So how many brands does a company put on the market? Does it adopt the single-brand or the brand-portfolio model? These are the type of questions asked by modern company and group managers. And this is how group policies evolve, based on the lessons learnt from the development of their market shares and from the diagnosis of the causes of a possible upper limit on profits.
As has already been seen, Michelin is a typical example of a group whose global market share reached an upper limit in spite of the widely acclaimed excellence, not to say superiority, of Michelin tyres, including Formula 1 versions. After years of using a virtually single-brand model, the Michelin group decided to change its policy.
Michelin certainly remained the flagship, but it was no longer the only brand to be the focus of innovative ideas and new advertising. In the private car market, Michelin realised the advantages of double segmentation – the first linked to price, the second to the fashion for status tyres.
There are customers throughout the world who want value for money but, while recognising the superiority of the Michelin brand, are not committed enough to want to buy Michelin tyres. But should they simply be left, as in the past, to turn to the competition in the form of Bridgestone? The demands of this segment of smart buyers needed to be met, and this was done via Kleber in Europe – an old brand in the portfolio that has been revitalised through innovation, such as the non-puncturing tyre – and Uniroyal in the United States.
But there is also a segment of drivers, usually drivers of pick-ups and 4 × 4s in the United States and Europe, for whom tyres are a kind of status symbol. They want their tyres to be flashy and ostentatious and are not attracted by Michelin because, in their eyes, a brand that focuses on safety, performance and long-term development is too staid, not fashionable enough, not different enough.
It is to these drivers that the group dedicated its US brand Goodrich, with a policy of offering a regularly updated range of large, custom made tyres. However, while Kleber is cheaper than Michelin, Goodrich is positioned in the same price bracket.
SEB, world leader in small household appliances, decided to concentrate on four major brands (Moulinex, Tefal, Rowenta, Krups) to compete with Philips on the international market, while for the moment retaining certain local and regional brands such as Calor, SEB and Arno. However, there was a strong temptation to emulate Philips and its single-brand policy on the domestic market. But this would have been a mistake since there is no point in imitating a market leader on a smaller – and therefore less visible and less successful – scale.
The growth of Legrand, the market leader in small electrical appliances for the residential and service sector, was achieved through the acquisition of specialist brands. Then Legrand picked up 80 per cent of its catalogue and ‘Legrandised’ it, making it simple, ergonomic, user-friendly for installers and electricians, and above all compatible with the rest of the catalogue (based on the Lego model). Legrand became the reference catalogue for the sector – a business model that is repeated worldwide.
So what does Legrand do with the brands it buys? It keeps them to create a protective barrier, using them in a preventative capacity to ensure its domination of the market. The electrical installation market is no different from other markets and Legrand, like other market leaders, creates the desire to be different among certain customers, making sure they do not want to have the same brand as their colleagues and competitors.
So, rather than leaving them to turn to its competitors, Legrand keeps their custom by offering – albeit much reduced – specialist brands. As already stated, these brands also create a protective barrier for Legrand so that a newcomer trying to penetrate the market could not replace Legrand in the eyes of wholesalers. It would be offered the place of a small specialist brand.
There are also parameters linked to the distribution strategy that explain why the Volvo truck division that bought Renault Trucks has maintained the Renault brand name. But this can only be understood by taking account of the general strategy of manufacturers in response to the liberalization of the European car and truck market.
Agents are now no longer obliged to deal exclusively with a single brand so, if they want to prevent another manufacturer from filling the breach, it is better to offer two fairly well differentiated brands, but which belong to the same group. And this is exactly what Volvo did. To prevent the risk of any drift towards the lower-priced models (as is happening in the Volkswagen group), the price of Renault Trucks was re-evaluated, which helped to greatly increase the profitability of the division.
The l’Oréal group continues to buy new brands and thereby extend its portfolio. In fact, it is moving out of Europe, is currently targeting the United States and has plans for Asia where it is still a modest player.
To accompany this expansionist strategy, the group buys strong local brands either because they are the leaders in their market segment or because they anticipate the trends of the future. This is why it bought the US mainstream brand of make-up, Maybelline, as well as Softsheen Carson, which specialises in haircare for African- Americans. It has also bought the US brands Redken, a very fashionable haircare brand for professionals, and Kiehl’s, a ‘long-term development’ and ‘niche’ brand of cosmetics. In Japan, it has bought the Sue Uemura brand.
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