While Repositioning a Brand is a Difficult Decision, It Can Offer Significant Benefits When It Works

At some point in the life of a business, they face tough marketing choices if they want to grow. For some businesses, it is deciding whether to spend big money to grow their distribution network, such as building new warehouses and hiring more employees so they can expand beyond the geographic areas they currently serve. In other cases, the decision is whether to commit to a sizeable promotional campaign, such as the production and placement of expensive advertisements, in an attempt to stand out from competitors. Or maybe, a marketer is considering whether to launch a new product that is very different than what present customers are accustom to seeing.

While these decisions are challenging, possibly the most difficult marketing decision is the one where the marketer decides to shift direction and appeal to an entirely different target market. Unlike spending money on enhancing distribution, creating new ads or developing new products, retargeting a business requires changing all marketing decisions. This is an enormous undertaking and few companies ever get to the point of making such a decision. For those that do decide to target an entirely different market, they often do so by creating new brands while retaining their existing brand. For example, as we noted last week, Whole Foods is targeting a somewhat lower income consumer by creating a new retail model.

But shifting the whole business in a new direction, using the same brand name, is a bold move. An example of a company that decided to change strategies and target a different market can be seen in this Washington Post story. It discusses how home furnishings retailer, Restoration Hardware, made the decision to redirect their marketing away from the middle-income customer they previously served and, instead, repositioned the company to target high-income customers. This move, made during the economic downturn that started in 2008, has not only saved the company, it has catapulted them to record profits. In fact, Restoration Hardware believes so much in this marketing strategy, they are now planning to establish a newly branded retail chain targeting the same customers but with different products.

Now some may wonder whether this strategy can be sustained whenever the next recession comes. Well, if history has told us anything about retailing during a recession, it is this: the retailers that suffer most during an economic downturn are those not perceived as being low cost but also are not viewed as offering high-quality products. Instead, they are stuck in the middle. If this holds true the next time the economy dips, then Restoration Hardware’s repositioning strategy is likely to have been a good decision.

 

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