Positioning new products to gain from good name of brand

Gillette once reacted to introduction of a low-cost product. FILE PHOTO | NMG

What you need to know:

  • If opinion about brand is favourable, the behaviour towards the extension should also be positive.

Paint manufacturer Crown Paints Kenya Ltd #ticker:BERG has announced plans to launch a new line of low-cost paint by early February, making its products available to a new consumer segment and a factor that is likely to increase its market share.

“The main difference is durability and lifespan. Premium paint as the name suggests is our high-quality paint which can last for over five years when applied while the low end also known as economy paint could last for about two years. Of course, the pricing is also different due to the material used in manufacturing these paints,” said Rakesh Rao, the Crown Paints CEO.

“This sector has huge potential and as a brand leader, we want to place ourselves in all categories and take care of all clients. We expect to roll out this product to low-cost housing who are our target market and certain pocket of retail and developing areas of the upcountry.”

According to a report released in 2017 by The Coatings Group, publishers of the Polymers Paint Colour Journal, on the Kenya paint market, Crown Paints Kenya Ltd controls 65 per cent of the market share and plans to increase it to more than 75 per cent by 2020. Therefore in launching a line of products for a different consumer market, it is underway in achieving this target.

“Providing access points to a targeted consumer market makes the product readily available which in turn provides an opportunity for repeat purchase. In the case of Crown Paints, the new line will be cheaper than its other main product, therefore, consumers may choose to switch to it due to the brand name and its proven quality status,” said Bruce Gumo, marketing analyst at Biztrace, a marketing solutions company.

“It will increase its market share at the same time; given that it will be able to cater to a new segment of consumer market which they would not have reached with their premium products.”

In this, consumer knowledge of a brand plays an important role in selling a new product. Product awareness is available and the brand is now tasked in effectively marketing the benefits of its new product in order to sell.

“Consumer trust: the existing well-known-strong brands represent a promise — of quality, useful features ...— for the consumer. Thus, the new product will benefit from this fame and this good opinion about the brand to create a compelling value proposition in a new segment or markets,” according to a study by Halmstad University in Sweden on the effects of new product launches by brands.

“The customer is expecting to transfer their information from the brand to the new product range. If the general opinion about the brand is favourable, the behaviour regarding the extension should be the positive as well. This will win customer loyalty because a satisfied customer of a new product is more willing to repurchase the same brand.”

However, when a brand creates an access point to a new market segment, it is likely to trigger a reaction from its competitors, including engaging in price wars or promotions and discounts or even lead to the launch of its own new line of products for that consumer segment.

An example of a brand that reacted to a competitor engaging a new market segment is Gillette.
“When Gillette’s main competitor introduced low-cost disposable razors sold by the bag, the dynamics of the razor category began to shift. At first, Gillette’s managers responded in kind by introducing their own packages of low-cost disposable razors,” said Vijay Vishwanath and Jonathan Mark in their Harvard Business Review article, Your Brand’s Best Strategy.

“Realising, however, that a dominant share in a value-oriented category would confine the company to a return of sales of five per cent to 10 per cent, it also began to consider other paths to profitability.

As a result, Gillette poured more than $200m into research and development and introduced the Sensor shaving system. The Sensor sold at a 25 per cent price premium over Atra, another Gillette brand, which until then had been the highest-priced system on the market.”

- African Laughter

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