On this episode of Dear Strategy, we analyze the practice of offering the same basic product across several different brands – especially when some of those brands are positioned as premium and some are – well – not! Is this a good strategy for companies to take, or is it something that will eventually backfire on them?
Last year, I needed to buy a new oven. I had a favorite brand in mind based on a previous appliance that I had owned, so I went to my local dealer feeling pretty sure that I had already narrowed down the field. But my confidence dissipated quickly once the salesperson informed me that my favorite Brand X had been acquired by Company Y, who also owned Brands A through C; which also apparently meant that Brand X was no longer the same Brand X that I had come to know and love. Sure enough, further research confirmed that, under the hood, many of the brands that this company owned were effectively the same, regardless of how they were marketed. And so I ended up going with another brand altogether.
This practice of marketing multiple products under different brands is far from new, and has been utilized in industries ranging from consumer products, to food and beverage, to appliances, to automobiles, and even to industrial equipment. The idea, of course, is that different people have loyalties to different brands. So if a company can market one product under multiple labels, they should be able to increase their market coverage while simultaneously decreasing their product costs. And, if everything aligns, everybody wins – the customers get their brands, the companies get their customers, and everybody lives happily ever after.
So, at least on the surface, that sounds like a pretty good strategy. So what, then, is the point of this story?
Let’s say I have two brands in my portfolio. And let’s also say that those brands are equivalently positioned in the marketplace as being premium-level brands. As long as the product quality matches my market positioning for both of those brands; and as long as customers don’t mind buying a product that is also being sold under other brand names (usually with slight differences in design, aesthetics, etc.); then everything should align and, yes, the strategy should hold.
But in my story, I actually ended up going the other way. Once I found out that my favorite brand was now sharing components with a different brand that I wasn’t nearly as fond of, I decided to look elsewhere. And the reason, of course, is that I didn’t trust the reputation of that other brand. Why? Because that other brand wasn’t positioned in the marketplace at the same level as the brand that I already knew and loved. And therein lies the rub. When a company tries to market the same product or (as it was in my case) even similar products under two brands that are positioned differently in the marketplace, that’s when things start to go bad. In those cases, consumers may feel like they’re being deceived – either because they’re paying a high price for a low-quality product, or because they’re paying a high price for a product that they could have paid less for if they’d just purchased the lower-priced brand. Either way, that sort of strategy is usually driven from an operational point of view and, at least in my experience, it rarely works well as a marketing strategy over the long run.
So my advice here would be to make sure your operational strategy matches your marketing strategy. Premium brands need to be protected with premium quality products that aren’t shared with lower quality brands. It’s as simple as that.
And here’s something that’s even simpler – if you don’t want a customer to know what you’re doing under the hood, then you’re probably doing the wrong thing. Because they’re almost always going to figure it out in the end.
Listen to the podcast episode
Dear Strategy: Episode 125
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Bob Caporale is the founder of Strategy Generation Company, the author of Creative Strategy Generation and the host of the Dear Strategy podcast. You can learn more about his work by visiting bobcaporale.com.