Last week Three and Vodafone launched new sub brands targeting the youth segment. It’s hardly a new concept. O2 launched giffgaff seven years ago, following up with ‘48’ two years later in Ireland.
What’s interesting is that two new sub brands have come along at once and it’s potentially a glimpse of what’s to come for the highly competitive telecoms market.
Sub brands clearly work. giffgaff is rumoured to have 2 million customers and proving that if your brand won’t stretch and appeal to all customer segments than you must create one that will.
Up until now this has been the role of the MVNO market and operator wholesale teams. But dynamics are changing.
The case for the sub brand
Simple economics drive the mobile market: the more customers you have using your network the better the revenues and profits.
However, the values of a brand don’t always support the theory. Take Vodafone for example. It’s not a brand that has traditionally appealed to the under 25s, so it stands to reason that they should launch a brand that does in the guise of Voxi.
And of course, the network economics add up – there are no wholesale costs and every penny of the margin is banked. What’s more, the parent network can trade on the credibility of its brand, control the segments that the sub brand targets and most importantly influence its pricing and offers to ensure it’s not competing head to head.
Of course, parent brands have to put a lot of faith in the power of its brand to drive the success of the sub brand. And, to be blunt, that’s not enough to attract customers, in fact it could actually detract from its appeal.