Diesel for Successful Living Case Analysis

Diesel For Successful Living Case Analysis

ADV 388K Integrated Communication Management Group 4

Abigail Klein (AMK3766) Natalia Lara (NTL397) Sophia Liu (YL25797) Monica Sherry (MBS2773) Jiahuan Yan (JY8892)

The University of Texas at Austin

Situation Analysis

Demographic Environment The demographic environment differs between D-Diesel and StyleLab. D-Diesel focuses on high school students, college students, young professionals and people in the HIP generation. Many of these people are in the middle or upper-middle class and their ages range between 16-25 years of age. StyleLab focuses on members of Generation X, ages 25- 34. Many people in Generation X are professionals or managers in the upper-middle and lower-upper social class.

The clothing industry in the mid to late 1990’s experienced an increase in market segmentation. Some consumers began spending large sums of money on casual wear for leisure and others for the workplace. Additionally, being trendy started to mean being dynamic, lively, mobile and casual.

Economic Environment People with medium to medium-high incomes tend to purchase D-Diesel products while StyleLab is aimed to attract consumers with medium-high income. In 1997, Diesel’s consolidated annual turnover amounted to 503 billion lire, 85 percent of which was generated outside Italy.

Sociocultural Environment D-Diesel tends to target people with a teenage-spirited lifestyle, such as a shopaholic, neo hedonist, tribe member and trend followers. D-Diesel customers tended to be open-minded as well as innovation receptive. In contrast, StyleLab targets travelers and worldly consumers who are visually educated, fashion perspective and culturally aware. Customers of StyleLab either like the D-Diesel brand and feel it has become too mainstream or they value the possibility of creating their own style.

Additionally, once the consumer has taken the time to think about D-Diesel’s advertisements, they can pick up on a hidden order behind the work, a meaning that is less shocking and more a balanced observation of the realities of the world we share. As shocking as D-Diesel advertisements can be, they more often than not manage to rise above a purely attention-getting level either by containing a serious point of social concern or, simply but effectively, by causing us to ponder the meaning of life. No other clothing company would appear to offer such philosophical discourse.

Competitive Environment Diesel was ranked number two in the jeans industry in Europe and they had high expectations for StyleLab. D-Diesel (denim leisure clothes) competes with Armani Jeans, Levi’s Mustang and Calvin Klein Jeans and sold garments comparable to GAP at a much higher price point. Comparatively, StyleLab (high casual wear) will compete with Miu Miu, Prada Sport, CP Company, and D&G. One key factor in the competitive environment is price. Within Diesel, prices are even different. For example, D-Diesel jeans sold for $100 USD and a jacket at $139 USD while StyleLab sold pants at $150 USD and jackets at $415 USD. 2

Product Environment Originally, Diesel was a typical young design company focused on launching new products. Beginning in 1991, they started to develop a global branding campaign – “Diesel for successful living.” In 1998, before the launch of StyleLab, the brand’s portfolio of Diesel Spa consisted of three main product lines: D-Diesel, Diesel Kids and 55DSL. D-Diesel was the core business line, focusing on denim jeans and skirts. Their products were characterized by very high durability and quality. The Diesel Kids line was targeted at kids who did not want to be treated like kids. The 55DSL line was aimed at extreme action sports fantasy, which was full of a surprisingly fresh color combination.

Under the current circumstances, some consumers are willing to spend a large amount of money on casual wear for the workplace and leisure. Because of this, there was a new market opportunity in high casual wear.

According to Diesel, D-Diesel and StyleLab should have distinct brand identities but with some common roots: freedom, global outlook, creativity and thoughtfulness. D-Diesel stands for irony and irreverence while StyleLab stands for sophistication and mystery. Diesel focuses on denim while StyleLab experiments with a variety of innovative fabrics. StyleLab is more exclusive, refined, expensive and more innovative in its use of design and materials when compared to D-Diesel. It also offers less of a street look than D-Diesel and targets consumers who are design conscious.

Company Analysis Overall, Diesel is a strong company. They focused heavily on developing the Diesel style. Diesel garments were featured in many popular and independent movies as well as participating in video game production. Additionally, Diesel was one of the first clothing companies on the Internet in 1995. Diesel also has different media teams and different goals for advertising StyleLab and D-Diesel. For StyleLab, this consists of a distribution plan unique to their products.

Historically speaking, Diesel transferred from a simple jean label into a major fashion brand in 1985. Its products were available in more than 50 countries through 10,000 independent retailers and 40 company owned stores, including flagship outlets in New York and London. In 1997, its consolidated annual turnover amounted to 503 billion lire, 85 percent of which was generated outside Italy.

