Failure of Saturn is a clear illustration of the importance of ensuring the profitability of flanker brands. GM did not design Saturn to have sustainable profits. Therefore, Saturn’s collapse restored the market dominance of the cheap Japanese imports. This invalidated the efforts of the company.

Conclusion

The major aim of flanker brands is to overcome competition. However, companies should ensure that flanker brands have sustainable profits. This guarantees the long-term stability of flanker brands. The success of flanker brands may lead to the formation of new market segments.

However, there is no guarantee that flanker brands would be successful. Therefore, it is vital for companies to consider various critical success factors prior to launching a flanker brand. This would guarantee the ultimate success of the flanker brands. Intel is one of the companies that have used flanker brands to subdue competitors.

Bibliography

Aaker, David A. “Should You Take Your Brand to Where the Action Is.” Harvard Business Review 75, no. 5 (1997):135-143.

Buday, Tom. “Capitalising on brand extensions.” Journal of Consumer Marketing 6, no. 4 (1989): 27-30.

James, David. “Guilty through association: Brand association transfer to brand alliances.” Journal of Consumer Marketing 22, no. 116 (2005): 14-24.

Kim, Chung K. and Anne M. Lavack. “Vertical brand extensions: Current research and managerial implications.” Journal of Product & Brand Management 5, no. 6 (1996): 24-37.

Kim, W. Chan and Renee Mauborgne, “Blue ocean strategy,” Harvard Business Review 82, no. 10 (2004): 76-84.

Lomax, Wendy, Kathy Hammond, Maria Clemente and Robert East. “New entrants in a mature market: An empirical study of the detergent market.” Journal of Marketing Management 12, no. 4 (1996): 281-295.

Miles, Raymond E. and Charles C. Snow. “Causes for Failure in Network Organizations.” California Management Review 34, no. 1 (1992): 53-72.

Porter, Stephen S. and Cindy Claycomb. “The influence of brand recognition on retail store image.” Journal of Product & Brand Management 6, no. 6 (1997): 373-387.

Ritson, Mark. “Should you launch a fighter brand.” Harvard Business Review 87, no. 10 (2009): 86-94.

Varadarajan, Rajan, Mark P. DeFanti and Paul S. Busch. “Brand portfolio, corporate image, and reputation: Managing brand deletions.” Journal of the Academy of Marketing Science 34, no. 2 (2006): 195-205.

Varadarajan, Rajan. “Fortune at the bottom of the innovation pyramid: The strategic logic of incremental innovations.” Business Horizons 52, no. 1 (2009): 21-29.

Volckner, Franziska and Henrik Sattler. “Drivers of brand extension success.” Journal of Marketing 70, no. 2 (2006):18-34.

Footnotes

¹ Stephen S. Porter and Cindy Claycomb, “The influence of brand recognition on retail store image,” Journal of Product & Brand Management 6, no. 6 (1997): 374.

² Franziska Volckner and Henrik Sattler, “Drivers of brand extension success,” Journal of Marketing 70, no. 2 (2006):18.

³ Rajan Varadarajan, “Fortune at the bottom of the innovation pyramid: The strategic logic of incremental innovations,” Business Horizons 52, no. 1 (2009): 22.

⁴ Rajan Varadarajan, Mark P. DeFanti and Paul S. Busch, “Brand portfolio, corporate image, and reputation: Managing brand deletions,” Journal of the Academy of Marketing Science 34, no. 2 (2006): 199.

⁵ Chung K. Kim and Anne M. Lavack, “Vertical brand extensions: Current research and managerial implications,” Journal of Product & Brand Management 5, no. 6 (1996): 26.

⁶ David James, “Guilty through association: Brand association transfer to brand alliances,” Journal of Consumer Marketing 22, no. 116 (2005): 16.

⁷ David A. Aaker, “Should You Take Your Brand to Where the Action Is,” Harvard Business Review 75, no. 5 (1997): 136.

⁸ Raymond E. Miles and Charles C. Snow, “Causes for Failure in Network Organizations,” California Management Review 34, no. 1 (1992): 61.

⁹ Mark Ritson, “Should you launch a fighter brand,” Harvard Business Review 87, no. 10 (2009): 90.

¹⁰ Tom Buday, “Capitalising on brand extensions,” Journal of Consumer Marketing 6, no. 4 (1989): 29.

¹¹Wendy Lomax et al., “New entrants in a mature market: An empirical study of the detergent market,” Journal of Marketing Management 12, no. 4 (1996): 283.

¹² W. Chan Kim and Renee Mauborgne, “Blue ocean strategy,” Harvard business Review 82, no. 10 (2004): 77.

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