Adv 388k diesel case analysis group 6 (1)

Case Analysis: Diesel for Successful Living ADV 388K Integrated Communication Management [Group 6]

Zachary Bodner (bodnerzd) Alex Hart (amh6375) Xing Liu (xl5525) Darya Procopovich (dp28353) Emma Szyller (es34345) The University of Texas at Austin

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Situation Analysis Renzo Rosso, Diesel’s president and founder, needs to make some important decisions about the branding strategy of his Diesel SpA’s new line, StyleLab. The objectives set for StyleLab are to enter the new and attractive high casual wear market; to create an aura of prestige for the core DDiesel line; and to provide Diesel's designers with the opportunity to experiment with new cuts and fabrics.

Company Analysis Renzo Rosso and former partner Adriano Goldschmeid founded the Italian clothing company, Diesel, in 1978. Although Diesel began as a typical clothing design company, its designs, advertising and management style embodies started to evolve into a controversial and unique brand identity. Interestingly, before 1991, Diesel did not even have a consistent brand logo because it was so focused on launching new products. Once a new advertising director was appointed, Diesel began to adopt a very unique brand of advertising and established itself as a counterpoint to established norms and institutions. Overall, Diesel advertising campaigns are artistic, colorful and sexy - as fashion advertising often is - but they are clearly differentiated by their themes, complexity and radical irony. They require wit and involvement to be deciphered. Many are left perplexed or fail to see the underlying irony. Those who do understand Diesel’s humor can feel a real sense of complicity between them and the brand. Thankfully for Diesel, many of these are wealthy teenagers looking for clothes that will stand out and distinguish them from the crowd.

Today, the advertising and branding efforts revolve around a love of humor, creativity and irreverence towards established rules.

Diesel brand portfolio:

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D-Diesel Licenses - the D-Diesel brand has been extended to a larger number of fashion products beyond clothing.

Diesel Kids - targeted at kids who do not want to be treated like kids.

55DSL - the clothing is aimed at extreme action sports fanatics.

StyleLab is the new upscale product line of Diesel SpA, the Italian casual wear company famous for its cult Diesel jeans and controversial advertising. The StyleLab name originated from the idea of creating a laboratory in which designers could freely test new ideas.

Diesel’s objectives for creating StyleLab revolved around the idea of creating a lab in which designers can experiment and let their creativity run free. Overall the new brand’s addition into the Diesel brand portfolio was meant to exploit a number of trends: 1. Exploit the luxury segment (high casual wear) 2. Counteract “mainstream” Diesel image and diffusion of D-Demin 3. Fuel designer creativity a. Narrow focus → unleash creativity b. Experiment with styles and fabrics Demographic Environment D-Diesel, one of Diesel’s three main product lines, has no specific target audience because they believe that anyone who has a teenage spirited lifestyle can fit within the brand’s target demographic. However, while the company does not target classic demographic categories, the primary consumers are male and female young professionals, age 25-34, with a medium to high income. They are upper middle to lower upper class professionals and managers who are part of Generation X. They are influenced by high media exposure and are worldly. Their personalities are independent, visually educated and driven, fashion perceptive and culturally aware.

Additionally, Diesel Kids, another brand within the umbrella Diesel portfolio targets kids who do not want to be treated like kids. Lastly, 55DSL, with their color combinations and prints in contemporary styles, offers extreme action sports lover an alternative option of clothing. See Appendix A for more information on target audience for each brand.

Economic Environment Diesel employs more than 1,000 people worldwide. Its products are available in more than 50 countries, through 10,000 independent retailers and 40 company-owned stores, including flagship outlets. In 1997 its consolidated annual turnover amounted to 503 billion lire (260 million Euros), 85% of which was generated outside Italy.