SWOT Analysis

Strengths Weaknesses • Successful Brand: • StyleLab: o Diesel is a strong brand. It o The profitable market in high went from only a jean brand casual wear is uncertain. to major fashion label. • Potential Dilution:

o In 1997 Diesel’s consolidated o Multiple horizontal turnover amounted to 503 extensions of Diesel could billion lire; 85 percent of dilute its identity therefore which was generated outside Diesel could suffer from its of Italy. own success. • Promotion: • Advertising: o Diesel pays great attention to o Diesel's ironic and tacky product placement among advertising caused actors, musicians and resentment among the celebrities without paying general public and triggered the stars or giving anything a response. away. o Diesel has no precise o Diesel’s design, advertising definition of the target for and management style StyleLab. embodied a love of humor, o Diesel's vision of consumer creativity and irrelevance paradise was to be towards established rules. interpreted ironically. o Advertising campaigns were o Diesel ads were too highly artistic, colorful and sexy. involved and often confusing o Diesel is an Innovative brand. to consumers. They required They were one of the first wit and involvement to be clothing companies on the deciphered. Internet. o The Diesel for successful o Diesel created a hotel that living campaign resulted in envisioned the brand’s sarcasm directed at Diesel philosophy. The hotel was a themselves. success among big influencers like people such as Cindy Crawford, Grace Jones, Yoko Ono and JFK. • Products: o Diesel offers a wide variety of products. For example only about 30 percent of the D- Diesel collection was denim. o D-Diesel’s products are high quality and durable. o Diesel has been able to expand to include a wide variety of successful product lines. • StyleLab: o They offer wearable clothing from a “ laboratory of surprising style” for

customers. It is more exclusive, refined, expensive and more innovative in its use of designs and materials.

Opportunities Threats • Market: • Perception: o There is an opportunity for a o The perception that casual high-end casual wear line in wear should not be the market. expensive. • Attitude towards attire changes: • Competition: o The clothing industry in the o StyleLab was positioned at mid and late 1990’s the lower end of high casual experienced increasing wear, competing with Miu market segmentation. In Miu, Prada Sports, CP particular, some consumers Company and D&G. were now willing to spend o Other companies could begin large money not only on using new styles and fabrics smart clothes but also on to compete, taking a portion casual wear, both in of the original market. workplace and for leisure. • StyleLab: o Being trendy started to mean o It is hard for many dynamic, lively, mobile and consumers to justify casual. spending $150 on a pair of • Designers: jeans. o StyleLab would help manage Diesel's most important assets, their designers. In doing so designers are free to experiment with new fabrics and cuts. • Target Customers: o StyleLab could focus on previous D-Diesel customers who still like the brand and its values but felt D-Diesel had become too mainstream. o StyleLab could appeal to people who are looking for cutting edge style and who value the possibility of creating their own style.

Problem Statement

How does Diesel associate both D-Diesel and StyleLab while maintaining separate identities by determining the branding strategy of their new line, StyleLab?

Critical Factors

1. Distinct brand identities, but while sharing some common roots

D-Diesel and StyleLab should have distinct brand identities but with some common roots: freedom, global outlook, creativity and thoughtfulness. D-Diesel stands for irony and irreverence while StyleLab stands for sophistication and mystery. From a product perspective, Diesel focuses on denim while StyleLab experiments with a variety of innovative fabrics. Additionally, StyleLab offered less of a street look and is more exclusive, refined, expensive and innovative in its use of design and materials compared to D-Diesel. Another common root is their target market. D- Diesel targets people who are 18-25 years old while StyleLab targets past buyers of D-Diesel who liked the brand but had outgrown it. This is a critical factor because if the brands do not share common roots, it is difficult for the brands to be linked in any way.

2. StyleLab’s main focus is to build the image of the brand

Since D-Diesel is already an established brand it has different marketing goals, such as supporting the brand and products equally. Like any new brand, StyleLab’s focus has to be on building brand image because without establishing a strong, independent image apart from D-Diesel, StyleLab will only achieve low awareness with consumers. Additionally they will not be able to develop a strong platform in the market.

3. Diesel management was concerned that D-Diesel would suffer from success of itself because of brand dilution

One of the objectives assigned to StyleLab was to counterbalance the increased diffusion of D-Diesel products and to prevent any possible commoditization of the brand. There was a concern that the multiple horizontal extensions of D-Diesel could dilute its identity and that D-Diesel would suffer from its success. More importantly, too high a diffusion would erode the exclusive and unconventional image of the brand. An example of this is with Germany and how there were already concerns about D-Diesel losing its edgy, rebellious appeal because of its success with older consumers. This only made the growing gap between the irrelevant image communicated in advertising and the image reflected by their conservative, 35 year old, BMW driving professionals wearing Diesel Jeans.

