Brand Proliferation and the other strategies

by Sree Rama Rao on May 11, 2008

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 brought in with new brand names. In other words, the firm has several brands in the same product/product category. It means that the list of independent brands swells up. For instance, Unilever has more than 25 brands of ice creams and P&G has more than a dozen brands of detergents.

Brand proliferation can help expand the market as well as the company’s market share in the category. It can also increase the company’s clout at the retail level by offering variety. New brands also generate excitement of the sales team of the company at the same time, however, there are also many pitfalls in brand proliferation. More brands from a company’s stable enhance competition in the market. It also paves the way for the company’s brands to compete among themselves, a phenomenon known as brand cannibalization.

In particular, when a firm introduces a number of brands in the same product line with an amount of parity among them, the danger of cannibalization is high; the share of individual brands can come down. Another disadvantage is that the company may dissipate 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 minimizing cannibalization. If different brands are designed to deliver different benefits to different segments of markets, it can restrict competition among brands. To avoid cannibalization completely is often impossible. It is not essential either, but one has to be sure whether a net incremental benefit that justifies the additional cost and complexity accrues by adding one more brand.

A good marketing strategy strikes a fine balance so that too many brands do not result in brand cannibalization and erosion of profits. For instance, HLL manages it well. It enjoys a 70 percent share of the four lakh tons personal wash market, and 30 per cent share of the 20 Lakh tons fabric wash market. It resorts to both brand extensions and brand proliferation in a balanced manner in these categories. HLL finds that both strategies are required to fight competition; they have to be blended appropriately.

Brand Development through Acquisition/Takeover:

One major in brand development is that it is a long drawn out time consuming task. Companies in the thick of competition and the compulsions of growth often do not have that kind of indefinite time disposal. They can command the resources, but they cannot wait. They find takeover/acquisition/buyout of ongoing brands as an easy way out. And just as there are buyers, there are sellers of brands, because the latter are either exiting the business, or contracting their portfolio or sometimes they just cannot maintain their brand anymore due to changing competitive realities.

Examples of Brand Acquisition:

Pepsi acquire Duke’s: While entering India, Pepsi wanted to enlarge its brand portfolio and to ensure it without much gestation it went in for out of some on going 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.

Godrej acquires Good Knight: When Godrej acquired Transelekta, the company that revolutionized the Indian home insecticides market with many successful brands like Good Knight, Hit, Jet and Banish, it was essentially a case of acquisition of brands. The acquisition was part of Godrej’s long term strategy to become a substantial player in the growing home clean product market. It needed brands in the category.





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