Ladder branding in the wine business
Back in the mists of time when BMW launched the 3 Series, I can remember reading an article suggesting that this was a serious mistake. By making BMWs more widely available, the argument went, their image of exclusivity would be irrevocably damaged, an image that had taken years to establish.
This came to mind as I read of the launch of Margaux de Chateau Margaux, which represents the third of four rungs in the ladder; below Pavillon Rouge and Chateau Margaux itself and above Margaux AOC. I’ve heard criticism in the trade about this move: some implying they are cashing in on the value of the parent brand, others suggesting that it represents a devaluation of Chateau Margaux’s brand equity.
One thing is clear: neither BMW nor Chateau Margaux will have taken the decision lightly. In the end, the decision on whether to cash in on exclusivity depends on the company’s long-term goals and financial position. Some companies’ success criteria may be satisfied by selling broadly similar volumes every year at high prices; others may decide that their goals can only be achieved by broadening their customer base, even if this means that their premium image is put at risk.
The fact that existing consumers’ perception of a brand will certainly change for the worse if it moves off its lofty perch should certainly influence a producer’s decision, but ultimately companies are not in business simply to please their existing consumers. Brands are a means to an end, not an end in themselves. If it is considered that the end is best served by making the brand more widely available then that is certainly the correct decision. This was surely the case for BMW as it was for its great rival Mercedes.
I would also argue that some consumer loyalty is transient, however clever a company’s marketing. Consumers who might be classed as “discoverers” tend to move on anyway, even if a brand remains exclusive, which can leave such brands high and dry and with a reduced ability to cash in. Timing therefore, as in so many areas of marketing, is everything.
Writing as a self-confessed “ladderphile”
Many car manufacturers have developed what are known as “ladder brands”, and they are pretty common in our own industry too. I became a convert to ladder branding in the 90s, influenced as I was by my experience with Penfolds, perhaps the ultimate wine brand of this type. The advantages of ladder branding are clear. It encourages consumers to stay within one brand whatever the occasion, whatever their budget – you become to some extent a one-stop shop.
With all brands of course it is vital to keep consumers engaged and with ladder brands this is less difficult as one has more flexibility. There is more room to add new lines, and more material therefore for interesting stories. My mantra at Penfolds was “the day our core consumer completely understands Penfolds is the day they move on to another brand”; on the premise that train spotters tend to find another hobby when they’ve spotted all the trains. And with Penfolds it wasn’t difficult to come up with new “trains”.
The problems with ladder branding
The major problem with a ladder brand comes if it gets out of balance: if what is happening with the lower rungs becomes too important and waters down the aspirational value to an unacceptable level.
This of course is the risk BMW took, and why most of their marketing subsequent to the launch of the 3 Series was focused on the tiers above that and the overall image of the brand. With Penfolds, the marketing of Grange and the upper rungs plays the same role.
Which is why ladder branding is easiest if you go “top down” as opposed to “bottom up”. Brands with an exclusive image create a halo effect which draws consumers in, but brands building from the bottom have no such advantage. They may have a strong franchise in their own way, but the values they own do not as a rule cross over in to premium sectors. Thus brands such as Kumala and Jacob’s Creek did not find premium sales easy to come by. Also the more successful you are in the mainstream sector, the more you are constrained by this sector: it may be quite possible to move horizontally, but more difficult to climb vertically.
Having said that, top down laddering only works if the brand is genuinely aspirational. People tend not to climb up ladders unless they want to get to the top. And creating effective halos takes either a substantial investment or a great deal of time … and often both.
The lessons from generic brands
Some of the best examples of ladder brands in our business lie in the generic field. On the positive side the presence of the leading Bordeaux chateaux clearly adds value to every single wine from Bordeaux; less so perhaps than in the past, but it is still very apparent.
On the negative side, however, as noted in an earlier post (Going regional: why the new world should bother) the Australian ladder became a disadvantage when all the discounting at the mainstream end sucked the premiums into the quicksand. The same happened to Germany with the over-promotion of Liebfraumilch in the 1980s. Meanwhile, the very strength of the lower rungs of the Chilean and South African ladders has ensured that not enough consumers have bought in to these countries as sources of premium wine.
The lesson is that strong ladder brands, by their very nature, need to be aspirational, but they also need to be appropriately balanced. And the further you stretch a ladder the more one risks it getting out of balance. With Penfolds we thought long and hard about launching a £4.99 range. Were we stretching credibility? Would Rawson’s Retreat (as it became known) unbalance the brand?
The difficulty in keeping all this together, for any length of time, is why many producers aspire to a portfolio of brands with very clearly focused roles and target consumers. Less “one-stop shop” and more “individual boutique”. This approach is in many ways more costly and less manageable, but it’s also less risky, particularly if some of your brands are exceptionally exclusive or have highly defined positioning.
I’d be very surprised if simply by adding another rung to their particular ladder Chateau Margaux has put its exclusivity in any way at risk. But, as many generic and individual brands have proved, premium images which take decades to build up can be jeopardised in far less time. Creating a stairway to heaven is a great idea in principle, but sticking to the marketing equivalent of the straight and narrow is a lot easier said than done.