4. StyleLab’s exclusivity in distribution vs. D-Diesel being widely accessible

Initially, D-Diesel was distributed only through multi-brand teen-oriented stores and department stores. Since the 1990’s, they began using flagship stores in New York, Chicago, London, San Francisco and Rome as vehicles to bring the D-Diesel brand identity to its entirety. D-Diesel was also distributed by mail order or through the Internet. StyleLab’s products were to be distributed only through specialized fashion stores, boutiques and high-end department store such as Joyce in Hong Kong, Barneys in New York as well as Selfridges and Harrods in London. Additionally the customer service guidelines for StyleLab retailers indicated that the staff should look more mature than those of a typical D-Diesel store.

5. StyleLab was positioned at the lower end of the high casual wear segment

This is a critical factor because without knowing where StyleLab is positioned, it is difficult to determine a branding strategy. At the lower end of high casual wear, StyleLab’s competitors are Miu Miu, Prada Sports, CP company and D&G. Diesel executives believe that this is an untapped market and that they can be successful in this market.

Solution 1 Umbrella Brand

For Solution 1, we proposed Diesel uses an umbrella brand. An umbrella brand is stated as “both D-Diesel and StyleLab becoming sub-brands of a new corporate umbrella brand (e.g. Diesel Planet)”. Diesel Planet would be used as Diesel’s marketing campaign involving the use of a single brand name for the sale of two or more related products underneath a distinguishable brand name. The umbrella brand provides a potential solution for Diesel as Diesel Planet, which has structured itself as a brand hierarchy already in a blueprint strategy (Exhibit 6). Diesel’s management team has emphasized that D-Diesel and StyleLab have distinct brand identities, but do share common roots. The management was initially concerned with the dilution of the brand itself, but by emphasizing the shared values, we believe that Diesel could grow. Both brands share values such as freedom, global outlook, creativity and thoughtfulness. By implementing the umbrella strategy, Diesel will be able to maintain both target consumers for the two brands of D-Diesel and StyleLab under one umbrella brand, Diesel Planet. D-Diesel targets people with a teenage-spirited lifestyle, while StyleLab is targeting the trendiest D-Diesel customers concerned that the brand has become too mainstream and potentially lost its underground cachet. By implementing an umbrella brand, Diesel Planet would oversee the distribution of products and make sure they are maintaining separate identities of their brands. Finally, by maintaining both of these target audiences, Diesel could participate in continuous growth because the brand extensions require a delicately balanced relationship between D-Diesel (teenage-spirited consumers), StyleLab (lower end of the high casual wear segment) and the consumers.

Pros: Cons: • Practice of umbrella branding does • Diesel Planet may dilute the original not disallow a firm to implement identity of Diesel itself. different branding approaches for • Moving forward if StyleLab is very different product lines (i.e. D-Diesel successful, it will be hard for it to be could have one branding strategy under the umbrella of the Diesel that is distinguishably different that brand because it will not be able to StyleLab’s). separate itself if ever necessary. • Provide uniformity to certain • The consumer’s experience with one product lines by grouping them umbrella branded product may affect under a single brand name. their perception of the specific • Easily identifiable and enhance their branded products (StyleLab or D- marketability. Diesel) and services falling under the • Reduces Diesel’s marketing costs due same corporate umbrella as well as to the consumer-brand association the brand itself. through which consumers already • If one umbrella branded product recognize the brand, making new does not satisfy the consumer's products from StyleLab more easily expectations, the other products sold identifiable to consumers. under the same brand are also likely • The success of one umbrella branded to suffer. product (D-Diesel) may translate to • Umbrella branding is only beneficial other products under the same when promoting relatable products corporate umbrella due to the through which consumers could positive brand equity. recognize the brand.

