Diesel Analysis

TABLE OF CONTENTS Using the SWOT framework, analyze the marketing position of Diesel. Is the Company in a favourable marketing position to meet its future challenges?....2 Strengths...........2 Weaknesses...........3 Opportunities...........3 Threats...........3 Analysis of the Marketing Position......4 Evaluate the 3 marketing strategies outlined in Exhibit 15. Which of these strategies would you advice Diesel to adopt and why?..........6 Strategy 1...........6 Strategy 2...........7 Strategy 3...........7 One can argue that D-Diesel brand can be damaged by the confusion arising from its association with StyleLab. Provide arguments for and against this statement.9 Appendix............11 Figure 1 (Competitor's Prices)............11 Figure 2 (StyleLab's Positioning in the Market)...........12 Figure 3 (Target Customers of D-Diesel & StyleLab)...........13 Bibliography..........14 Using the SWOT framework, analyze the marketing position of Diesel. Is the Company in a favourable marketing position to meet its future challenges? In order to analyze the marketing position of Diesel, it is essential to consider the various factors in the Company's internal and external environment that can impact its current position as well as future strategies. This can be understood better with the help of the following SWOT analysis. Strengths: Diesel's biggest competitive advantage is the radical nature of its products, which are an extension of Renzo Rosso's dynamic personality. Diesel loyalists identify with the uniqueness of the brand. Diesel's success has been acknowledged by several prestigious awards over the years, creating a high brand image in the minds of the customers. Diesel's extensive coverage of the market, especially its flagship stores across global fashion centers reflects the exclusive & upmarket brand status. Diesel's brand strength lies in enriching value, thereby distinguishing its customers from the crowd. Diesel's products are of high quality and durability, justifying the high price tags to its customers. A majority of Diesel's highly synchronized workforce is personally selected by Rosso himself, ensuring that only highly skilled & passionate workers produce Diesel apparel. Diesel uses the media cleverly to market and distribute D-Diesel & StyleLab differently, preventing any juxtaposition of these diverse products while its ironical & shocking advertisements differentiate the brand from the competition and create a link with the consumer. A diverse brand portfolio ensures that Diesel can target its customers better and prevents brand commoditization. Weaknesses: With less than a month to go for StyleLab's first fashion show, Diesel hasn't come up with an appropriate branding strategy

for the new product line. This reflects lack of planning and foresight among the top management. Rosso's lack of faith in market research could prove to be a major weakness since marketing decisions not based on creditable research may ignore current market forces that influence the demand and supply for a product. Decisions based on 'gut feelings' cannot always guarantee success. Lastly, Diesel did not have any specific target market for StyleLab. Rosso assumes that people who found D-Diesel too young or trendy would automatically switch to StyleLab, which may not be the case. Opportunities: Rosso identified an emerging opportunity in the high casual wear market and launched StyleLab to counteract the diffusion of D-Diesel. The Company wanted to retain the exclusivity of its top selling product by diversifying its market. (Figure 3) Diesel's unique ads constantly offer the company opportunities to emphasize its exclusivity in relation to competition. Diesel can attach greater importance to having its products endorsed by top celebrities who are willing to do so even without any monetary incentive. The company leaves no avenue unexplored in its efforts to reach its customers better and therefore it should focus on introducing innovative marketing gimmicks as in the past. Lastly, through StyleLab, Rosso wants his designers to experiment with fabrics apart from denim and exploit the emerging market in high casual wear. Threats: Diesel's controversial ads often invite the wrath of critics and the masses in general. Extremely provocative ads might lead to large scale public resentment of the company if the underlying message in the ad is misinterpreted. Upward brand extensions are rare in a fashion industry characterized by downward extensions. Since the market is full of big players like Miu Miu, Prada, etc. and none of them have opted for upward extensions, it presents a high risk situation for Diesel. It is quite difficult to predict future prospects in this niche market segment. Lastly, StyleLab was positioned at the lower end of the high casual wear market. (Figure 2) In a market where price is equated with quality and exclusivity this might affect Diesel's image adversely. Analysis of the Marketing Position At present Diesel is in quite a strong position in the fashion market but needs to consolidate its position further. There is obviously the issue of how Diesel can protect its core-product i.e. D-Diesel without compromising the image of the brand. The company wants to ensure that it has covered every segment of the market with unique products that reflect the radical ideology of the brand but at the same time do not affect its core product. D-Diesel is targeted at people in the age bracket of 18-25 years who are looking for a radical lifestyle and want to wear clothes that distinguish them from the crowd. Diesel has achieved a high degree of success in achieving this objective till date. However, in the recent past, the increasing popularity of D-Diesel among more mature professionals is alienating the product's main target audience. Rebellious youngsters who are D-Diesel's primary customers are not comfortable with the idea of mature office goers wearing the same product because they feel that it lessens the aura of the brand. Rosso identified an emerging trend in the fashion market wherein office goers in the age bracket of 25-34 years want to wear trendy clothes to the workplace, i.e. the concept of 'Friday dressing'. So far this segment of the market has been making use of D-Diesel products to meet its needs for a different lifestyle. Hence, in order to protect the image of D-Diesel and at the same time tap into this new emerging market for high casual wear, Rosso decided to introduce StyleLab. The introduction of StyleLab encompasses a diversification and differentiation strategy at the same time since Diesel aims at introducing a new product at the lower end of the premium 'high casual wear' market so that it could offer unique products at a 'relatively' lower price. The positioning strategy seems quite sound on paper but there seem to be certain inherent flaws as well: - The positioning is based on gut feeling rather than sound market research which could lead to poor market knowledge in defining the product and its target audience. - StyleLab is 'relatively lower priced' and placed at the lower end of the 'high casual wear' market. (Figure1) This is a niche market for high income customers with mostly big players as competitors. In such a segment, the price is often considered a measure of quality & exclusivity, making StyleLab less desirable. (Figure 2) - There is no evidence that can categorically prove that after launching StyleLab, mature professionals will prefer that over D-Diesel. Therefore it might be concluded that Diesel needs to revise its positioning strategy in order to eliminate the above flaws and ensure that the launch of StyleLab is a success.

