A company may use one name for all its product capitalizing on its brand equity and the favorable perception that the consumers have for it (i.e., the company’s trade name and brand name are the same, as it is for Sony, GE, and Microsoft). This strategy allows for product-line extensions, or the use of an existing brand name to enter new market segments in the same product class. Line extensions work best if they take business away from the competition (i.e., incremental business) and do not cannibalize the company’s existing sales.
An important decision companies must make is under which brand a new offering will be marketed. For example, Black & Decker makes power tools for consumers under its Black & Decker brand, while tools for more serious do-it-yourselfers and professionals are under its DeWalt brand. If Black & Decker decided to add to its DeWalt line new products such as coolers, portable radios, CD players, and other accessories construction professionals might find useful at a job site, the company would be creating a brand extension, which involves using an existing brand name or brand mark for a new product category.
Why would Black & Decker add these accessories to the DeWalt line? If the company did, it would be because DeWalt already has a good reputation for high-quality, long-lasting durability and performance among construction professionals. These same professionals would trust the DeWalt brand to deliver.
When they’re branding a new offering, firms have to consider the degree of cannibalization that can occur across products. Cannibalization occurs when a firm’s new offering eats into the sales of one of its older offerings; ideally, when you sell a new product, you hope that all of its sales come from your competitors’ buyers or buyers that are new to the market. A completely new offering will not result in cannibalization, whereas a line extension likely will. A brand extension will also result in some cannibalization if you sell similar products under another brand. For example, if Black & Decker already had an existing line of coolers, portable radios, and CD players when the DeWalt line was launched, the new DeWalt offerings might cannibalize some of the Black & Decker offerings.
However, some marketers argue that cannibalization can be a good thing because it is a sign that a company is developing new and better offerings. These people believe that if you don’t cannibalize your own line, then your competitors will.
Other companies engage in sub-branding, or combining the corporate brand with another brand (e.g., Lamborghini Murcielago or Porsche Boxter). On the other hand, a brand extension capitalizes on a strong brand equity and involves the use of an existing brand name to enter a totally different product class (e.g., Suzuki motorcycles extending its name to cars and outboard motors). However, too many uses of a brand name may dilute its meaning to the consumers as has happened with Arm & Hammer’s brand that has been used for toothpaste, detergent, cat litter, baking soda, carpet deodorizer, deodorant, and air freshener (Kerin & Hartley, 2017, p. 308).
With multibranding strategy, the company gives a distinct name to each product. This is a useful strategy when each brand is intended for a different market segment. For example, P&G markets its flagship detergent under the Ariel brand, while Tide is the low-tier brand. In the United States, Tide is the flagship detergent. This strategy involves higher promotion and advertising costs compared to the multiproduct branding strategy; however, since each brand is unique to its market, there is no risk that failure of one brand will impact the other brands in the line (Kerin & Hartley, 2017).
With a private branding strategy, a company manufactures products but sells them under the brand name of a retailer (e.g., Rayovac produces batteries for retailers such as Walmart and Kroger). This is a highly profitable business for both sides, and about 20 percent of all products sold in drugstores and supermarkets bear a private label (Kerin & Hartley, 2017).
Using a mixed branding strategy, companies market products under their own brand and under private labels and sell in different market segments (Kerin & Hartley, 2017).
Kerin, R. & Hartley, S. (2017). Marketing (13th ed.). New York, NY: McGraw Hill.
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