Sales/pricing In 1998, a pair of D-Diesel staple blue jeans cost on average €67 and a jacket €72 in Europe ($100 and $139 respectively in the USA). Diesel sells casual wear garments in the same range as GAP but at a much higher price. Fashion industry experts often criticize Diesel’s high pricing policy, but Diesel executives argue that “it was not unreasonable to pay three figures for a pair of jeans likely to last forever” (pg. 7).

In Europe, StyleLab pants will sell for €125 and jackets for €335 ($150 and $415 respectively in the USA).

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The figure below shows the price levels of StyleLab and D-Diesel in comparison to their competitors in a fashion store in Italy in spring of 1998.

Technological Environment Diesel has high quality denim and is famous for its durability and high quality fabrics. StyleLab allows designers to experiment different styles and fabrics to help them with their creativity.

Diesel claims that their manufacturing process is more rigorous than other brands’ processes and thus it is probable that a pair of Diesel jeans would last forever. To illustrate this point, the Lexington Avenue flagship store in New York featured a washing machine in which a pair of Diesels turned endlessly.

Competitive Environment StyleLab is positioned at the lower end of the “high casual wear” segment, competing with the likes of Miu Miu, Prada Sport, CP Company and D&G. In contrast, D-Diesel is positioned at the upper end of the “denim and leisure clothes” segment, competing with Armani Jeans, Levi’s, Mustang, and Calvin Klein Jeans.

The figure on the next page shows the positioning and distribution of D-Diesel and StyleLab in comparison to their competitors in the fashion industry.

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Product Environment The clothing industry in the mid and late 1990s experienced increasing market segmentation.

Renzo Rosso, being a good trend spotter, quickly identified a new market opportunity in high casual wear. He observed the increasing appeal of casual clothing, both in the workplace and during leisure time. He noticed that the definition of “trendy” shifted to dynamic, lively, mobile and casual.

Based off of this observation, StyleLab could be targeted at two types of people: 1) past buyers of D-Diesel who still liked the brand and its values but who felt that they had outgrown it, or 2) people who were looking for cutting-edge style which they could not find in the D-Diesel line.

StyleLab shares values such as freedom, global outlook, creativity and thoughtfulness with DDiesel. However, while D-Diesel stands for irony and irreverence, StyleLab stands for sophistication and mystery. While D-Diesel focuses on Denim, StyleLab experiments with a variety of innovative fabrics.

Diesel’s up-market extension is a bold move. In particular, it is critical to delicately balance the relationship between the D-Diesel leading brand and the new StyleLab brand. In order to achieve the objectives set for StyleLab, both lines have to be clearly differentiated while retaining a common link with Diesel’s core identity. See the table in Appendix B for more information on the 4 P’s for both brands.

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SWOT Analysis Strengths

Weaknesses

Diesel Brand Diesel SpA • Diesel is already a notable major fashion • Lack of a consistent brand logo caused brand. by paying too much attention to o No. 2 in the jeans industry in Europe launching new products o Won advertising and fashion industry • Renzo Rosso made split decisions awards from gut feelings without collecting • One of the first clothing companies on the the proper research to back it up.

Internet • The Diesel Way: style embodied by a love of D-Diesel • Some advertising has been known to humor, creativity and irreverence towards “cross the line” which triggered the established rules resentment and criticism from the • The Diesel brand portfolio offers its general public customers a ‘total look’ • Growing gap between the image • Diesel Brand Portfolio: D-Diesel, 55DSL, communicated by Diesel’s advertising Diesel Kids, Diesel Licences and those buying/wearing the products o Multiple brands within the portfolio • Diesel’s designers seldom attend allows Diesel to target different customer segments the catwalks of competitors.

• Rosso personally selects about 90% of his employees, mostly on the basis of their StyleLab shared passion for Diesel • Low awareness of new brand • Quality and creativity of designers • Diesel’s strong brand identity - need to • The company finances “research trips,” distinguish StyleLab from Diesel in during which designers photograph and buy order to succeed everything that can inspire a new collection • StyleLab had no precise definition of • Previous success launching popular and target segment due to their rejection of profitable fashion lines traditional “Procterian” marketing and market research StyleLab Line Extension: o In Rosso’s view, lifestyle • Creates an aura of prestige and fashion matters more than age. around the D-Diesel brand • StyleLab’s high pricing policy raised • Counterbalances the increased diffusion and criticism from experts of the fashion prevents commoditization of the main denim industry D-Diesel line.

