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Once a brand reaches a high market share in a particular industry for a certain target market, it needs to expand. Yet, because customers in another target market are by definition not identical, the product needs to be modified. Often, what separates one target market from another is the buying power that the group constituents have. However, creating a modified or luxury version of a product under the same brand name will create an ambiguous brand. To avoid this, companies often create a new brand identity that is dissociated with the parent brand in terms of marketing.

For example, once Toyota dominated its middle income target market, it decided to target the upper class. It invented the brand Lexus for the upper target market. Toyota created the brand to be synonymous with luxury. When Lexus owners drive around, passersby will know that the owner is affluent. Thus, Toyota can charge a premium for the brand name. This is very common practice among auto manufacturers: Cadillac/Chevy, Buick/GM.

What’s even more interesting is that when these brands go abroad, the luxury products typically remain the same while the middle class product needs to be adapted to the local demands. For example, Lexus sells the same cars in the United States as in China. There is no product differentiation. However, when Toyota sells in the US, its product line up includes trucks like the Tundra and large minivans like the Sienna. When the auto brand sells in China, it does not offer tucks and offers a smaller minivan version for the tighter streets. The explanation here is that luxury is the same across the globe. The product will not be adapted to the environment; the environment will be adapted to the product. When a consumer has a smaller wallet, adapting to the environment is a necessity. So, product adaptations become a necessity as well.

Can you think of another brand that separates its brands based on target markets? What are their production and selling strategies?