Solution 2 Token Endorsement

For Solution 2, we proposed that Diesel implement the branding strategy of token endorsement, which is defined as “the endorsement is mentioned in the communication in plain text, with small fonts and relatively far from the StyleLab logo”. Using this approach, enough distance will be created in the potential customer’s mind between D-Diesel and StyleLab, while still artfully referencing the shared common link and association between the two brands. This approach of subtle referencing to the shared association between the two brands will allow D-Diesel’s past customers who are attracted to the brand and its values but have outgrown its style to more easily transition and convert to StyleLab. Specifically, majority of D-Diesel’s past customers who are transitioning out of the 16-25 age group with medium to medium-high income and high school/college students occupation profile can be easily directed towards StyleLab as it targets those of 25-34 age group with medium high income and professional or managerial occupations. Furthermore, as token endorsement can adequately establish the shared common link and association between D-Diesel and StyleLab, D-Diesel’s customers who may be concerned of D-Diesel becoming too mainstream and losing its edge can be directed to consider a favorable

alternative in StyleLab clothing. On the other hand, by allowing enough distance between the two brands, it affords StyleLab more freedom and opportunity in the marketplace to attract new customers who do not feel related to Diesel’s focus on denim but are attracted to StyleLab’s experimentation with innovative fabrics. Finally, the adequate differentiation in token endorsement between the two brands will also allow StyleLab to not appear as just another extension within the D-Diesel brand, which Diesel feared would dilute the brand’s identity.

Pros: Cons: • Token endorsement will allow for a • May cause confusion in the minds of clear differentiation between D- potential customers, and not strong Diesel and StyleLab, while still enough to offer and establish the referencing the shared common link “common link” reference. between the two. • May run the risk of deterring D- • Will better appeal to the past buyers Diesel’s loyal customers into of D-Diesel who still like the D-Diesel speculating that Diesel is no longer brand and its values but have remaining true to its original identity outgrown it. but is now focusing on brand growth • Will better appeal to D-Diesel and merging into mainstream customers who are concerned of D- fashion. Diesel’s style becoming too mainstream and are looking for something more “exclusive and innovative”. • Allows StyleLab more room to develop its brand identity and more opportunity to grow in the market. • Since StyleLab’s target customers are of the upper-middle and lower-upper social class, as well as professionals and managers, this approach will provide a better brand positioning for StyleLab to attract new customers within its target market. • Place less emphasis on StyleLab as another extension within the D- Diesel brand, thereby not diluting D- Diesel’s brand identity. • Will allow for a more focused launch campaign emphasizing on building StyleLab brand awareness. • More reasonably justifies StyleLab’s strategy on pricing and distribution plan.

Solution 3 Acknowledged Ownership

Solution 3, acknowledged ownership, is “where StyleLab and Diesel are not linked visually, but consumers are aware of the link between brands”. The reasoning behind using acknowledged ownership is that StyleLab would be free to create their own identity, without being immediately associated with the Diesel line. StyleLab’s goal is to be perceived at the lower end of the “high casual wear” segment, along with brands like Miu Miu, Prada Sport and D&G. Acknowledged ownership would allow StyleLab to create their own identity and status appeal without being immediately associated with D-Diesel, which is a mid-level brand. With this in mind, StyleLab has chosen to make the line available in select fashion stores that are known for carrying luxury brands, such as Barney’s New York, Joyce in Hong Kong, and Harrods in London. However, D-Diesel does not have the immediate association of being a luxury brand and is available in retail stores that do not specifically cater to a “high casual wear” market segment. Because of this, we believe that StyleLab could benefit from the distance acknowledged ownership would allow them, while also still having the ability to piggyback off of the established Diesel name, if needed. Although, due to this distance created, this approach runs the risk of consumers being unaware of the link between StyleLab, D-Diesel and Diesel all together. For example, Toyota’s Lexus uses acknowledged ownership approach. Lexus is a part of Toyota’s luxury vehicle line. However, when advertising Lexus, Toyota allows Lexus to stand on its own and choses to not make the link obvious. Some consumers find the relationship between Toyota and Lexus to be common knowledge, however there are some consumers who do not know of this link at all. If this happens with StyleLab, the ability to gain consumers who have outgrown D-Diesel could be lost. To circumvent this risk, StyleLab would need to ensure that the common roots with D-Diesel remain somewhat clear. Those shared common roots are freedom, global outlook, creativity and thoughtfulness. These commonalities are subtle enough that StyleLab would continue with the freedom of establishing its own brand identity, but the look and feel of the company would remain similar to D-Diesel in a more subtle way. Keeping this commonality is important to Diesel, and in order for StyleLab to take advantage of the being a part of an already established, successful company, they need to ensure that this link is not lost.

