Example Of Diesel Condoms: Brand Extension Report

Executive Summary

Diesel is involved in the design, manufacture and distribution of kids’ clothes and sportswear, eyewear, earphones, fragrances (Fuel for Life and Only the Brave), footwear, furniture, leather goods, jewellery and watches. This report explores the opportunities and difficulties that exist in the market to introduce a new brand of condoms, on the back of the Diesel brand (Yahoo Finance, 2014; Diesel, 2015). It aims include:

Determining Diesel Jeans’ winning formula and the reasons why previous extensions have been very successful

Determine Diesel’s brand values and recognition
Assessing the nature of the competition in the condom and contraceptives industry
Find out ways in which Diesel condoms can fit into the Diesel brand and the condoms industry
Determine if the proposed brand extension can be successful
Introduction
Diesel Jeans is a high octane, rugged and cool fashion-forward brand. While it is known for its high prices (Jeans go for upwards of $300), the company’s pride lies in the production of highly unusual and fashionable women’s and men’s casual wear. The company has operations in more than 80 countries and territories through its 400 company-owned stores, thousands of speciality retailers and department stores. Diesel also markets its products through catalogues and the internet. This report explores the opportunities and difficulties in the market for establishing a Diesel condoms brand, given the highly competitive industry and established players. It includes an assessment of the Diesel brand values, analysis of the competition in the contraceptives market and evaluation of the prospects for the new condom brand.

Method

Primary Research - In order to obtain primary data on the market and its characteristics, a market survey was conducted. Pre-prepared and tested questionnaires (reliable and valid) were handed out to a sample of 120 customers selected at random from patrons at six randomly selected Diesel Stores. Customers, who were aged above 18 and consented to participate in the study, were assigned codes, from which a random sample of 120 was drawn. Those chosen were sent the questionnaires or were interviewed by phone using the questionnaire. The results were analysed using a statistical computer package.
Secondary Research - With regard to secondary data, the researcher consulted market reports, company websites and marketing theory resources on a variety of related subjects and industries. The resources consulted have been included in the references list below.

Findings

Existing brand and Brand Values
CBBE Model
Brand Identity – The Diesel Brand design, marketing and management style are centred around creativity, irreverent attitude towards established rules and humour. Inextricably associated with the personal story and lifestyle of its founder, Renzo Rosso, Diesel has managed to carve out a reputation as a rugged, passionate, cool, trendy and genuine.
Brand Meaning (Performance & Imagery) - Its edgy advertising that mainly targets 18 to 35 year-olds, portrays the company as artistic, sexy, and colourful, with an emphasis on radical, interesting and complex taste for clothing and lifestyle. Such is its successful marketing, brand values and image that the company has partnered with myriads of other companies to successfully extend the brand into wine manufacturing and marketing, motorcycle industry, hotel and restaurant chains (Pelican Hotel) and headphones market among others. Traditional companies have sought association with Diesel in order to appeal to the youthful market.
Brand Response – According to Diesel (2015), the company’s customers recognize the company’s insistence on unique, trendy, artistic and passionate pursuit for the best even when it means disregarding rules. Diesel products consistently imbue an appealing and original sense of rebellion, creativity, and novelty, which has allowed it to revolutionize everyday products such as jeans, helmets, restaurants and wine into premium-priced collectables for customers. In addition, customers are unfazed by the high prices (even appear to prefer them) because they add to the feeling of exclusivity if the mass market has no access to the products (Brassington & Pettitt, 2006; Reed, 2014).
Brand Resonance – The consistently high, and growing sales, as well as the successful brand extensions in the past, point to high repeat purchases, attitudinal attachment and sense of belonging to the brand. In order to meet its customers’ demands on the brand, Diesel has its own stores across the world, besides having built up a large community of followers on social media and other forums to promote engagement.

Kapferer’s Brand Pyramid

Diesel Brand is at the advantage and bonding levels of the Kapferer’s brand pyramid. With operations in more than 80 countries across the world (more than 10,000 independent retailers, 400-company-run stores department stores) and upwards of $2 billion in 2012 revenues, it is evident that the company’s products reach a large number of customers. The brand’s appeal to the customers and their identification with it is clear in the company’s past brand extensions, besides the fact that customers are happy to pay upwards of $300 for jeans, when much cheaper alternatives bound in the market. Diesel can exact premium prices without losing its market share because it has successfully differentiated its products and attained absolute customer loyalty (Brassington & Pettitt, 2006; Yahoo Finance, 2014).

Condom Market Competitor Research

The condom market is currently dominated by 13 companies with the largest selling brands being. Durex, Kimono, Paradise, Crown, Impulse, Ria, Pleasure Plus, Trustex, Lifestyles and Beyond Seven. The largest five companies, which control more than 85% of the branded condom market are SSL International (Durex), Armkel Company (Trojan), Ansell Company (Condom Discs, Contempo and Lifestyles), Johnson & Johnson (Shields).
SSL International – It has a 75-year old history in the market with a presence in 140 countries and a global market share of 22%. It controls 15% of the US market. The Durex brand has become a generic term for condoms. It has a high market recognition and value, known for its durability, excellence and reliability.
Armkel Company – It is the best-selling brand in the US (69% of the market share), with more than 20 different condoms in its assortment. The company invests highly in advertising, with its advertising budget estimated to be up to 26 times more than SSL International’s budget.
Lifestyle Condoms – It is manufactured by an Australia’s Ansell Ltd and available in multiple variants, sizes and types (texture, thickness, and flavours, etc.)

