When a company sells products or services via several brands, it has a multi-brand strategy. Take Pendragon, for instance. You may not know the name, but you may well know CarStore, Evans Halshaw and Stratstone, its motor retail brands. Multiple brands enable a company to target different audiences, secure greater shelf space and grab more market share. Is multi-brand a smart approach? It can be, but it’s not for everyone.
We’re going to take a closer look at multi-brand strategy including some good (and not so good) examples. Get ready to discover the pros, the cons, the whos, the hows, the whys and the why nots.
Chances are, you’ve already used a product from a multi-brand purveyor today, although you may not know it. For example, there’s Kellogg’s – whose cereal sub-brands include Rice Krispies, Coco Pops, Cornflakes, Special K and many more. Then, there’s Reckitt Benckiser who own Calgon, Clearasil, Cillit Bang, Vanish, Veet, Harpic, Strepsils, Nurofen, Durex and Dettol. Grabbed a bar of chocolate today or fed your dog some Pedigree? You’ve touched base with Mars, another multi-brand monster.
From the examples we’ve given so far, you’ll see that there are two kinds of multi-brand companies: the ‘house of brands’ and the ‘branded house’. Pendragon, Reckitt and Mars fall into the first category, with a one parent company and a portfolio of independent brands that are unconnected. Kellogg’s falls into the latter, alongside companies such as easyJet, Virgin and DHL. These businesses leverage their name to sell a plethora of different products or services under one umbrella brand.
The benefits of a multi-brand strategy
So, why have all these companies chosen the multi-brand route? There are some very compelling reasons. Let’s check out some of the benefits.
Outflank the competition
Create seven types of shower gel, each with a different brand. Give them each a distinct identity to appeal to different customer segments. Whichever one a customer chooses, the same parent company benefits, although the customer isn’t aware of it. Even if the customer likes to brand hop, there’s a good chance they’ll be buying from the same parent company. Meanwhile, competitors are squeezed off the shelves and out of the market. Goodbye competition. Hello market domination.
Attract different customer segments
As the example above shows, selling multiple brands means an opportunity to attract multiple customer segments, from high-end, luxury lovers to thrifty, budget buyers. It’s more customers overall and more revenue – just ask the big airlines. Almost all of them now have a low cost carrier in addition to their existing mid-market brand: think Lufthansa and Eurowings; KLM and Transavia.
With multiple brands, the level of risk is reduced. If one brand has a crisis, the others aren’t affected and they can pull you through. With your eggs in several baskets, you can minimise the financial hit and maintain a positive reputation. For instance, when Covid hit, the airline industry tanked, but easyJet survived thanks to a big clutch of non-travel ‘easy’ businesses. easyJet’s expansion into everything from property to coffee machines to storage certainly paid off. (Yep, that’s why Sir Haji-Ioannou is an extremely rich modern business icon.)
Enter new markets and develop new income streams
Got a strong brand name? It can be your passport to profitable new markets and other income streams. Think Virgin. Although the company started in travel, it now has businesses spanning a dizzying range of products, sectors and services: wine, mobile, media – even space! Moral of the story? As Mr Branson might tell you (although perhaps not in these words), it pays to have your fingers in multiple pies.
Brand awareness and credibility
When your brands are everywhere, people know and trust them. Multi-brand strategies can raise visibility and help you build brand loyalty.
Reduced costs and economies of scale
Let’s get back to our seven brands of shower gel. Because you’re ordering raw ingredients in greater volumes, you can achieve economy of scale. Your production costs are lower and you can also optimise your workforce: seven different brands, but one centralised team. You can also use data and insights from your suite of brands and make them work for you. Cross-selling, up-selling and new product creation are all more likely to succeed when you’ve got the information to support your business ventures.
At the most fundamental level, multiple brands means more customers, more sales and therefore greater revenue. Sounds good, right? But before you start drawing up your new multi-brand marketing plan, there’s a few things to consider.
