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Retailers battle it out with their 'fighter' brands.

Retailers battle it out with their 'fighter' brands

Take a trip down the Tesco aisles and you'll notice a section of the store that feels more like discount stores Aldi, Lidl or Netto than Britain's premier retailer.

The "discount brands at Tesco" shelves - usually placed at the near the entrance to the main grocery section of Tesco's largest stores - contain a range of unfamiliar brands, from Country Barn cornflakes to Daisy washing-up liquid. They mimic the "feel" of Tesco's cheaper rivals and are designed to win back custom from them.

Chief executive Terry Leahy has described "discount brands at Tesco" as the biggest change in the brand's offering in more than a decade. But they are actually an example of a strategy that business schools usually dismiss as defunct.

So-called "fighter brands" are designed to combat low-price competitors that threaten to steal market share from a company"s premium brand. Other examples are Song, the low-price airline that Delta Airlines launched to combat the challenge from JetBlue Airways, and Surge, which Coca-Cola introduced to take on PepsiCo"s Mountain Dew. But Delta closed Song within two years and Surge disappeared after five.

One risk of fighter brands is that they take customers from the company"s own premium offering. Another is that they consume resources and distract management from the company's core business.

Yet not all fighter brands fail. Intel, for example, successfully created Celeron as a cheaper, less powerful version of its Pentium computer chip to face down the threat from competitors like AMD's K6 chips in the low-cost personal-computer market. And Australian airline Qantas's budget Jetstar airline turned in a tidy $114 million profit in the year to June 2009 when most of the world's major carriers were suffering.

In the September 2009 issue of Marketing, Ritson, who has written extensively on fighter brands, considers whether John Lewis"s value range of home-ware products will help the company to defend its "Never knowingly undersold" slogan against the supermarkets that have moved into its territory, or whether it will fail.

He concludes: "If John Lewis gets its strategy right, its value line could deliver a coup. Yet, the odds are against it. History teaches us that it has only a fighting chance of emerging victorious."

Internet and telephone savings bank ING Direct is another company that is trying something different in the recession. In the October 2009 issue of Admap, Bain and Lambert report that the firm is going against the grain of traditional banking communications to replace the usual emphasis on trustworthiness with an appeal based on the uplifting feeling of saving with the bank.

Consumer trust, long central to financial-services marketing, was severely dented by the economic crisis. ING Direct therefore opted for a communication strategy based on the "feelgood" nature of saving to engage emotionally with consumers.

The results, so far, are encouraging. Sales have increased by 194% and the value of deposits has risen by 36.3% year-on-year. Awareness has grown by 12% and consideration by 90% among ING Direct"s target audience.
A bank where customers can feel good about putting their money: it's an idea that could run and run.