New Market/PEST Analysis

Political - As one of the most important contraceptives (prevents unwanted pregnancies and sexually transmitted diseases), condoms have a special place in national governments’ reproductive health and HIV/Aids prevention policies, with many governments and institutions providing free access to basic condoms to populations. The global effort by governments and international non-governmental organizations such as the UN, WHO and USAID to prevent HIV/AIDS, unwanted pregnancies and population explosion in developing nations present an important opportunity for Diesel condoms and other similar products. However, there is a fine line between government’s support for condoms, and the policy attitudes that encouragement of condom use promotes sexual activity and immorality among youths. In addition, the decidedly hostile policy attitude towards same-sex partners, prisoners, sex workers in many conservative countries including the United States, remain a challenge for condom manufacturers that intend to reach this population. These negative attitudes by governments across the world have manifested through stringent regulations on condom advertising and distribution, and taxation.
Economic – The condoms market was unaffected by the Great Depression. The market posted growth throughout the economic turmoil. The global economic crisis is well over, with the world’s most important economies in North America, Asia Pacific and Europe experiencing steady growth. Europe represents the largest and most valuable condom market with 25% of the global market share. This bodes well for consumer confidence and purchasing power for contraceptives and other products. The global condoms market is estimated to reach $5.4 billion by the close of the year 2018. In the US alone, the contraceptives sales amounted to $1.1 billion in 2013, representing an 11% expansion since 2008. Despite having suffered a sales reduction in 2008, the growth is expected to continue. Similar trends are in evidence across the UK. In addition, over the counter contraceptives (mainly condoms) make up the largest proportion of contraceptive sales.
Social – Condom usage is heavily influenced by sociocultural and deeply personal factors. According to Mintel (2012), condom use depended on the nature and status of the relationship, with sex partners that were not in a relationship and/or did not trust their partners mostly using condoms. Similarly, purchase decisions were dependent on availability, point of sale embarrassment/confidence, alcohol/drugs use, and availability of free condoms. Price does not seem to be a major concern. In many other countries, social stigma for engagement in premarital or extramarital sex, use of contraception (e.g. the Catholic Church forbids contraception), negative cultural myths and beliefs about condoms and contraception remain a challenge.
Technological – The condom and surgical gloves manufacturing technologies are advanced and subject to stern quality checks. High investment and licencing requirements must be met before Diesel and/or its subsidiary/associate can successfully set up operations.

Target Market

Diesel Condoms will seek to re-invent the condoms market, in the same way, that it has done in the wine, watch, motorcycle, earphone and other markets into which it extended its brands. The primary and secondary research results point to a fiercely loyal Diesel Brand market, which can be leveraged to push the Diesel Condom. As long as the Diesel Condoms keeps within the established brand values and meets the brand expectations of the target customers, then it is certain that the extension would be successful. The primary market research results shows that a high number of customers expect Diesel condoms to be reliable, safe, pleasurable and would draw respect from peers, with even more indicating that they might switch from the existing products. See the Figure below.
Figure 1: Diesel Condoms have a ready market
Given the established nature and market power controlled by the existing brands, it is important the proposed condom extension taps to tap into the Diesel market and establishes itself, at least initially, as a niche market product. A focus on high quality, exclusivity branding, rebellion, and creativity must be emphasized in the design of the products, packaging and advertising campaigns (Brassington & Pettitt, 2006; Aaker, 1990). The best way to take on the competition is to build on the Diesel brand. This is not least because it appears there is little to separate the current competitors other than the brand value, market presence and advertising. Further, an emphasis on markets away from the US, Europe and Asia Pacific is critical to avoiding competition, while at once tapping into a growing middle class in countries such as Brazil, China, India and South Africa (World Bank, 2014; Companies & Markets, 2014). Diesel Condoms will be targeted at the same markets that the Diesel brands have always targeted with the following segmentation strategies:
Demographic – Diesel condoms will be targeted to the 18-35 age bracket, which have always been the company’s target market. This market is experimental, keen on surprise and extremes, besides the fact that they are unlikely to have already established condom brands because they are newly sexually active.
Geographical – The markets in the US, Europe, Asia Pacific and the emerging markets will be treated separately for administrative, competitive and product differentiation reasons. Even most importantly, Diesel’s current distribution channels will be used as the primary distribution networks (Aaker, 1990; Brassington & Pettitt, 2006).
Psychographic – Personal, social and other factors that influence the use of condoms and purchase decisions are extremely important. Diesel condoms will seek to tap into the desire and expectation for surprise, safety, rugged, high sensation, enhanced pleasure, comfort, natural feeling and durability. The primary and secondary research results demonstrate that customers already associate these qualities with the Diesel brand, besides expecting that the Diesel condom will have the same qualities.