The disadvantages of a multi-brand strategy
Difficulty in keeping brands distinct
Multi-brand strategy only works when you carve out a distinct brand identity for each brand you own. If customers start to see them as interchangeable, you lose your advantage – you’re competing against yourself. To appeal to different consumer segments, all your brands must be distinct from one another. That can require a lot of time and effort from a marketing perspective… multiple brands mean multiple brand guidelines and branding, multiple marketing strategies and multiple campaigns. Which leads to another problem…
Let’s go back to our seven different brands of shower gel. How much will it cost to market each individual brand? How much will you need to spend on building distinct identities and breaking through the noise of competing campaigns? If you spread your marketing budget too thinly and spend less than competitors, customers will choose other, more prominent brands. Do the maths and make sure you’ve got the money before you take the decision to go full multi-brand.
Weak brand identities
If you don’t have the time, money or expertise to develop distinct brands, you’ll have internal problems on your hands. Your brands will start going head to head instead of targeting different customer segments. This kind of rivalry isn’t good for your organisation, or for sales. One solution is to use a cloud-based brand centre to help you establish clear brand identities and keep them separate.
The ‘top performer’ dilemma
In any stable of brands, there’s likely to be one that outperforms the rest. If it’s significantly more profitable, that raises some major financial questions. Is it really worthwhile pumping time and money into lower-performing products? Again, it’s time to pull out the calculator and make some tough decisions.
Contagious consumer rejection
This one is more a problem for the ‘branded house’ model. If consumers decide they don’t like one of your products or services, they may reject your brand completely. If the customer experience is not up to scratch, they may decide not to buy anything with your name on it and there will be a negative impact on sales and overall reputation. An umbrella brand can work for you – but it can also work against you.
High standards for new brands and products
Even if consumers like a branded house’s products or services, there can still be issues. New products may well be welcomed – but they will be held up to the benchmark the brand has set. If customers judge a new product to have fallen short of the brand’s usual quality standards, they may reject it and leave negative reviews. If you’re adding a new brand to your stable, make sure it lives up to expectations.
A company that’s got multi-brand right
Case study: Meta/Facebook
One company that appears to have multi-brand strategy down is Facebook, now known as Meta. In just under 20 years, it has become a multi-brand behemoth, rivalling other digital titans such as Google. Here’s its success story in a nutshell.
Back in 2004, there was just Facebook. A single, revolutionary app developed by Mark Zuckerberg. Fast forward to 2022 and Facebook is now Meta, with a whole stable of brands including Instagram, Messenger, WhatsApp, Oculus, Workplace, Portal, Calibra and the original Facebook. The benefits of buying and deploying multiple brands exist on several levels, but among the most important is expanding Meta’s market share and acquiring even more users. For example, by buying Instagram, Facebook “bought itself 30 million hipsters and all their wonderful hipster cool,” says Kashmir Hill, of Forbes magazine. Today, Meta reaches some 3.6 billion users – and that’s just via its social media and messaging apps. Not bad for an app that had a measly (in social media platform terms) million users, less than 20 years ago.
And one that got it wrong…
Case study: Centrica
Between 1998 and 2003, Centrica, the multinational energy company, attempted to diversify. It developed the Goldfish credit card and bought the AA and telecoms business, One.Tel. Centrica’s plan was to be ‘a brand that would take care of life’s dull necessities’, providing energy through Centrica and British Gas; finance through Goldfish; and telecoms through One.Tel. It envisaged big opportunities to cross-sell and to cut costs by combining facilities for the different brands, such as call centres. Unfortunately, things didn’t quite work out like that – because the British public just didn’t get it. Cross-selling didn’t work because customers preferred to shop around when it came to choosing providers for other services. By 2005, Centrica had off-loaded all of its acquisitions. It was multi-brand experiment that went badly wrong. A cautionary tale for companies whose ambition blinds them to the immutable facts of customer behaviour.
As you can see from the examples above, multi-brand strategies can be seriously big and complex. Get them right and there’s big wins to be had. Get them wrong and… *shudders*. One thing to remember is that each one is different and will depend on the family of brands involved. So, when it comes to advice, off the shelf is off the table. What you need is an expert who will understand your particular situation and offer guidance to suit. If you’d like some assistance from the people who’ve helped DHL and Pendragon to master their multi-brand strategies, give us a call. We’re always happy to help with any multi-brand issues.