Why do some companies maintain multiple brands within the same category even though it is more expensive to do so? Here are some of the reasons companies maintain multiple brands in their portfolios:
- The brands appeal to different market segments and have different positions in the market
- The company maintains multiple brands to encourage vigorous competition between brand managers
- One brand is an upscale or premium brand
- One brand is a no frills brand targeted at price conscious consumers
- The additional brand uses an older formulation or technology and may be sold as a “cash cow”
- The second brand could draw on the core brand’s quality and service perceptions without being that brand. This is useful with market segments that are more price conscious but that still appreciate high quality and service levels.
- The additional brand is created to establish a higher reference price in the category (often increasing the perceived value of the core brand)
- One is a “flanker” brand, designed specifically to compete directly with other brands in the category, while protecting the company’s flagship brand from direct competition
- One or more brands are created to reduce or eliminate channel conflict issues
- The new brand may be a way to take a company’s products [and, in some cases, a variation of the core brand] out to new channels or customers without alienating current customers
- Some brands are created to meet specific retailers’ needs within the category
- The additional brands may be created as “private label” brands for specific retailers
- The additional brand may allow the company to acquire more shelf space
- The company can use the additional brand to experiment within new channels without affecting the core brand(s)
- To create more perceived variety at retail without giving sales up to the competition
Depending on the reason(s) for the additional brand(s), their link to the first or core brand might be non-existent, through a subtle endorsement, as a sub-brand or as some variation of the first brand. Or, the association may only be talked about by salespeople to the trade but not referenced on the product or its packaging.
Each brand in a company’s portfolio needs to have a clearly defined role. Ideally, that role is in support of key business or marketing strategies. If a brand is no longer serving any purpose in the portfolio, consider repositioning it or eliminating it.
I wish you great success in crafting your brand portfolio strategy.