Marriott International is one of the largest hotel chains in the world, with a portfolio of brands including The Ritz-Carlton, Sheraton, Le Méridien, JW Marriott, Courtyard by Marriott and others; BMW Group is one of the largest automobile manufacturers in the world with a portfolio of brands like BMW, Mini and Rolls-Royce; Mondelēz International is one of the world’s largest confectionery, food, and beverage companies in the world with a portfolio of brands like Oreo, Cadbury, Tang, Chiclets and others.
You might be thinking why companies add new brands in their portfolios when they already have a few popular brands with significant market share. Well, there are both challenges and opportunities hidden behind management of brand portfolios.
Let’s first have a look at a few of the challenges that come along with creation of new brands:
New brands, new costs
Every new brand brings along with new requirements around packaging, sales force, distribution channel, advertising, promotion, vendors, manufacturing processes and so on. These requirements add on to cost.
More brands mean more brand communication
In today’s world, customers’ attention span has drastically reduced and at the same time, the number of marketing channels have increased. Multiple brands are sending thousands of messages to these customers and if a new brand comes in the market, it also tries to gain attention of these customers by bombarding them with its marketing messages.
Pressure to gain market share
Every new brand brings along with its expectations to gain market share and increases performance pressure for brand managers.
Now, let’s have a look at a few of the reasons behind having multiple brands in a portfolio:
To create separate identities
Brand identity refers to how a brand is perceived by its consumers. Perceptions about a brand are created by category it represents such as health drink or dairy product; market segment it serves such as sportswear or fashion wear; distribution channel through which brand is sold such as medical stores or departmental stores. Expectations of different categories, different market segments and different channels are different and a brand can’t talk about multiple qualities at the same time. So, when a product with different qualities is created, a new brand is created with a new identity. For example, PepsiCo has brands like Gatorade for sports drinks, Tropicana for fruit-based drinks, Pepsi for carbonated cola soft drink and others.
To create entry barriers for competitors
Cannibalisation is an important element in marketing strategy applied to increase a company’s market share by introducing new brands that will harm competitors more than the company’s own brands, and will sell to a different segment of buyer. For example, customers use detergents to wash delicate fabrics, bright colours, white cottons and other kind of clothes. When it comes to choosing the detergent, they have multiple options such as Ariel, Tide, Surf Excel, Rin, Nirma, Wheel, Ghadi and a few others. Brands like Surf, Rin and Wheel are owned by HUL and brands like Ariel and Tide are owned by P&G. When a low-priced brand Nirma was eating up market share of Surf Excel, HUL launched a low-priced brand Wheel, a prime adversary to Nirma. In the premium segment, Surf Excel has competition with Ariel. In mid-segment, Rin competes with Tide and others.
It is important for companies to keep innovating to remain relevant to their customers. But sometimes, innovations don’t work, and associating them with successful brands during initial stages may backfire. To test customer reaction, a company can come up with new brands. In addition, if a company has come up with multiple innovations, all of them can’t be attached to a single brand. Innovation that could justify 'premium' would go with up-market brands and innovation that could justify 'value for money' would go with mass market brands. For example, Marico’s Parachute is a market leader in coconut oil category and over the years, the brand has seen a lot of innovations in packaging, sizing and tamper-proofing. When Marico came up with a product formulation that combines the goodness of coconut oil and the anti-lice properties of ingredients like Neem and camphor, it introduced this innovation under the brand name Mediker.
To leverage popularity of acquired brands
When global companies acquire local brands, they get access to local brands’ R&D, manufacturing, distribution, sales and market dominance. For example, when Coca Cola acquired Parle’s soft drinks brands, there was duplication of brands serving similar categories. Thums Up and Coca Cola (or Coke) were cola drinks; Gold Spot and Fanta were orange drinks; Limca, Citra and Sprite were lemon drinks. To avoid redundancy, Citra and Gold Spot were discontinued. But Thums Up was a dominant brand and its taste, different from Coke; Thums Up is stronger, fizzier, and slightly spicier, Thums Up continued to thrive.
While creating their brand portfolio, companies should keep in mind that if they come up with two brands selling identical products, both customers and retailers will get confused. For a successful brand portfolio, each brand must be targeted to a specific segment and must provide unique propositions to customers.
The writer is author of the book 'Booming Brands'. (Views expressed are personal and don't necessarily represent any company's opinions)
The thoughts and opinions shared here are of the author.
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