One of the most significant effects of the recession has been consumers scaling back purchases in many ways, including trading down to purchase lower priced brands. It is an alternative to eliminating purchase of a certain product altogether. Serving customers in downscale segments has always been a delicate situation for marketers. On one hand, the potential to generate revenue from customers that may not be able to afford a company’s core brands can be reached through value priced offerings. On the other hand, a foray into value segments could have a negative impact on image perceptions of the core brand. A common strategy for managing this dilemma is to create a separate brand identity to distance the lower priced brand from the core brand. But, this approach diminishes the ability to leverage the strength of the core brand.
Coach is a brand that has enjoyed a brand positioning as a luxury lifestyle brand, the very type of brand that was vulnerable to consumers forgoing it for a lower priced alternative. What made Coach particularly vulnerable was that its core product, handbags, is more of a discretionary purchase, meaning that consumers might postpone buying a Coach handbag or trade down to another brand. Its response to the recession: tackle the shift in consumer behavior head-on with a line of lower priced handbags. Coach’s Poppy Collection carries an average price of about $200 compared to more upscale products priced at $400 and higher.
Is there a risk to a brand like Coach to entering lower priced markets? Yes, although some people would argue that a $200 handbag is not exactly a value priced offering! A branding strategy that isolates lower priced products to a certain line or group like the Poppy Collection is a way to protect core brand associations while enjoying the benefits of tapping into Coach’s brand equity. It is a matter of practicality versus pride; strong sentiment to “protect” a brand may steer strategy away from entering lower priced markets, but practicality recognizes that consumer behavior has undergone a distinct change. Product development should be guided by meeting customers’ needs, and at a time when the psyche of the consumer is still fragile that means exploring options in downscale markets that meet consumers where they are.
Marketing Daily - "Coach Makes Big Gains on Small Prices"