Brand Conscious: Does brand proliferation lead brand cannibalisation?

Published: January 13, 2020 12:42 AM

Each brand requires a different treatment, each brand is a unique identity, and each brand needs unique handling; the very dynamism of product proliferation makes it hard to manage the brand.

However, it can also lead to money-spinning because of too many products, efforts and economic resources being wasted. However, it can also lead to money-spinning because of too many products, efforts and economic resources being wasted.

By Vidya Hattangadi 

Branding is a complex process. It is a tough job for any marketer to personify a product or a service into an image, that is either liked or not liked.

Marketers keep juggling with branding strategies. To introduce one new product and build a brand out of it is a very intimidating task. To have a plethora of brands in the portfolio can suffocate the basket of products. This concept of launching and managing a plethora of brands by one company is considered as Brand Proliferation.Brand proliferation is the opposite of brand extension. While in brand extension, new items are added using an existing brand name and several products are offered under the same brand name, in brand proliferation, more items are added to the product line with different brand names. In other words, the firm has several brands in the same product line or product category. It means that the list of independent brands increases. For instance, HUL has more than 20 brands of soaps; this produces diversity for the firm, enables it to capture its sizable portion into various market segments. However, it can also lead to money-spinning because of too many products, efforts and economic resources being wasted. Consumers get confused and make mistakes while purchasing products.

Each brand requires a different treatment, each brand is a unique identity, and each brand needs unique handling; the very dynamism of product proliferation makes it hard to manage the brand. Complexities multiply by an ever-changing landscape of customers who demand and companies’ attempts to meet that demand with the formation of products and more product variations. Brand proliferation also leads to brand cannibalisation—each brand eating into the market share of another product from the same basket.ITC’s soap portfolio consists of a product line with Essenza Di Wills at the top end, followed by Fiama Di Wills in the premium segment, Vivel in mid-segment and Superia at the entry-level. ITC seems to have segmented the market fittingly and has different products to cater to different segments. Moreover, Vivel is targeting young consumers who are ready to flirt with new brands.

On the negative side, when a firm introduces several brands in the same product line with an amount of parity among them, the danger of cannibalisation is high; the share of individual brands can come down because of sibling brands. Another disadvantage is that the company may dispel its resources over several brands, which may not guarantee proportionate returns, nurturing just a few brands to a highly profitable level often proves to be a wiser option.Having brands with distinctive positioning is, strategically, the best way of minimising cannibalisation. If different brands are designed to deliver different benefits to different segments of markets, it can restrict competition among brands. To avoid cannibalisation entirely is often impossible. It is not essential either, but one has to be sure whether a net incremental benefit that justifies the additional cost, also, complexity accrues by adding one more brand. When differentiation is not sensibly done the entire strategy can retort back.

Companies in their struggle to compete with other brands and the compulsions of growth often do not have kind of definite time at their disposal and time is the essence. They find takeover, acquisition and buyout of ongoing brands as an easy way out. For example, while entering India, Pepsi wanted to enlarge its brand portfolio and to ensure it without much gestation, it went in for out of some ongoing brands. Pepsi acquired the 105-year-old Duke’s and gained two powerful brands, Duke’s Soda and Mangola overnight. It gained a strong position in the Mumbai market which has dominated traditionally by Duke in the relevant categories. Similarly, Godrej acquired Transelectra, the company which revolutionised the Indian home insecticides market with many successful brands like Good Knight, Hit, Jet and Banish; it is an excellent example of acquisition of brands. The acquisition was part of Godrej’s long-term strategy to become a substantial player in the growing home insecticides product market.

It is worth noting that most organisations do not go into the depth of examining their brand portfolios from time to time: this examination is essential to check if they are prone to sell too many brands, identify the weaker brands, and discontinue the loss-making brands or the unprofitable ones. When organisations tend to ignore loss-making brands and merge them with healthy brands instead of selling them off, or drop them, they choke the healthy brands. Furthermore, the startling truth is that most brands don’t make money for companies. The 80-20 thumb rule is a reality that organisations make 80% of profits from 20% of their products from a small number of brands. Unilever had 1,600 brands in its portfolio in 1999, its business spread over in some 150 countries. More than 90% of its profits came from 400 brands. Most of the other 1,200 brands made losses, or they earned marginal profits.

Another example is Nestlé. In 1996 it marketed more than 8,000 brands in 190 countries, 55 were global brands, 140-odd were regional brands, and the remaining 7,800 or so were local brands. The bulk of the company’s profits came from around 200 brands or 2.5% of the portfolio.

If only corporations realise that if they slot several brands into the same category, they incur hidden costs because multi-brand strategies and the decisions lead to a partial treatment to healthier brands. And, that brand proliferation strategy increases inter-brand rivalry.

The author is Management thinker and blogger

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