• Innovative approach to design Production experimentation with fabrics and new cuts • Increased cost from introducing a new • Diesel’s strong brand identity can help build brand and new products awareness for StyleLab • StyleLab will allow designers to unleash their Pricing • Diesel’s high pricing policy raised creativity and experiment with new styles criticism from experts in the fashion and fabrics industry Point-of-Purchase Material Miscellaneous • POP materials based on simple themes are • Renzo Rosso makes split decisions 50% more effective based on gut feelings without input • Develop the brand’s image; based on the

Diesel for Successful Living – Group 6 Case Analysis corresponding advertising campaign Brand Identity • Highly exclusive advertising style • Diesel has a unique style that embodies a love of humor, creativity and “irreverence towards the established rules” • Ads established Diesel as a counterpoint to established norms and institutions • StyleLab is more refined, exclusive and innovative than D-Diesel Media Strategy • Diesel: Highly exclusive advertising style Volunteer product placement by actors, musicians, celebrities and movies StyleLab: o Mysterious spy story: interactive; readers are invited to make up their own intriguing story o Exclusive magazines aimed at an advanced fashion-oriented audience: Flaunt, Vogue, Wallpaper, Dutch, ID, Mixte and MAX o o

•

Production and Distribution • Diesel has vast distribution channels already established: more than 50 countries, 10,000 independent retailers and 40 company-owned stores, including flagship outlets • Diesel has a more rigorous manufacturing process that leads to higher quality products Miscellaneous • The Pelican Hotel in South Beach, Miami: vivid manifestation of the Diesel philosophy o Popular with the fashion, music and publishing set • Participated and contributed to Successful Living logo and other creative content in the production of video games for Sony PlayStation, Nintendo, and personal computers Pricing •

StyleLab is inexpensive and priced competitively compared to Miu Miu, CP Company, and Stone Island

7 from more object market research

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Opportunities Market Trends • Emerging luxury segment of the casual wear market • Increasing market segmentation o Some consumers are willing to spend large amounts of money on casual wear • Increasing appeal of casual clothing in the workplace and leisure time, even formal business attire Target Markets • Psychographic: traveler, worldly, independent, culturally aware, curious, high media exposure, fashion perceptive • Demographic: 25-34 years old, medium-high income, professionals, managers, generation x • Customers attracted more by innovation itself than by the diktats of fashion - StyleLab will appeal to a new audience segment who would like to create their own style of clothing • Past buyers of D-Diesel who still liked the brand and its values, but who had outgrown it, are a perfect target to StyleLab • Customers looking for cutting-edge style Distribution • StyleLab’s specialized high-end stores, boutiques and high-end department stores are reflective of the image of exclusivity and refinement Miscellaneous • Celebrities identify with and work with Diesel brand for free • Other marketing opportunities including redesigning the website, creating an exclusive shopping atmosphere, and cooperating with influencers are also available

Threats Market •

• •

No marketing research has been conducted to support the claim that there is a profitable market in high casual wear.

Upward brand extensions are risky Increasing age of loyal customer base

Consumer Perception • Diesel: too much diffusion can erode the exclusive unconventional brand image o Growing gap between Diesel’s communicated image and those actually buying/wearing the products Competition • Already well established competition: Miu Miu, Prada Sport, CP Company and D&G

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Problem Statement Diesel needs to determine the best branding strategy for StyleLab in order to counteract the potential diffusion of Diesel products and clearly differentiate the brand image from Diesel, all while retaining a common link to Diesel’s core identity.

