some indications so as to follow more than just your intuition.
This is a typical problem in strategic marketing for the big luxury groups and just this month on the Italian edition of the Harvard Business Review it is dealt with comparing the performances of who has chosen the mono-brand way (e.g. Giorgio Armani.) and of those who have chosen to create a group with a multitude of Brands (e.g. Gucci Group).
The dilemma though is not just pointed out for the big groups, it is not just a problem of the Luxury world, and good Darwin’s phrase cited in this article can easily be applied to all types of enterprises: «It is not the strongest of the species that survives, nor the most intelligent, but the most responsive to change».
Which of the two brand strategies allows more possibilities for you to adapt to change, which gives you the possibility to govern the market trends, before these govern you?
Let’s try to make some comparisons.
Having more brands available allows you to better exploit the market segmentation, not always a sole brand is capable of adapting to several market segments without contradicting itself.
If your goal is to conquer segments that are appealing to you, but apparently antithetical, a portfolio logic on more brands, guarantees you a better adaptation to the characteristics of the segment without compromising your positioning on the others.
But more brands mean even advertising campaigns for each brand, management and investments dedicated to each and therefore in fact a loss of savings in branding and in the enterprise management.
On the other hand it allows you for example to maintain a solid positioning on your traditional and consolidated market with your classic brand and attack the new and most risky markets with other brands without compromising the former. In a nutshell a bit like it is for the management of financial investments, the portfolio logic allows you to adjust the risk putting side by side the most risky products with the safest ones.
In the last 7 years of consulting I have come across several mono-brand enterprises, but also very many multi-brand ones, I do not think it is possible to state that one or the other is the most favourable condition, as I have said, it depends a lot on the strategy of the enterprise and on its goals. The effects of similar branding strategies, in any case, cannot be evaluated in a short and medium term period, but they must be observed in the long run period.
Most of the times I have dealt with an enterprise that had more than one brand, it was due to a series of passed acquisitions and not due to the strategy of multi-brand organic growth.
On the other hand for the mono-brand enterprises I have always observed a great inclination to the brand extension so as to conquer new markets or to launch new product classes more than for the hypothesis of creating new brands. Almost always for the fear of costs and for the natural friction in the abandonment of one’s own classical brand.
My advise has always been to analyse in detail the advantages and disadvantages of the two strategies, because very often what initially can seem costly, in the long run, results to be more effective and less expensive.
I remember a service enterprise, leader in the SMEs sector; it had created a new innovative product in order to break into a sector that was extremely seductive for it, the banking market. It had all it took to make it, but the management did not want in any way to stray from the traditional branding and from its family feeling, we tried to show that a new brand would guarantee further success possibility and I presented examples of every kind, even in other sectors of public domain (from Microsoft with XBOX, to the VW group with Audi...). In the end they decided to work with the classical brand.
After a few years, the Managing Director confessed to me that it was a mistake. Today that product has a new brand.
Ing. Simone Lovati
Strategic marketing consultant and president
ADVBOUCLE & PARTNERS