By Kevin Susman, VP of Consulting, MATRIXX Software
The flanker brand has been a go-to in the incumbent brand competitive playbook for years. When it works, it adds a powerful competitor that can scaffold off the main brand to build new markets and grow revenue. Yet, all–too often, somewhere between the strategy and the implementation, there is a tendency to over-index on defending the main brand at the expense of the flanker’s growth. Which is why one of the more common questions I get from clients around the globe is how to balance growing the flanker without resorting to cannibalizing the main.
What’s a Flanker?
Interchangeably referred to as a fighter or sub-brand, flankers are part of a strategy where an incumbent launches a new brand in the market. Most often, that new brand is lower-priced. Notably, in today’s app-centric world, it will frequently be digital-only for both retail and support. Of course, flankers can go up-market instead of down, with Toyota’s LEXUS being one of the better-known examples. Setting the exceptions aside for this article, consider that they are generally driven by two imperatives:
Imperative one: protect main brand revenues while expanding market share.
Building a brand is a delicate art, maintaining the equity built into it is even trickier. Big mainstream brands are not going to be for everyone, nor should they be. Enter the flanker. Often targeted at “tech-savvy, digital natives” and/or “young people” deemed inaccessible to the more conservative, mainstream main brand, they are typically hipper and edgier than their sibling brands. Most importantly, the strategy of the flanker is simple – enable down-market competition while insulating the main brand from being perceived as cheap.
Imperative two: defend the main brand by bypassing the status quo.
Usually started from a clean sheet of paper, flankers are freed from all the complicated backend processes of their incumbent parents. As a result, they can lean into today’s digital-first ethos with a promise to offer simpler and (frequently) improved customer experiences versus their incumbent parent. In very real terms, they enable the incumbent to bypass internal resistance and deliver new and/or innovative offerings and experiences, via the flanker, while limiting downside risk.
The challenge of inside-out thinking
If you noticed a recurring theme of defending the main brand, you now understand the challenge of inside-out thinking. In the simplest of terms, inside-out thinking is when the incumbent defaults to believing that customers will behave based on what’s best for the brand, and not the other way around. In practical terms, this means that the flanker’s job is to defend the main brand at all costs, and not win at all costs. Which for many is good enough.
Except where good enough isn’t. In hotly contested markets, the competition wins by disrupting the status quo. That leaves the flanker with two options. It can grind on price and impact margins, or it can innovate on products and services. Except, it cannot be too innovative, or it resorts to cannibalization. So that leaves price as its primary weapon even as leadership wants to grow revenue and improve margins. Therein lies the dilemma of inside-out thinking.
To break free from this, the inside-out orientation must be replaced. Significantly, it means completely reinventing the go-to-market strategy across the portfolio of brands, not just the flanker. In very real terms, it results in realigning the incumbent’s view of the world such that the main brand simply becomes the brightest star in the sky, as opposed to the center of the universe. What happens when that happens?
Improved monetization across the portfolio
Instead of defaulting to rationing products and services to compel users to “switch up” to the higher priced main brand, this approach empowers the flanker to price up towards the main. For the digital flanker, this means unlocking new products and services that improve its competitiveness, while also opening new monetization vectors.
For the main brand, it creates an imperative to improve its competitive footprint so that it can better defend its higher margin customers. The net result – the main and the flanker monetize more, and more effectively. A win for both.
Stronger defensive posture against churn
Of course, the goal should always be to practice loyalty as a strategy to keep the churn numbers down. Nonetheless, not all brands are suited for every customer. The question then becomes what to do when a customer threatens to churn (or is at risk of doing so)? A portfolio approach leans into this idea, proactively leveraging the different brands to keep customers “in the house.” Some incumbents I work with lean into this strategy, too many don’t. The question should no longer be centered on how the individual brand keeps the customer (often at whatever cost), but rather how does the portfolio collaborate to place that customer where they can best be served with the best monetization outcome? The individual brand may lose, but the portfolio overall wins.
More efficient customer acquisition
Finding customers is hard. Converting them is even harder. While advertising is far from the exact science, we all wish it were, there is no question that seeing sibling brands unintentionally spending precious ad dollars fighting each other (in addition to the competition!) is frustrating. By approaching the market as a portfolio strategy, aligning everything from customer personas to product and experience strategies, commercial teams can realize better allocation of customer acquisition costs. The end goal is to fight each other less and fight the competition more.
The goal of all of this is to better enable the incumbent, and its flankers, to compete in the marketplace. By ending inside-out thinking and embracing a portfolio go-to-market strategy, the main brand will be compelled to adapt more quickly to the rapidly evolving market, and the flankers will be better equipped to deliver against the bottom-line.