Critical Factors 1. Brand Identity (product positioning) - D-Diesel and StyleLab share the same values of the Diesel brand, however, D-Diesel continues with the image of irreverence while StyleLab stands for sophistication and mystery. Due to the fact that most brands tend to extend downward instead of upward, it is possible that customers would expect a lower price from StyleLab. To avoid confusion of the two brands, a logo choice needs to be addressed to reflect the product positioning.

2. Product a. Uniqueness b. Quality c. Durability 3. Marketing (brand awareness/advertising) - As a new brand, marketing and advertising efforts for StyleLab are important. Advertising campaigns should differentiate the two brands, and use separate channels.

4. Distribution - D-Diesel uses their flagship store to build their brand image, however StyleLab focuses more on creativity and thus needs to find a way to distribute through separate channels.

The type of clothing StyleLab makes may be more or less successful in different countries.

5. Competition (both internal and external) - Internally, StyleLab may compete with the other brands in the Diesel portfolio, particularly D-Diesel. Externally, StyleLab will compete with other high-end casual wear brand.

6. Target Audience - D-Diesel appeals to the demographic group of 18-25 year olds, whereas StyleLab targets young professionals and design- and innovation-conscious buyers.

7. Price - Prices for StyleLab clothes are higher than for Diesel clothes. With no clear differentiation, customers may decide that StyleLab is just a more expensive version of Diesel.

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Solution 1: Diesel StyleLab This solution involves a sub-branding strategy where Diesel StyleLab will be tightly associated with the original mother-brand. The main advantage of co-branding is that a product (or in this case a brand) can be convincingly positioned by virtue of multiple brands, generating greater sales from the existing market and opening opportunities for new consumers and channels (textbook, pg. 150). It can also reduce the cost of product introduction because it combines wellknown images and speeds adoption. However, cons can also arise from this type of co-branding strategy. There is potential risk and a loss of control in becoming aligned with another brand. For instance, consumers could have high expectations of such a venture and thus their brand perceptions must be carefully managed.

Advertising Point of purchase material: Since D-Diesel is successful at using simple themes featuring products and models, Diesel StyleLab could continue with that strategy, however, this would not differentiate the two brands.

Brand strategy/Identity: The branding strategy of Diesel StyleLab should be aimed at achieving two goals: 1) point out differences between the two brands, particularly the sophistication and mystery that will define the StyleLab brand. Particularly, Diesel needs to demonstrate the positive outcomes from buying Diesel StyleLab instead of D-Diesel. 2) point out similarities of the two brands (reason to buy Diesel StyleLab for people who are already loyal to D-Diesel and may have simply outgrown that type of clothing style). This will include emphasizing the sense of freedom, global outlook, creativity and thoughtfulness of StyleLab. Logo: Being a part of an umbrella brand and keeping close ties with the parent brand would allow Diesel StyleLab to use the same style, color palette, and typography in their logo as Diesel’s current logo. This would clearly show the brand continuity and help create association between Diesel and Diesel StyleLab in consumers’ minds. Below are the two types of implementation: Diesel as a main driver and Diesel as a co-driver.

Examples:

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Media Strategy: Avoid juxtaposition of advertising for both brands in the same magazine.

Target Audience: Diesel brand loyalists and enthusiasts. Diesel has no precise definition of the target segment for StyleLab. In Rosso’s view, lifestyle matters more than age. D-Diesel targets people with a teenage-spirited lifestyle. However this new brand could appeal to a number of target audiences: • Past buyers of D-Diesel who still liked the brand and its values but who felt that they had outgrown it.

• The trendiest D-Diesel customers concerned that D-Diesel has become too mainstream and lost its underground cachet.

• People who were looking for cutting-edge style that they could not find in the D-Diesel line.

Competition: Beside Miu Miu, Prada Sport, CP Company, D&G that were already identified as competitors for the lower end of the “high casual wear,” Diesel StyleLab would also compete with Diesel itself, because when a customer buys Diesel StyleLab clothes they would compare it with Diesel clothes by price, design, and creativity. At the same time, Diesel competitors also may be competing with Diesel StyleLab despite the slight price difference.

