In our strategic brand development work, we’ve helped several clients navigate successfully to, or away from, a multi-brand strategy. They ask themselves: Do we stick with our current brand? Or create a new one? They might reach that juncture from various paths, like an acquisition or merger, development of a new product or extension of a service line to a new audience or market. So, when does a multi-brand strategy work and when should you avoid it? Here are the top five considerations we discuss with clients:
1. Audience differentiation. Does each brand within the multi-brand strategy give you the opportunity to speak to a different market segment? If so, it could help you grow your overall market share. If not, then you run the risk of cannibalizing your current market position. For example, LVMH (the parent company of Louis Vuitton) owns a multitude of fashion brands. It’s obvious that Birkenstock products appeal to a different audience than Louis Vuitton products, so it’s a no-brainer that they’d brand those products separately. But when Louis Vuitton brand wanted to offer a high-end fragrance, they didn’t need a new brand since a high-end fragrance would likely appeal to high-end handbag owners as well. (We’re not implying we worked with LVMH on this strategy, just that we like what they did).
2. Brand equity. If you’ve got significant brand equity within a legacy brand and an opportunity to reach a new audience or segment, then perhaps a product line extension is best marketed under your current brand (as in the Louis Vuitton fragrance example above). Or perhaps a new product does not align with your current brand positioning and would detract from your current brand equity. An example: If you’ve built your brand on the promise that products are made in the USA, and your latest acquisition or product development is out of another country, it could damage your legacy brand. Considering a new brand in that instance might be beneficial.
3. Pricing. Is the price of a product or service a differentiating factor that would justify another brand? Pricing can go hand in hand with both audience differentiation and brand equity. As it relates to audience differentiation, a price point could be so high that the product would be unattainable to your current audience. Considering brand equity, a price point that is too low could damage your current brand in some cases. This is the reason many automotive manufacturers have created additional brands—think Toyota and Lexus, Honda and Acura or Nissan and Infiniti.
4. Distribution. A new brand might be a solution if you are trying to enter a new distribution channel without conflict. For example, the makers of well-known products often create a separately branded (albeit similar in quality) product to be able to sell in warehouse stores like Costco. You might be surprised to know that several of the Kirkland brand products are from the very same name-brand manufacturers you know and love!
5. Investment level. A new brand requires new marketing. Essentially, whatever you have already built for your brand (website, marketing materials, advertisements, etc.) needs to now be created for the new brand. It requires a significant investment of both time and money. So unless you’re prepared for that budgetary reality, a multi-brand strategy might not be the best route.
When clients choose a multi-brand strategy, marketing can be a huge advantage to help eliminate brand overlap and maximize the impact of two coexisting brands. Identifying unique advantages, individual brand tones and personalities, and clear and differentiated USPs is essential when managing a multi-brand strategy. The challenge is complex, but not impossible—especially if you’ve got the right partner to help you navigate it.
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