Pros: Cons: • Due to the loose affiliation with • Using the acknowledged ownership Diesel, StyleLab would be able to approach risks losing the association attract new customers who may not with D-Diesel all together in the identify with Diesel specifically, but minds of consumers. Losing this link like the StyleLab brand and designs. between brands may prevent • StyleLab will have some freedom to StyleLab from retaining the core grow independently in the future and identity with Diesel, which is create their own identity as the something StyleLab wants to brand gains traction in the target maintain. market segment. • The shared common root with D- • Acknowledged ownership would still Diesel is not clearly outlined, thus

appeal to customers who like the D- can be easily missed by customers Diesel brand, but feel they have who are not informed of the common outgrown the style. StyleLab could root between brands. This creates position itself as the natural disassociation with consumers and is maturation of D-Diesel and gain a disadvantage for StyleLab to reach those customers. customers of the D-Diesel brand. • StyleLab is a luxury brand and this • Acknowledged ownership disallows approach allows them to present StyleLab the ability to take advantage themselves in that way without the of D-Diesel’s successes due to a less immediate association to a casual obvious association with the Diesel line. brand. • D-Diesel is already an established brand name within the fashion industry. Introducing StyleLab with only acknowledged ownership from Diesel would allow StyleLab to come up as its own brand, rather than being diluted by the D-Diesel brand name within the market.

Recommendation

After reviewing the three possible solutions, we recommend Diesel uses Solution 2 and implement a token endorsement as StyleLab’s branding strategy. This solution is recommended because we believe it most adequately addresses Renzo Rosso and his team’s concerns related to StyleLab branding. By having the endorsement brand, Diesel being mentioned in the communication in plain text, with small fonts that’s relatively far from the StyleLab logo, enough distance can be established between the two brands for clear differentiation while still retaining a common link and association with Diesel’s core identity. The clearly established differentiation between the two is also beneficial in that StyleLab would not be perceived as another horizontal extension of D-Diesel, which runs the risk of diluting Diesel’s brand identity. Not only so, by establishing enough distance between the two brands, it will allow StyleLab’s branding team to develop advertising campaigns that are exclusively focused on building the image of the brand, which is a critical part of StyleLab’s success.

Furthermore, the token endorsement branding strategy will afford enough distance between the two brands in the minds of the consumers while providing sufficient referencing to their shared common link and association. Such balance between the two brands is important and beneficial because it will allow D-Diesel’s past customers who are attracted to the brand and its values but have outgrown its style to easily transition to and favor StyleLab. In this way, Diesel will be able to retain and not lose its past D-Diesel customers within its own market via StyleLab.

As StyleLab will be positioned at the lower end of the high casual wear segment, D-Diesel’s past customers who have transitioned to a more sophisticated and high end style but are still looking for similar brand identity as D-Diesel will be able to continue buying Diesel products via StyleLab in the high casual wear segment. Specifically, as shown in Exhibit 11, D-Diesel’s past customers who have transitioned out from the 16-24 age group into the 25- 34 age group, as well as from high school/college students/young professionals to professionals/managers, will likely find themselves purchasing products in the lower end/upper end of the high casual wear segment. Therefore, by skillfully referencing the shared common link between the two brands, it cleverly directs D-Diesel’s past loyal customers to continue supporting the Diesel way through StyleLab.

In addition to being able to retain the more loyal segment of D-Diesel’s past customers through StyleLab, by appropriately differentiating the two brands using token endorsement brand strategy, it offers the segment of D-Diesel’s customers who are concerned and wary of the brand becoming too mainstream and losing its edge a favorable alternative that shares the same core identity as D-Diesel.

For the new brand’s distribution plan, StyleLab were to be distributed exclusively through specialized fashion stores, boutiques and high-end department stores; which is in contrast to D-Diesel’s widely accessible distribution plan ranging from flagship stores, department stores to mail order or the internet. Correspondingly, StyleLab aims to reach target consumers in the medium-high income level. With both factors in view, utilizing token endorsement branding to thus establish a clear differentiation and distance between the two brands makes more sense in the customer's’ mind, as well as better justifies StyleLab’s decision on pricing. Specifically, because StyleLab will be an up-extension brand, its style and quality does not need to resonate that of D-Diesel. Rather, StyleLab should act as a representative of Diesel’s core brand identity within the high-end market. With all the above considerations in mind, we believe StyleLab could more effectively enter into the new market of high casual wear and further create an aura of prestige and fashion around the D-Diesel brand through token endorsement branding strategy.

In conclusion, token endorsement affords enough distance between the two brands in the customer’s mind to offer more freedom and opportunity for StyleLab to develop and grow in its high casual wear marketplace, whose focus is on innovative experiment rather than just denim as D-Diesel is.

Appendix

Exhibit 6 – Diesel Brand Portfolio

Exhibit 11 – Target Customers of D-Diesel and StyleLab Brands

Exhibit 15 – Three Branding Strategies for the StyleLab Brand and their Variants