Distribution Diesel sells its clothes in more than 50 countries, through 10,000 independent retailers and 40 company-owned stores. By being included in the Diesel brand, Diesel StyleLab may use some of these distribution channels as well as establish new ones. There are suggested channels: • Specialized fashion stores, boutiques and high-end department stores; • Company-owned stores (separate part of a Diesel store with more mature staff) • Online: StyleLab sub-domain at Diesel website StyleLab will be located everywhere Diesel is already selling.

Product Positioning Diesel StyleLab vs. Diesel: Diesel StyleLab shares the same core values of creativity and freedom, but its clothes are more exclusive, refined, expensive and innovative. Diesel StyleLab should be positioned as a more innovative version of Diesel for people who are not teenagers anymore, but still feel that they are young and creative.

Diesel StyleLab vs. other brands: Diesel StyleLab will have superior quality material paired with a more innovative, sophisticated and design-centric approach compared to the competition of other brands in the high-end casual wear space. For Diesel StyleLab, Diesel’s already established competition would also become competition because they are highly interrelated to each other in this positioning strategy.

Scenario analysis Success: Success for Diesel StyleLab would be defined as returning to its earlier glory when it was edgy, hip, fashionable, irreverent, and as a result they would see an increase in sales and

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awareness. Additionally, success for Diesel StyleLab would be to drive non-Diesel’s customers to buy Diesel’s clothes for other occasions.

Failure: Failure in the case of Diesel StyleLab would be defined by directly hurting the Diesel brand in terms of profit and image.

Pros: • Clear association with Diesel will help StyleLab raise awareness faster and convert already loyal Diesel customers to the new brand.

• Can utilize the brand awareness already established by D-Diesel (e.g., placement among actors, musicians and celebrities) and Diesel’s cult commercials and other advertising.

• Through Diesel StyleLab’s close association with Diesel, Diesel StyleLab may use the same logistical and distribution system (40 company-owned stores and 10,000 independent retailers) as Diesel.

• Create an aura of prestige and fashion around the Diesel brand as a whole. Could potentially elevate the entire Diesel brand.

• Potential synergies: customers may want to wear Diesel StyleLab for more formal occasions and Diesel during their leisure time.

• When a company lengthens its current product line up-market, companies seek to achieve more growth, realize higher margins, or position themselves as full-line manufacturers.

Thus with this up-market extension, Diesel and its new Diesel StyleLab brand have the opportunity to bring major growth opportunities for the umbrella brand.

• Brand extensions can reduce launch costs (textbook, pg. 124) • Brand extensions can improve the odds of new-product success, because consumers form expectations about a new product based on what they know about the parent brand and the extent to which they feel this information is relevant (textbook, pg. 123) Cons: • 4 P’s aren’t very compatible.

• Consumers could have cognitive dissonance with the idea of Diesel having a more expensive brand (difficulty perceiving Diesel as a high end product).

• Potential negative effects from higher pricing – the reason for the higher pricing may not be transparent to customers and thus they may feel like Diesel is abusing their loyalty. As a result, consumers might just perceive Diesel StyleLab as a higher-priced version of DDiesel.

• The new brand will be associated with the “Diesel for Successful Living” campaign, which exaggerated the standard promise of “success.”

• Diesel targets people with a free-spirited lifestyle, as a consequence, people over 25 often consider D-Diesel “too-young” and “too hip” for them and might extend this feeling onto Diesel StyleLab. • If the StyleLab brand extension fails, it could harm Diesel’s entire brand portfolio.

