Wednesday, March 23, 2011

Parent Company's Dilemma: Associating a new brand with an established one

While coming up with a new product, parent companies of successful brands often face a common dilemma- How to associate the new brand ( let us say, B) with the established strong brand ( let us say, A) even while keeping the strong brand separate from the new one?  

Essentially what the company wants is to associate the new product with the established one, without modifying the branding of the latter. What parent company is trying to achieve is to position product B as a product extension of A (most common example of product extension: Coke and Diet Coke. The latter takes the branding of the former, without changing former's brand equity).

To make this association, first the brand manager must look at the points-of-parity and points-of-differentiation between A and B. The manager probably will be able to identify one of the following three relationships between products A and B.

1.   Product B can either be marketed as one, which complements usage of A for specific purposes. Example: Colgate toothpastes (Product A) and Colgate Peroxyls ( cleans canker sores) or other Colgate OTCs ( these are products B). They complete the suite of oral care.
2.   Product B can act as a substitute for same usage occasion, but for different tiers of customers. Example: Jet Lite (budget airlines owned by Jet airways India) and Jet airways. Jet has an amazing reputation as a full service airline at domestic Indian market and they share the stardust with JetLite (though different website and all).
3.   The value of product A can easily get transferred to B. That is, customers feel whoever does a good job of making product A should be doing a good job of making product B.  Example: Samsung does a good job of making cellphone; hence Samsung will do a good job of making tablets.


4 comments:

  1. Thats a nice post!
    I specially like the diet coke and JetLite example. Though there is threat of cannibalization - people can move from diet to diet coke and from Jet Airways to Jet Lite but its a case where product A is giving some other features in form of product B and I think that is the right growth strategy - cannibalization will happen but net $s will be increase!

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  2. Great comment, Rajat! Cannibalization is definitely an issue.

    But I think as long as a company is keeping the loyal customers within the brand portfolio and expanding the market ( for example, consumers who would not have drunk soft drinks now purchasing Diet Coke), they will be doing okay!

    I will be super ineterested to know if someone has any further insight!

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  3. Subhra,

    You may also think about the example of sub-brands Toyota has created from its main brand. Lexus and Scion. For two different economic brands of the market, sold through entirely different showrooms. But in either case, there was a value proposition in these brands. Lexus for luxury sedan, and Scion for lower end cars.

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  4. Thanks Awaz for the comment!

    Yes, Toyota , Scion and Lexus are VERY interesting studies in branding ( and extensions). From what I know, Toyota did not want to associate the brand Toyota with Lexus/ Scion. These cars even do not sport the parent Toyota logo. So, Toyota wanted to take the advantage of their own expertise/ skills to build the product in the backend, but did not want to bring that association with brand Toyota in the customer facing sides of the business.

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