Conclusions

Diesel has an established brand with multiple past brand extensions in diverse industries. Diesel condoms will seek to tap into the same brand loyalty and identity to push itself into an industry that is currently dominated by 13 companies, selling products that are largely separated by advertising and brand awareness. The challenge lies in overcoming the brand loyalty that the existing companies have shaped over several decades (Companies & Markets, 2014; Brassington & Pettitt, 2006). However, Diesel condoms can co-exist, even without eating into the markets for the existing products. This is not least because the market is expanding rapidly, and the growing awareness of HIV/AIDS, sexually transmitted diseases and family planning will ensure that the markets expand even further. By building on the brand and remaining faithful to the established brand values and reputation, coupled with the use of the company’s expertise in marketing to the 18-35 market, Diesel condoms are destined to succeed.

References

Aaker, D., 1990. Brand Extensions: The Good, the Bad and the Ugly. [Online] Available at: http://sloanreview.mit.edu/article/brand-extensions-the-good-the-bad-and-the-ugly/[Accessed 22 Jan 2015].
Brassington, F. & Pettitt, S., 2006. Principles of Marketing. 4th ed. New York: Financial Times/ Prentice Hall.
Companies & Markets, 2014. Global Condom Industry. [Online] Available at: http://www.companiesandmarkets.com/MarketInsight/Consumer-Goods/Global-Condom-Industry/NI8052[Accessed Jan25 2015].
Creswell, J., 1998. Qualitative inquiry and research design: Choosing among five traditions. Thousand Oaks: Sage Publications.
Diesel, 2015. Lifestyle. [Online] Available at http://www.diesel.com/[Accessed 5 Jan 2015].
Mintel, 2012. Sexual Health - UK - July 2012. [Online] Available at: http://store.mintel.com/sexual-health-uk-july-2012?cookie_test=true[Accessed 25 Jan 2015].
Mintel, 2013. Contraceptives - US - July 2013. [Online] Available at: http://store.mintel.com/contraceptives-us-july-2013[Accessed 22 Jan 2015].
Perner, L., 2011. Consumer Behavior: The Psychology of Marketing. [Online] Available at: http://www.consumerpsychologist.com/[Accessed 12 Oct 2014].
Reed, C. J., 2014. Diesel stretch their brand like their jeans. [Online] Available at: http://wallblog.co.uk/2014/04/22/diesel-stretch-their-brand-like-their-jeans/[Accessed 25 Jan 2015].
World Bank, 2014. GDP (Current US$). [Online] Available at: http://api.worldbank.org/v2/en/indicator/ny.gdp.mktp.cd?downloadformat=excel[Accessed 28 Dec 2014].
Yahoo Finance, 2014. Diesel S.p.A. [Online] Available at: http://biz.yahoo.com/ic/58/58096.html[Accessed 17 Jan 2015].
Young, L., 2011. How to use segmentation effectively. [Online] Available at: http://www.warc.com/Security/LogIn/Default.aspx?GUserID=&OriginalURL=%2fContent%2fContentViewer.aspx%3fID%3db089fe77-32f0-4691-aba7-e443a12da0ae%26CID%3dA11721%26PUB%3dBESTPRAC%26MasterContentRef%3db089fe77-32f0-4691-aba7-e443a12da0ae[Accessed 22 Jan 2015].
Appendices
Market Research Results
Condom Industry
The global condom industry has been forecast to hit a market value of US$5.4 billion by 2018, with the industry set to be driven by the growing concern towards the spread of various sexually transmitted diseases, particularly HIV/AIDS and the need for a safe and cost-effective method of contraception.
Evidence of condom use dates back to 1220 B.C. in Egypt, according to Durex. Today the condom is morphing beyond its utilitarian functions -- protecting against pregnancy and disease -- into a kind of entertainment product, setting the stage for growth.
Although condoms played a vital role in the 60's and 70's in protection from sexually transmitted diseases like syphilis and gonorrhoea, the main use of a condom remained for contraception purposes. However, the use of condoms got a severe jolt with the invention of the "PILL", as more and more women started using it as it provided the maximum protection against pregnancy.
One of the most devastating diseases to affect humanity is AIDS. As of 2011, about 35 million people were surviving with this life-threatening infection worldwide, while over 2.5 million newly infected cases were reported. In terms of death toll since the spread of the disease, about 30 million people have succumbed to date, with the year 2011 alone accounting for over 1.7 million deaths.
The condoms market, of late, has opened up to the introduction of new pleasure-oriented condoms, in contrast to conventional condoms such as latex rubber, polyurethane, lambskin, lubricated, and spermicidal types of condoms. Other noteworthy market trends include launch of thinner condoms, increased focus on younger generation and women, use of nitrile polymer for female condoms, innovative packaging and labeling of condoms, and line extensions
Distribution-wise, condoms are increasingly being picked up from self-service counters available at drug stores, supermarkets, and more specifically online. The internet is catching the fervour of users who prefer to buy condoms discreetly. The internet is also widely being used as a forum for the distribution of educational literature and condom samples, in addition to providing encouragement for safer sex.