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Solution 2: StyleLab by Diesel This solution involves an endorsement strategy where StyleLab by Diesel will be associated with the original mother-brand but also distinguished as a unique brand in and of itself. The endorsement strategy can be very beneficial for both brands because D-Diesel benefits from the aura of prestige of StyleLab and StyleLab’s introduction into the market can be facilitated by the already established Diesel brand. Additionally, StyleLab’s overall costs will be lower. Overall, this would fulfill StyleLab’s objective to enter a new market and have the opportunity to experiment with new fabrics and cuts.

Advertising Point of purchase material: With StyleLab being in the front and the Diesel name in the background, the brand can create POP based on creative ideas that are used in the commercials, and by doing so can remain at the top of mind of the consumer.

Brand strategy/Identity: Branding strategy should focus more on creating the image of the new brand than on differences between Diesel and StyleLab (irony and irreverence vs. sophistication and mystery, denim vs. variety of innovative fabrics).

Logo: Logo of StyleLab by Diesel should combine the two logos: a new one for StyleLab and the old Diesel logo, in a smaller size. There are four types of implementation: • Strong endorsement: Diesel’s name is not directly used, but instead StyleLab is described as “by Diesel.”

• Linked name: the logo contains the letter “D.” • Umbrella brand: both D-Diesel and StyleLab become sub-brands of a new corporate umbrella brand.

• There is no Diesel logo in the StyleLab logo, but the endorsement is mentioned in plain text (e.g., “Inspired by Diesel,” or “Created by Diesel”).

Examples:

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Media Strategy: It is possible to advertise Diesel and StyleLab by Diesel in the same magazine, but alternative strategies should be explored.

Target audience: Young professionals who have outgrown the Diesel brand, and those who love cutting edge style that is no longer found within the D-Diesel brand.

Competitors: Competitors of StyleLab by Diesel would be other lower end “high casual wear” design companies such as Miu Miu, Prada Sport, CP Company, and D&G. Due to the reference to Diesel in its name, customers may compare StyleLab by Diesel may be compared with Diesel.

Distribution An endorsement brand strategy would allow Diesel to sell StyleLab clothes through the same distribution channels as a sub-branding strategy (specialized fashion stores, boutiques and highend department stores, company-owned stores, and online). Additionally, Diesel could establish a new chain of StyleLab by Diesel stores.

StyleLab will be found everywhere Diesel is already selling, while independent StyleLab by Diesel stores would be found in high fashion cities such as London, New York and Paris.

Product Positioning StyleLab by Diesel vs. Diesel: StyleLab by Diesel is a more sophisticated and innovative brand.

Designers for both brands are talented and get their ideas by experimenting with new cuts and fabric, but StyleLab by Diesel clothes are more strict and less irreverent. It is possible to wear them in the office.

StyleLab by Diesel vs. other brands: Same product quality, due to the Diesel brand still being related to Stylelab, thus customers may still relate StyleLab to the Diesel brand when comparing Diesel Stylelab with other brand, which may cause confusion as to whether it is an upward or downward extension.

Scenario analysis Success and failure for StyleLab by Diesel would be defined similarly to that of Diesel StyleLab: Success would help return edge and style to Diesel brand’s image; failure will undoubtedly hurt the Diesel brand.

Pros: • More freedom in building a unique brand, compared to the first solution.

• Will help acquire former customers of D-Diesel because of the association to it in the name.

• Built-in positive associations from D-Diesel brand.

• Connection, through endorsement by Diesel, could help launch the brand and create awareness.

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StyleLab could target two types of people: 1) past buyers who still liked the brand but felt they had outgrown it, and 2) people looking for cutting-edge style which they can no longer find in the D-Diesel line.

Again, a company up-market extension and the association between the two brands has the opportunity to bring major growth to the umbrella brand as a whole.

Cons: • StyleLab is not entirely independent. As a result it is not as free to make self-serving brand decisions.

• Potential harm to the high-end image of StyleLab by associating it with Diesel.

• Potentially higher cost to get off the ground compared to the first solution.

• If consumers think this brand extension is inappropriate or too vague, there may be backlash that could damage the Diesel brand as a whole.

