Growth or dilution? Adding another label

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.

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  1. Miracle says:

    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.

    Yes, that’s one of my things (although I should never say never). I believe that having the company name and brand name the same work if you are only planning to ever make one category of merchandise, or if you are building a lifestyle brand that can encompass all company growth.

    In this day and age, newer manufacturers have followed the path of several niche brands, versus one large lifestyle brand. While there are notable exceptions (for example, Juicy Couture), many companies find it easier to manage a few highly targeted brands vs building one mega brand. Especially if there will be different retail channels for each product line or category.

    Also, keeping them separate allows agility as the popularity of your brand fluctuates. I think this article is a very good example because it’s about Liz Claiborne. One of the reasons Liz Claiborne has remained relevant is through the acquisition of other brands (even though they are dumping the ones that aren’t performing well). But overall, there is a perception of a… well a company that’s not really hip because of the brand Liz Claiborne. When they started acquiring contemporary brands there were a lot of people who wondered if they have what it takes to keep those brands hot because… well, they were Liz Claiborne.

    So, while I think large companies can do whatever they want, I think smaller companies (like us) should think strategically. Surviving the business long term requires lots of changes and adaptations and it’s easier to do it when everything you’ve built isn’t sunk into one identifiable brand (unless, again, you’re building a lifestyle brand).

  2. Miracle says:

    Oh, and since we’re talking about the topic, I would not have named the JC Penny brand simlarly to the main brand. The only way would have done that (what do they call them, diffusion lines?) similarly to the higher price point one is if they were going to stay within the same type of retail store. I believe that Macy’s made the right move in doing what they did. After all, they have to maintain a distinction from retailers like JC Penney because they have to keep their dominance in the “middle ground” because that’s where the waters are more easily muddied. It’s clear to be at the top of the price point game (Neiman, Barney’s), it’s clear to be at the bottom for price point (Target, Old Navy), but the middle ground is where you have to maintain your brand integrity. How would Macy’s maintain it’s position as a mall retailer when JC Penney has the same kind of stuff for less?

  3. Esther says:

    I am curious what Miracle has to say about establishing an online presence. Should a domain be the brand name or the company name? I think the two tend to get muddled online.

  4. In the world of product and company naming there are three generally agreed upon models for creating brand names, with pros and cons for each. The first and most widely understood is the “umbrella brand name” (eg Nike, Motorola). The pros of this model: simplicity, focus, and fewer dollars spent on marketing and awareness because you’re only building one brand — not many. The downside, as mentioned above by Miracle, is there may be less flexibility in terms of changing your market focus. If you go this route, it’s best to choose what the naming industry terms an “empty vessel” — that is, a name that’s big (eg Amazon) that you can ultimately use to cover any path you choose (on a personal note, it’s why I chose “Oiselle” for my running apparel company. There are other sports I’d like to branch into in the future…and as this name is broad — it’s French for female bird, simply alluding to flight and freedom — I can ultimately fill it with whatever I want.) Now, I may have to change the name of the company from “Oiselle Running, Inc.” to simply “Oiselle, Inc.” but that’s not too difficult.

    The second naming model is what’s called an “endorser brand name.” (eg Kelloggs Frosted Flakes, Kelloggs Rice Krispies). Frosted Flakes and Rice Krispies stand on their own, but they’re always endorsed by Kelloggs. The pros: you get more flexibility to move around and start new lines. The cons: you’ll spend a lot of money building those sub brands, and overall your life will be more complicated.

    The third naming model is what’s called a “product name brand” (eg Proctor & Gamble and their infinite array of stand alone brands like Tide, Palmolive, etc.) P&G is the parent brand but it plays zero role in marketing and product visibility. The pros: maximum flexibility in terms of launching new stuff. It also protects in a liability respect. If, for example, P&G launched “Sensora” (made up name) a dish soap that ultimately gave people exzema and nasty rashes, they could kill it and the P&G brand would likely remain unscathed. The cons: again, lots of money building those brands. In particular, businesses of all sizes face considerable difficulties in finding ownable words and names for trademarking. Just in the last 30 years, the rates of applications at the US Patent & Trademark Office have incrased by almost 1000% and it’s estimated that 95% of the words in the English language are trademarked. This kinda takes you back to model one…if you have a single brand, and you own it, that will save you a lot of time and grief. Sorry this got so long. I’ve been doing product and company naming for over 10 years now, so I get a littlte carried away…

  5. J C Sprowls says:

    The label is one of the products (or, by-products) of the Brand. The vehicle through which the philosophy is distributed to the masses.

    I’d love to stick with the Liz Claiborne example. But, that brand has become a little muddy having undergone so many incarnations over the years. My perception is that LC, Inc. has really relegated itself to the role of mentor and incubator for IPO fashion brands. And, that’s a fine reputation to have…

    Ralph Lauren is a “cleaner” (IMO) design example. RL is (now) a Brand. It has a Home division, an Apparel division, a Fragrance/Cosmetics division, etc. RL is (obvious to me, at least) building a lifestyle brand.

    Within the Apparel division, there are various labels, which are akin to quality, style, price point and – to a lesser extent – lifestyle or application (e.g. Purple Label, White Label, Polo, Chaps, etc). The marketing is aimed toward a specific lifestyle/activity, which influences Consumers to buy.

    The message I get from the Polo line is: Polo is rugged and sporty. And, if you’re rugged and sporty, these are the products for you. The garments are affordable and durable, so they can withstand rough wear, are easy to care for and will launder well. We’ve even made every garment coordinate by default so it’s very easy to shop, season-after-season. Think of it like grown-up Garanimals! [smart, btw!]

    In contrast, Purple Label delivers a different message: High-contrast colorways and fabric textures for the sophistocated gent [omit: who knows how to coordinate/dress]. High-end fabrics with fine finishes and great details…

    See where I’m going with this? RL is using Labels as a way to further break up the operational areas of the larger lifestyle company. Each label/line has a specific voice, focus and market objective. RL, putting on the CEO hat, has designed each label/line to cross-market and cross-pollinate each other. Why? Because Consumers are complex, e.g. “On Saturdays, he’s a Polo guy roughing around with the kids; but, on Friday evenings, he’s a Purple Label guy taking his spouse on a date.”

    *I love use scenarios, don’t you?

  6. We started the other way around. We started on the highest level, selling designer gowns, at designer prices, and once we had enough stores and enough recognition, we saw a demand for a lower priced line. We were asked to do a simpler version of our designer line and at a lower price point for major retailers and some larger boutiques. Our designer label has my name, Marialexandra, and we named our new line Marialexandra M-Label. It has gotten a great response and now stores see us fitting into two departments, which is good for business. Now, because we had always initially thought of having more than one brand at different price points, and to protect the main brand name, when we registered our company, we decided on a name that had nothing to do with the brand name or any name we might want to use as a brand name in the future. All our brand names are owned by our company, but don’t “step on each others toes” sort of speak. So I agree w/ Miracle, 100%. Someday we can produce a line for a store like Target or Walmart, and call it whatever, and it won’t affect our main brand at all.

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