What Is a Multi-Brand Strategy? [+ Examples]
What do L’Oreal, Procter & Gamble (P&G (Procter & Gamble)), Unilever, and Facebook have in common? They’re multi-brand companies that have several brands in their portfolio. The distinct brands in each group may compete, 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.
Table of content
- What is a multi-brand strategy?
- How do I know which brand strategy to choose?
- Examples of Multi-Brand Companies
- Multi-Brand Strategy Advantages
- Multi-Brand Strategy Disadvantages
- The Growth-Share Matrix (BCG Matrix)
- Does a multi-brand strategy make sense for you?
What is a multi-brand strategy?
A company has a multi-brand strategy when their portfolio of products has distinct brands or names. For example, NestlÃ© has a multi-brand strategy with over 2000 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.
How do I know which brand strategy to choose?
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 quite different audiences, right? It’s not likely that the same target customer will be 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 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 distinct 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 rebranded Porsche as a posh Volkswagen, sales would most likely plummet. The Porsche customers don’t see themselves as Volkswagen drivers.
Examples of Multi-Brand Companies
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)Â – “P&G products have made a name for themselves by combining âwhat’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.
UnileverÂ – “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 while others are separate. For example, a company can make several types of shampoo, take up more shelf space at the grocery store, and beat the competition.
Let’s talk about some of the benefits and downsides of having a multi-brand strategy.
Multi-Brand Strategy Advantages
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 may 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 value and become more inclined to buy 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 types of shampoo on the shelf, there is less room for competing products. Consumers may not even realize that your company makes all 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 keeping tabs on your brand’s reputation and a crisis occurs, the other brands in your portfolio may not be affected. 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 which brands are part of the same family.
Multi-Brand Strategy Disadvantages
Keeping brands distinctly different – It can be difficult to keep all brands separate and have a strong identity for each one. If consumers view your brands as interchangeable, you are competing with yourself instead of attracting different consumer groups. Brands need to put more effort into creating and advocating for brand guidelines internally, since a weak brand identity can cause friction within the company.
Loss of credibility – If consumers see a brand and decide they don’t want to purchase products from them anymore, this will negatively impact sales.
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 Growth-Share Matrix (BCG Matrix)
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:
- Cash cows are brands with high market share in a slow-growing industry. These brands typically generate cash in excess of the amount of cash needed to maintain the business. They are regarded as staid and boring, in a “mature” market, yet corporations value owning them due to their cash-generating qualities. They are to be “milked” continuously with as little investment as possible, since such investment would be wasted in an industry with low growth. An example of such a company would be a top brand in a stable industry such as banking or oil.
- Dogs are brands with low market share in a mature, slow-growing industry. These brands or products typically “break even”, generating barely enough revenue to maintain the business’s market share. Owning a break-even unit provides the social benefit of providing jobs and possible synergies that assist other business units. They also provide stability.
- Question marks are brands operating with a low market share in a high-growth market. They are a starting point for most businesses. Question marks have a potential to gain market share and become stars, and eventually cash cows when market growth slows. This could be any new company in tech/AI/IoT for example.
- Stars are units with a high market share in a fast-growing industry. They are usually question marks all grown up with a market- or niche-leading trajectory. An example of such a brand is Amazon.
Bringing it all together
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:
- stars whose high share and high growth assure the future;
- cash cows that supply funds for that future growth; and
- question marks to be converted into stars with the added funds.
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.
Does a multi-brand strategy make sense for you?
The examples we mentioned are all massive corporations with resources to develop new brands. If you’re launching your business, focus on developing a strong brand identity first.Â Your next step should be to build trust with your audience, and then 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:
- Why are you in business?
- Who is your target audience?
- How are you going to solve your customer’s problems?
- What makes your brand stand out from the competition?
Weigh your options before you decide to take on a multi-brand strategy.
If you already have a brand that people know and trust, there is excellent potential to expand with 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.