• Typically brands use the “by brand x” when they are pursuing a down-market extension because it gives the new, lower-end brand an air of exclusivity and value. Examples and results of brands extending up-market is limited and thus would need to be researched more thoroughly before choosing this solution.

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Solution 3: StyleLab This solution involves an independence strategy where StyleLab will be positioned and branded as its own unique brand with no mention of Diesel.

Advertising Point of Purchase Material: To develop their brand image, StyleLab can create their own flagship stores and an environment that appeals to young, design-conscious, creative professionals.

Branding Strategy/Identity: The main goal of StyleLab’s branding strategy is to build the image of the brand and create brand awareness. Diesel should position StyleLab as a brand that values freedom, global outlook, creativity, thoughtfulness, sophistication and intrigue. StyleLab should not associate itself with Diesel.

Logo: The logo of StyleLab should reflect its values, be fashionable and represent high casual wear. It should be completely new and contain no connections to the Diesel logo. Some customers may know about the relationship between StyleLab and Diesel, but they are not linked visually.

Example:

Media Strategy: It is possible to contrast StyleLab and Diesel in the same magazine, or to advertise StyleLab in movies and on television without any restriction from Diesel’s media plan.

Target audience: Young professionals. Age is not as important as attitude. However, particular attention will be paid to the consumer base that has “aged-out” of the D-Diesel target audience.

Competitors: Without mentioning Diesel in its name, StyleLab represents a new brand that would compete with companies such as Miu Miu, Prada Sport, CP Company, D&G. In this case Diesel would not be a competitor for StyleLab, because it represents another market segment.

Distribution The Independence brand strategy does not support selling StyleLab clothes at the same store as Diesel and requires the new brand to be separated from the parent brand, both mentally and

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physically. If StyleLab with no reference to Diesel is recommended they should use the following distribution channels: • Specialized fashion stores, boutiques and high-end department stores • Independent StyleLab stores • Separate website that does not refer to Diesel StyleLab stores would be found in high fashion cities, such as London, New York, and Paris.

This restricted availability will make the brand appear more limited and thus more desirable.

Product Positioning StyleLab vs. Diesel: StyleLab should not be directly compared with Diesel, because they are in different marketing segments and do not compete with each other directly. The brands share some values, but have different target audience, distribution channels and pricing strategies.

StyleLab vs. other brands: Same quality of the product, but with StyleLab comes a new brand.

This new brand will compete with other high-end casual wear companies such as Miu Miu, Prada Sport, CP Company, D&G. Scenario analysis Success: Success for StyleLab would be defined as awareness, earned media, influencers/endorsements, and appropriate level of sales without losing exclusive appeal, and production of a truly unique fashion line. StyleLab’s success should not affect Diesel. However, establishing a connection between StyleLab and Diesel after the success of StyleLab may increase Diesel’s reputation and bring it back to its former status.

Failure: Failure could be defined as no differentiation from Diesel despite the increased cost, no buzz at Fashion Shows, no endorsements, too much commercial success resulting in loss of edge and coolness of brand (like what happened with Diesel), and not enough creativity and style in the design. Failure of StyleLab would not hurt the Diesel brand, aside from causing financial losses for the company as a whole.

Pros: • Maximum separation allows for unique positioning opportunities.

• Less risk of negative spillover from D-Diesel.

• Because they are extending up-market, they may want to dissociate from the original Diesel brands in order to develop a greater sense of value and exclusivity around the brand.

• Diesel was number two in the jeans industry in Europe, so it is probably beneficial to dissociate from them because a “jeans brand” doesn’t give off a sense of “luxury” clothing line.

• Can create anything from scratch and can do anything they want without any connection or restrictions from an association with D-Diesel.

• When a company lengthens its current product line up-market, the company seeks to achieve more growth, realize higher margins, or position themselves as a full-line

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manufacturer. Thus, with this up-market extension, Diesel and its new StyleLab brand have the opportunity to bring major growth opportunities to the umbrella brand.

