Should You Take Your Brand To Where The
Action Is?
Case Study by David A. Aaker
Presented by Chelsea Holland and
Anthony W. Tucker

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Executive Summary
• When markets turn hostile and profit margins
begin to shrink it is no surprise that marketing
managers look to take their brand to other
profitable markets.
• But the big question is should they? Will their
current brand image and perceived value
transition well into Value markets or Premium
markets?
• Should they transition up or down the vertical
market scale?

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Vertical Extensions
Which way should you go? If any?
Downscale Upscale
Opportunity usually arise through a brand’s Motivation for moving a brand from mainstream
current distribution channel. A boom in the market into an upscale market is clear: high
value segment of any given product category. end markets enjoy much higher margins than
Increased volume and economies of scales are mainstream markets.
results of downscale vertical extension.
Does your brand have the credibility to move
Is it worth the risk of the brand loosing its upscale? Are the bulk of your brand’s customers
stature as a higher-priced brand. Consumers willing to pay a premium price?
perceive higher prices to be higher quality.
Revitalize tired
products that have
been commoditized.
Example: Water

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Vertical Extension
HOW TO ACCOMPLISH YOUR MOVE

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How did Toyota reach the value and premium markets?

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Reposition or Sub-brand
Reposition The Entire Brand Sub-brands
Managers can reposition an entire Sub-brands vary in the extent to which they
brand in a new downscale market influence consumers’ purchase decisions and their
by dropping its price, but beware of experience using the offering.
that move. Invest in a brand when the price
drops. Marlboro. When consumers buy a car such as the Ford Taurus,
are they purchasing a Ford, a Taurus, or a
combination of the two?
A price cut can have enormous financial
implications. Including cutting profit margins
for the entire industry. Inciting a price war Maintain the parent brands’ credibility and prestige
making weaker companies to match or exceed regardless of how the sub-brand performs to protect
any permanent price decrease. from cannibalization.
Tarnish the brand? Or strategize and launch an How to keep the negative impact to a minimum.
everyday –low-price program. Cost leadership.
Retailers and consumers understand.

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Market Development
4 Types of Growth • New Markets
• Existing Products
Non-Price Oriented Strategies
Product
Diversification Development
•New Products • New Products
•New Markets • Existing
Markets
Market Penetration
•Existing Markets
•Existing Products

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Three Types of Relationships Between Parent and Sub-brands
Endorser Co-Drivers Drivers
•Minimize damage and reduce •Roughly equal influence on •The brand is vulnerable to
threat of cannibalization consumers cannibalization very little distinguishes
one brand from the other.
Three Brands At Work Being the best the brand can Descriptor sub-brands are
1. Parent Brand splits into be in a different target risky because it signifies
two: product brand and market. Down, middle, and lower-quality offering.
an organizational brand. upscale markets. Different
2. Organizational brand expectations and positioning Integrated with core brand’s
endorses the sub brand. of the product. repositioning. Descriptor
3. Product brand remains does not drive consumers to
premium brand. purchase. Different target
market. Class to mass. The
parent brand’s name retains
the power of the consumer’s
decision to purchase.

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How Much Can One Brand Take
Global Brands Too Many Markets Minimize Risk and Sub-brand
• Confusing positioning and • Under one brand name • Rationalize and control a
pricing for people who image can be negatively portfolio of brands for price,
conduct international effected by each position value, and maintaining
business. of brand in each different premium brand
market. value/image/worth.
• Sony purchased Loews • Purchase a new brand
movie theatre chain. Old
and didn’t deliver service
compatible with Sony
brand.
• Walk-Man prices $25-$500

Review
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Lower-End Upscale
Class to mass. Can’t
afford high-end Upscale
offerings. Upscale sub- Customers has
brand descriptor specific
expectations.
Mainstream
Value or upscale
offer most profit
and won’t hurt
the parent
brand.
Value (Downscale)
Differentiate a value
offering from its parent
brand with physical
differences.

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References
Aaker, David (1997). Should You Take Your Brand To Where The Action Is: Boston, MA:
Harvard Business School Publishing