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The Benefits Of Multiple Entries in Multi-brand Portfolios11059

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The benefits of multiple entries

At the beginning, we looked at the practical reasons why the number of brands had to be reduced, sometimes even to a single brand. They all correspond to a strategy of domination and competitive advantage via low cost. While recognising the market segmentation, it has been decided not to take it into account at brand level, but only in terms of products.

The multi-brand approach, on the contrary, is the logical consequence of a differentiation strategy and as such cannot coexist with a low-cost policy, in view of reduced economies of scale, technical specialisation, specific sales networks and necessary advertising investments. Nevertheless, with the exception of exclusive luxury brands, pressure remains.

In order to take advantage of productivity gains, there is a tendency to fragment the production chain in the cause of differentiation at the last possible moment, thus exploiting the benefits of the learning curve. This is the case in the domestic appliances industry, making industrial regrouping a necessity, as well as in the food processing or automobile industries.

The policy of having general car brands makes the most of all possible production and corporate communication synergism, and breeds the loyalty of the customer who progresses from one model to another within the same make. With all the advantages of a mono-brand policy, what makes it necessary to have several brands on the market at the same time?

To start with, market growth. No single brand can develop a market on its own. Even if it forms the sole presence at the outset, once the brand has created the market, its development requires a multiplication of players, each investing to promote their respective differences. The collective presence of a number of contributors helps to promote a market.

Beyond their differences, their combined advertising accentuates the common advantages of the product category. A multiple presence is necessary to support the market as a whole. It would not be in Philips’ interest to see its competitors in the electric razor market disappear. This would only decrease the number of messages praising the merits of electric razors, which could only benefit Gillette and Wilkinson Sword.

Philips should acquire a brand and maintain it as an active brand in the market. In the pharmaceutical industry, a laboratory discovering a new formula could certainly profit from ‘co-marketing’ it with other laboratories in order to accelerate its impact. An example of this is found in the case of aspartame.

Multiple brands allow for best market coverage. No single brand can cover a market on its own. As a market matures there is a need for differentiation and it becomes necessary to offer a wider range; the market is becoming segmented. A brand cannot be targeted at several different qualities at the same time without running the risk of losing its identity. In any case, consumers and retailers themselves will object to further brand ascendancy. This dual process is illustrated by the case of Rossignol. The company Rossignol followed a dual brand policy:

a mono-brand multi-product policy: the hallmark Rossignol covers its skis, ski suits and ski boots (those coming from its acquisition of the Le Trappeur Brand, since then de-baptised);a multi-brand mono-product policy, with the Dynastar brand on skis, Kerma brand on sticks and Lange brand on boots.

With 20 per cent of the world ski market, Rossignol is the leading manufacturer. Its share in the upmarket ski sector is thought to be even greater, of the order of 40 per cent or more. This is an area where the company should not offend people’s susceptibilities by expecting them to dress from head to toe in Rossignol products.

If the world leader wants to grow even bigger, it should be the one increasing the choice, rather than its competitors. In this market, the distribution is still handled by a large number of small independent retailers, who fear the control of a single supplier. This is why each company brand has its own sales force.

In the United States the Rossignol company presence is assured by two separate companies, Dynastar Inc. and Rossignol Inc. In the industrial sector, Facom and Legrand, two dominant leaders, successfully increased their hold on their market by creating apparently separate and autonomous brands. This enabled them to find new distributors, who were only too happy to have at their disposal a near exclusive brand, different from those of other retailers in that zone.

Multiple brands offer a tactical flexibility which also enables one to limit a competitor’s field of extension. In this way Delsey, the leading European luggage manufacturer, cornered Samsonite. They created a new brand, Visa, positioned to undercut Samsonite prices, while at the same time Delsey restrained them from moving into the top-ofthe- range market.

A multi-brand policy can stop any new competitors entering a market. A strong entry barrier to a market can be created by offering a complete range to retailers, with a brand name for each sector of the market. This is why in on-premises in the European market, soft drink companies create barriers to entry by providing the full range of products needed (Coke, Fanta, Sprite and so on).

A multi-brand policy is necessary to protect the main brand image. This partly explains why the Disney Corporation uses a number of brands in film production, for example Buena Vista and Touchstone. This enables them to produce films of every type without endangering the revered Disney name.

Similarly, when the success of an innovation is not certain, it would be foolish to risk associating it with a successful brand. This is why Procter & Gamble launched their first liquid detergent under the brand name Vizir and not under the name of the leading market brand, Ariel. The inverse policy was adopted by the Cadbury Schweppes group when it decided to launch its new fizzy drinks not under the brand Wipps but as Dry de Schweppes.

This was not only because Schweppes’ name helped the sales but because it was thought that the new brand Wipps would reinforce the slightly old and stuck-up image of Schweppes, and would have, in the long term, threatened the value of the brand. In order to avoid having to lower the prices of its leading products, 3M created the sub-brand Tartan which only covers the products where 3M is the dominant leader.

This minimises the risk of unwanted cannibalisation. Where 3M is not dominant but a challenger, retailers might be tempted to move directly to the lowest priced alternative from 3M.