At the outset, it is true that growth means being able to produce more of what you’re already making but you may get to a point beyond that. If so, perhaps you should start another label entirely. This could also be a solution for those who’s startup strategy was to optimize their chances by targeting a lower price point. I can’t tell you how many DEs tell me they intend to price low at first but plan to raise their prices once they get their foot in the door. As some of you have already discovered, you can’t do that. You can’t set low price points and once you get some accounts, raise your prices. Your buyers have integrated you into their pricing mix and they’ll balk at your strategy. If once you’re in the market and recognize opportunities at a market segment above your existing one, it may be best to start another label with its own identity. If so, step cautiously.
Your watch words are “brand dilution”. An article in this morning’s New York Times tangentially describes one such misstep by Liz Clairborne. Macy’s threw a major hissy fit after Clairborne decided to launch a new line for JC Penney’s, threatening to punish the company. It was no idle threat, Macy’s dropped millions of Clairborne’s sales. The problem? Brand dilution. More specifically, the problem was the name of the new label LC developed for Penney’s. While Macy’s could be described as using strong armed tactics, their concern was brand dilution for products they were already buying from Claiborne.
Liz Claiborne had sold clothes to J. C. Penney for years, under the name Crazy Horse. But the new Liz & Co. name sounded an awful lot like the legacy Liz Claiborne brand.
Naming your new label can be difficult. Obviously, like Liz Claiborne, if your new line is lower priced than your existing one, you may want to lend some cachet to the launch of the new line by naming it similarly to your existing proven line but you may risk retailer defection. More importantly, you may not want to name your new label similarly to your proven line if you’re upwardly mobile. Why dilute your new higher priced line with the image of your moderate line? Besides, your new line may end up being more profitable and rewarding that you decide to drop your first label altogether.
Miracle says the name of your company should never be the name of your label. Maybe we can get our marketing maven to explain the reasons why.