Purity of a uniquely new brand allows for little dilution or negative associations with Diesel.

Cons: • Association has to be made if they want to gain any former customers.

• StyleLab is a completely new brand and thus will have to build brand loyalty with customers and create a unique brand image.

• No positive spillover from other brands in the Diesel portfolio.

• No brand leverage from the already established D-Diesel brand.

• Must build the brand from scratch.

• Would take longer to make a profit.

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Recommendation Independence strategy: StyleLab with no reference to Diesel.

We recommend Diesel position StyleLab using the independence strategy (Solution 3). StyleLab needs to differentiate from Diesel to ensure that the price difference is not the only distinguishing factor in the minds of the consumers. Connection with a lower segment brand may cause distrust to the newly established high casual wear brand and customers may not want to pay a higher price for clothes that they believe could be purchased at a lower cost.

There are many examples of downward brand extension, however there is only one example of a successful upward brand extension, and considering the possible outcome of failure of the extension, StyleLab with no reference to Diesel is a “safe” strategy.

According to Robert Lunardon, StyleLab category manager, there are three main goals for launching the StyleLab brand, and it is possible to achieve all of them by launching StyleLab with no reference to Diesel: • To enter the new and attractive market of high casual wear. StyleLab will not be limited

by Diesel’s image and customers will not compare two brands.

• To create an aura of prestige and fashion around the D-Diesel brand. If StyleLab succeeds, StyleLab can then later be tied to Diesel, and this relationship will increase the prestige of D-Diesel.

• To give Diesel designers an opportunity to experiment with new fabrics and cuts.

Without reference to Diesel, designers have an opportunity to create completely new clothes and will not need to worry that they will disappoint loyal Diesel customers.

The criteria for success includes: • StyleLab awareness • StyleLab image • Diesel revamping its image • Profitability of both brands This strategy recognizes that D-Diesel and StyleLab are derived from common roots of freedom, global outlook, creativity and thoughtfulness but with distinct identities.

Before launching StyleLab and creating the first line of clothes, we recommend Diesel conduct additional market research to specify the target audience and to uncover the perfect combination of hip but not “too young” and not “too hip-hop” or “street,” while at the same time creative enough and not too mainstream.

If Renzo Rosso decides to go with our recommendation, there will be two main concerns moving forward. However, these can be easily resolved with additional market research. The first is to determine how the D-Diesel brand is perceived; how do consumers view the Diesel brand today (when the case was written) and does the brand image suffer from the “democratization” of Diesel products? The second question that needs to be resolved is the demand for StyleLab. In addition, how strong is the competition in the segment? What are the targeted consumer profiles?

And will StyleLab erode some of D-Diesel’s customer base?

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Appendix Appendix A: D-Diesel and StyleLab target audience breakdown D-Diesel

StyleLab

Gender

Male/female

Male/female

Age

16-25

25-34

Income level

Upper/medium

Upper

Career

Student, young professionals

Managers, professionals

Media exposure

High

High

Psychographic

Open-minded, independent, teenage-spirited lifestyle

Curious, independent

Additional info.

Neo-hedonist Trend follower Innovation-perception

World traveler Fashion-perception

Appendix B: The 4 P’s for both brands D-Diesel

StyleLab

Product

Casual wear Street look Demin as main fabric

Exclusive wear Refined look Experimental use of designs and materials

Price

Affordable Upper end of denim/leisure segment (Similar to: Levi’s, Mustang & CK jeans)

More expensive Low end of high casual wear (Similar to: D&G, Miu Miu & Prada sports)

Place

Multi-branded teen-oriented stores Department stores Flagship stores Mail order Online

Specialized fashion stores High-end department stores Boutiques

Promotion

Print ads (Elle, Rolling Stone) Television Cinema Focus on brand & practical

Print ads (Vogue, Max) Focus on brand image