Category Archives: Brand Ladders

Climbing The Brand Ladder


I have been having a number of discussions lately with Marketers about how to build “brand ladders” particularly in the Consumer Packaged Goods (CPG) and beverage alcohol space. 


 


In my discussions there seems to be some confusion about what exactly a brand ladder is and how it works.  A brand ladder is a series of items in a product category that have a common brand name and are priced at different points in a category.  There is generally some way of differentiating the individual items based on product features/benefits.  The concept is that an entry level consumer starts at the bottom of this price/feature ladder and as they gain expertise they begin to climb the ladder to more complex and higher priced items.


 


For example for years now we have seen this in a number of hard goods categories such as running athletic shoes.   You start off with what is an entry level shoe for people just getting into a sport or activity priced at the bottom of the category as a “value brand”.  You then add features/benefits and increase the price point along the way to the point where you a number of distinct items at various price points.  In the case of athletic shoes these can range from $50 a pair to several hundred dollars a pair.  Certainly that is the brand model that companies like Nike and New Balance have employed with great success.  The more committed/expert you get the higher up the ladder you climb.  Note that when they launch a new line/ladder they do so with multiple items with varying features at different price points at the same time thus constructing their ladder at the time of initial launch instead of doing what a lot of packaged goods people do; start with one item, generally at the bottom of the price range and try and add new items as premium extensions over time.


 


Perhaps that is why when one looks at a lot of grocery items there is relatively little being done in the way of building brand ladders.  What tends to happen instead is that new premium lines are launched as new brands; even in the most indulgent/luxury categories such as ice cream.  In the ice cream category the producers launch products with discernible differences at different price points but under different names.


 


Most line extensions for grocery brands tend to be based on flavour and tend to be line priced even when there are distinct differences.  I know that a number of years ago when I worked at Coca-Cola we discussed premium pricing for Diet Coke because the product cost versus regular Coke was much higher but in the end decided we could not justify a premium price to the consumer and simply ate the extra cost.


 


In beverage alcohol there has been a mixed bag in terms of results.  The keys to success in building a ladder are the starting price point for the ladder, the number of items initially launched and most importantly discernible differences between the various items under the same brand name.  As a result some categories such as vodka are a virtual graveyard of ladders that didn’t work while others such as scotch and wines have achieved a measure of success because of their ability to accentuate the points of difference as a rationale for a higher price point.


 


Take a look at the Johnny Walker ladder of whiskies as an example of something that works.  The starting point, Johnny Walker red is at a premium price point to begin with and as you go up through Black, Green, Gold to Blue there are distinct differences in the product and taste profiles with which   consumers can readily identify.  That is why it has now been ranked the number 1 wine and spirit brand in terms of brand value.  On the other hand their parent, Diageo has been singularly unsuccessful in building a ladder for their Smirnoff brand despite several attempts to launch a premium Smirnoff Black extension as people just did not see a difference that justified the price premium and frankly in most markets did not see Smirnoff as a premium brand.


 


This experience has carried over into wine brands as well.  There are any number of mainstream “fun/lifestyle” brands that have attempted to build a premium extension, usually by tacking the descriptor “Reserve” before the brand name.  As a colleague once remarked to me in regard to a leading US wine brand “I have a tough time believing that a wine brand that is poured out of a beer like draft tap from a 50 gallon drum can also be a $100 a bottle estate bottled wine as well.”  Further it begs the question as to why you would want to pollute the image of your wine by having a cheap wine by the same name.


 


In short in my experience if you are looking to build a brand ladder, in CPG or beverage alcohol you need the following:


 



  • A premium price starting point for your base brand.

  • Having at least two if not more brands in your ladder launched at the same time.

  • Clear points of differentiation between the rungs of the ladder that is you have to give the consumer a clear and compelling reason to climb the ladder and ideally it is because he is going to get a perceptively better quality product.