Evaluate the 3 marketing strategies outlined in Exhibit 15. Which of these strategies would you advice Diesel to adopt and why? Branding strategy is crucial to build up the image of a brand and ensuring its acceptance by the target market. Before choosing the appropriate branding strategy for StyleLab it would be advisable to analyze the pros and cons of each strategy. Strategy 1 The first strategy involves the use of sub-branding which basically implies distinguishing between different product lines. A high degree of importance is given to playing up the role of the master brand. The company aims at portraying its ability to innovate and move into new product areas. All new product lines are defined in terms of the master brand. When Diesel is used as the 'main driver' it virtually dominates the whole StyleLab logo. Attaching the name of the main brand 'Diesel' to the sub brand 'StyleLab' is an implicit guarantee of quality, helping to reduce the perceived risk of the consumer. He expects an equally high level of satisfaction from StyleLab as he received from Diesel. Using Diesel as the 'co driver' allows the company to maintain a subtle connection between the company's image and StyleLab without imposing the master brand all over the logo. This strategy is not advisable since StyleLab would be completely overshadowed by the company brand name; the new products uniqueness would be undermined i.e. not seen as individual by the consumer.

Strategy 2 Endorsement Branding is suitable when the new product to be launched is not in line with the master brand's objectives but it would benefit the company to depict a relationship between both the brands. Involvement of the master brand adds credibility and allows the company to differentiate its products from each other. Adopting this strategy implies giving more prominence to StyleLab in the brand logo. However, the company would retain the use of the 'Diesel' brand name in the logo to remind customers that after all, StyleLab is a Diesel offering and therefore they should expect high quality from the new product as well. The minor variation here is the concept of umbrella branding, wherein Diesel could create a completely new umbrella brand e.g. 'Diesel Planet' and market both D-Diesel & StyleLab under this name. Although StyleLab is given a more prominent position in the brand logo here as compared to sub branding it is still a risky proposition. On one hand, it allows the company to use its past success to hype up the expectations and demand for its new product. On the other hand, if StyleLab fails to live up to these expectations, it could do irreparable damage to the master brand. Strategy 3 The last strategy which is independent branding is used when the new product line to be launched doesn't fit in with the master brand's long term goals and vision. This is the best branding strategy when the company wants to make a conscious effort to differentiate its products since both the products are likely to cater to completely different market segments. In case of Diesel, the best branding strategy to market StyleLab effectively would be the 'acknowledged ownership' strategy. Here, the company shall not use any visual linkages between Diesel and StyleLab although many customers will be aware that StyleLab is a Diesel offering. Under acknowledged ownership the company will continue to make use of the existing resources to produce the new product line as well. The main benefit of adopting this strategy is that it permits Diesel to portray a high degree of product specialization to its customers. It can convince customers that D-Diesel and StyleLab are completely unique and different types of products, catering to completely different market segments. Diesel wants to ensure that there is no confusion in the minds of its consumers regarding its products. The company was worried by the declining interest in its main product brand on account of brand commoditization. Therefore, by introducing StyleLab the company wants to divide its market segment even further to ensure that it can offer something unique to all its customers. Acknowledged ownership would be preferable for Diesel as compared to total independence since the latter would involve the creation of completely new facilities and staff to produce StyleLab. There would be no link between the master brand and StyleLab. This would be a huge disadvantage since StyleLab wouldn't have access to Diesel's main strength which is its experienced and innovative designers. By introducing StyleLab, Rosso wants to give his existing designers a chance to

express themselves, there is no mention to recruiting completely new designers to handle StyleLab. Therefore, it can be concluded that StyleLab would benefit most from an independent branding strategy but through acknowledged ownership and not total independence. Ideal Brand Logo:

