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What do L'Oreal, Procter & Gamble (P&G), Unilever, and Facebook have in common? They're multi-brand companies that have several brands in their portfolio. The different brands in each group may compete with each other, but the large corporations still get a large piece of the pie. By taking on a multi-brand strategy, companies can fill multiple market positions to reach consumers' needs.
A company has a multi-brand strategy when their portfolio of products has different brands or names. For example, Nestlé has a multi-brand strategy with over 2000 different brands including KitKat and Nespresso.
A company may want to take on a multi-brand strategy to reach a different audience or create a luxury line to appeal to a consumer willing to pay more for a product.
Practically speaking, imagine you are starting a face cream brand and have two products in development. One is made of the most exclusive and expensive ingredients and one is affordable, a good basic cream. These two face creams would have very different audiences, right? It’s not likely that the same target customer is interested in both products.
Now you may be thinking ‘okay, but why would I want to have these two creams under different names and brand identities? Isn’t it double the work to run two different brands?’. This is where it becomes tricky. You can keep the two products under one brand and call the fancier product a premium version, or you can separate the two so the customer doesn’t make comparisons between the two products.
The likely downfall of having two very different products under one umbrella brand is difficulty in brand management and appealing to the customer. Luxury products, eco-friendly products, vegan products, all-natural products, etc. are all marketed differently. If you have products with different benefits (and audiences) bunched together, you might be evoking cognitive dissonance.
Let's take the Volkswagen Group as an example. They own the Volkswagen brand but also the Porsche brand. If they would rebrand Porsche as a posh Volkswagen, sales would most likely plummet. The Porsche customers don't see themselves as Volkswagen drivers.
Let's have a look at some brands that have opted for a multi-brand strategy, and why they chose to do it.
L'Oreal - "Because we understand that beauty expectations and needs vary, we have built the richest portfolio of diverse and complementary brands. We want to be able to offer all around the world a perfect choice of brands for all types of consumer needs and desires and for all beauty dreams."
Brands include Garnier, Maybelline New York, NYX Professional Makeup, Kiehl's Since 1851, La Roche-Posay.
Procter & Gamble (P&G) - "P&G products have made a name for themselves by combining “what's needed" with "what's possible"—making laundry rooms, living rooms, bedrooms, kitchens, nurseries, and bathrooms a little more enjoyable for over 181 years."
Brands include Pampers, Gain, Tide, Pantene, Always, Crest, Braun.
Unilever - "We make some of the best-known brands in the world, and those brands are used by 2.5 billion people every day".
Brands include: Breyers, Dove, Lipton, Magnum, Ben & Jerry's
Facebook - "Facebook started as a single app. Now, 15 years later, we offer a suite of products that help people connect to their friends and family, find communities and grow businesses."
Brands include Facebook app, Messenger, Instagram, WhatsApp, Oculus, Workplace, Portal, and Calibra.
You may notice that some of these brands in these corporations compete with each other while others are completely separate. For example, a company can make different types of shampoo, take up more shelf space at the grocery store, and beat the competition.
Let's talk about some of the perks and downsides of having a multi-brand strategy.
Potential to position your brand as a market leader - When you build brand awareness, you're more likely to create a loyal following for your brand. A customer might recognize the parent company and trust that they're making a smart decision even though they have never tried a product before. They associate the brand with providing value and become more inclined to purchase other products the company makes.
More shelf space - Even though the branding for each product may be completely different and appeal to different consumers, you can create a leg up on the competition. For example, if you have eight different types of shampoos on the shelf, there is less room for competing products. Consumers may not even realize that your company makes all of the products because the marketing is unique for each one.
Cater to customers who like to switch brands - Even though a customer is happy with a product, it's not uncommon for some people to brand hop to see if they like something else better. Companies with a multi-brand strategy can appeal to these types of consumers without leaving the brand.
Brand reputation - If you're not monitoring your brand's reputation and a crisis hits, the other brands in your portfolio may not be impacted. With a multi-brand strategy, each brand has its own identity and personality and typically appeals to a different audience. In some cases, consumers may not know what brands are part of the same family.
Keeping brands distinctly different - It can be difficult to keep all brands apart from one another and have strong brand identities for each brand. If consumers view your brands exchangeable with one another, you are starting to compete with yourself instead of attracting different target segments (price conscious vs. environmentally conscious shampoo buyers, for example). Brands need to put extra effort into creating and advocating for brand guidelines internally, since weak brand identities can cause competition within the company.
See how an interactive, cloud-based Brand Center can help a multi-brand strategy company to achieve distinct identities and consistent branding.
Loss of credibility - If consumers see a brand name and decide they don't want to purchase products from that company anymore, that could impact sales for all the different products.
New products that don't live up to the standards of quality - Another disadvantage of a multi-brand strategy is that people may be tougher on newer products because they expect a certain level of quality when they're making a purchase. If a new product doesn't live up to those same standards, people may be quick to dismiss the product and leave negative reviews.
Spreading resources too thin - Companies that sell different products should focus on building a strong brand personality for each brand. If the people aren't connecting with the brands, they'll be less likely to purchase them. If this is the case, a company should go back to the drawing board and focus on what's working and what isn't instead of trying to release more new products.
One product can perform better than others - One of the disadvantages of having multiple brands is that one product may be more profitable than the others. Companies should evaluate if it's worth investing more time and marketing efforts in the lower performing products.
Overlapping of brands - If customers decide they're confused about a brand and want to try different products, they could leave the brand umbrella. Too many options may not necessarily be the best thing for some consumers.
The purpose of a multi-brand strategy is to restrict competition, diversify revenue streams, and increase market share. One way to assess if this strategy would benefit your company is to plot different products or brands on a Growth-Share, or BCG, matrix. The Y axis is market growth rate, X represents relative market share. These two axes divide the field in four boxes.
Here are brief introductions to each of the four categories:
Now, how does a plot like this translate to a multi-brand company? It has to do with long-term business success and diversification. As BCG stated in 1970:
Only a diversified company with a balanced portfolio can use its strengths to truly capitalize on its growth opportunities. The balanced portfolio has:
As your company plans for the future, it’s vital to think about new business opportunities, mergers, and setting up several different brands, if you are looking to thrive and grow. If you currently have an established product under one brand name, that’s great. But keep in mind that times change, and markets come and go. To stay in the race, the multi-brand approach might be worth investing in.
One thing you may notice about the examples we mentioned is that they are all massive corporations with resources to develop new brands. If you're launching your business, focus on developing a strong brand identity, and building trust with your audience before trying to create more brands. If you fail to develop strong brand awareness, all your products could fail. To achieve long-term success for your business, it's essential to focus on your why.
Every strong brand needs to know:
Weigh your options before you decide to take on a multi-brand strategy.
If you already have a brand that people recognize and trust, there is excellent potential to expand and launch new products that will appeal to your customers. Focus on creating a strong brand, and you'll know when it's time to move forward.
Want to get the most out of your brand? Check out:
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