One can argue that D-Diesel brand can be damaged by the confusion arising from its association with StyleLab. Provide arguments for and against this statement. The main purpose behind introducing StyleLab was to segment Diesel's target market even further and ensure that customers didn't confuse StyleLab with the core product i.e. D-Diesel. However, there is always the possibility that this plan might backfire and the resulting confusion between D-Diesel and StyleLab might actually hurt the image of the company's core product. This can be justified on the following grounds: - Churning out too many products under different brand names might lead to improper allocation of resources between DDiesel and StyleLab which might compromise the quality and success of not only the new product but also the master brand, D-Diesel. - Customers might equate the quality and desirability of a product with just one particular brand name, D-Diesel. In such cases multiple brand extensions might make customers feel that the exclusivity of the Diesel brand name is declining and may affect D-Diesel's market adversely. - Diesel might not be able to market the various brands in its portfolio with equal effect. In case the company focuses a majority of its resources on promoting StyleLab, D-Diesel might be forced backstage to the category of a mainstream product which is definitely not the image that Diesel would like to put across to its target market. - In a rather ironical fashion, D-Diesel's success could actually work against its favor. D-Diesel is the company's main brand and it has already attained a high degree of success. This will automatically generate exaggerated expectations for Diesel's new offering i.e. StyleLab among the customers. Failure to match these high expectations may do irreparable damage to the Diesel brand name. On the contrary it can also be argued that by introducing StyleLab the company might actually be able to consolidate DDiesel's position in the market. This viewpoint can be justified on the following grounds: - StyleLab could help to support the company's main brand by taking some pressure off D-Diesel's market and catering to it directly. Launching a separate brand for a new market segment helps to ensure that the demands of all the customers are met preventing brand commoditization of the company's products. - D-Diesel would benefit if it could specialize in only its primary target market (18-25 years) rather than cater to a broad range of customers including trendy youngsters as well as mature professionals. It would ensure a higher degree of brand loyalty among the primary market segment for each type of product. - In certain cases brand association can also help to enhance the core brand by giving it greater exposure. Customers who are trying Diesel products for the first time through StyleLab might take note of the fact that StyleLab has evolved from DDiesel thereby encouraging them to try out D-Diesel products. - Diesel quite obviously wanted D-Diesel and StyleLab to have distinct identities but retain some common roots as well. (Page 7) Although the company wanted to separate its markets by introducing a new brand it did not want to miss out on a chance of capitalizing on its already powerful brand image at the time of introducing StyleLab. - Diesel seemed to be quite aware of the possibility that customers might get confused by the introduction of a new brand. Hence, they were clever enough to adopt completely different marketing and distribution strategies for D-Diesel and StyleLab to minimize the chances of any damage to its brand image. As is the case of most other things in life, there are both pros and cons for launching StyleLab and measuring its impact on D-Diesel. It can be concluded that keeping in mind the relationship between risks & returns, Diesel should iron out the shortcomings in their strategy and go ahead with it as planned to capture a bigger market share. Appendix Figure 1 (Competitor's Prices) COMPETITORS PRICES (StyleLab = Index 100)

Figure 2 (StyleLab's Positioning in the Market) Positioning and Distribution of D-Diesel and StyleLab

Figure 3 (Target Customers of D-Diesel & StyleLab) CriteriaD-DieselStyleLab GEOGRAPHIC RegionInternationalInternational DensityUrbanUrban DEMOGRAPHIC AgeFocus on 16-25Focus on 25-34 GenderMale-FemaleMale-Female IncomeMedium/medium-highMedium-high OccupationHigh school/ college students/ young professionalsProfessionals; managers GenerationHIP generationGeneration X Social ClassMiddle class/ upper middlesUpper middles/ lower uppers PSYCHOGRAPHIC LifestyleHigh media exposureHigh media exposure ShopoholicTraveler Neo hedonistWorldly Tribe member Trend follower PersonalityOpen-mindedIndependent IndependentVisually educated Innovation receptiveFashion perceptive CuriousCulturally aware Curious Bibliography 1.Aspects of Marketing Management-Module Handbook [2005-06]. Westminster Business School. 2.Doyle, P. [2001] Marketing Management and Strategy. 3rd Edition. Harlow: Financial Times Prentice Hall. 3.Diesel for Successful Living: Branding Strategies for an Up-Market Line Extension in the Fashion Industry [2004]. Case Study. INSEAD, Fontainebleau, France