Walk into a stationery shop and you may find Nataraj and Apsara sitting next to each other. Different names, different packaging and different brand identities make them look like competitors. But both belong to Hindustan Pencils.
This raises an interesting business question: why would a company create two brands that compete in the same market? The answer is simple: one brand cannot always appeal equally well to every type of customer. Sometimes, competing with yourself is better than leaving that market space for someone else.
Companies do not always have to fight competitors directly. Instead, they can identify another customer segment, price range or market position where there is an opportunity. This approach is known as a flanking strategy.
A company can use a different brand to enter that space without disturbing the position of its existing brand. It allows the business to reach new customers while keeping the original brand focused on what it already does well.
Every successful brand creates a certain image in the customer's mind. It may be seen as affordable, premium, youthful, traditional or professional. Once this image becomes strong, changing it is difficult.
Toyota and Lexus are a good example. Toyota had already built a strong reputation in the mass automobile market. Instead of stretching the Toyota name into the luxury segment, the company created Lexus with its own premium identity. The company could then serve two different markets without confusing what each brand stood for.
Brand architecture is simply the way a company organises and connects the different brands it owns.
In a Branded House, one main brand is used across several products or businesses. Virgin is a familiar example. In a House of Brands, the company owns several brands that have their own identities. P&G, for example, owns Ariel, Tide, Pampers, Gillette and Head & Shoulders.
There are also sub-brands and endorsed brands, where the parent or master brand remains visible to different degrees. The right model depends on the company's customers, products and long-term plans.
A House of Brands can give a company the freedom to target very different customers. Volkswagen Group, for example, owns Volkswagen, Škoda, Audi, Porsche and Lamborghini. These brands operate at different price points and carry different images, even though some of their customers may overlap.
P&G also owns Ariel and Tide, two brands operating in laundry care. To customers, such brands may appear to compete. For the company, they help capture different parts of the same market.
When two brands owned by the same company compete for similar customers, one may take some sales from the other. This is called cannibalisation.
But cannibalisation is not always bad. If customers move from one of your brands to another brand you also own, they are still within your business. The bigger concern is whether the second brand brings enough new customers or market share to justify the cost of maintaining it.
Creating a new brand is not automatically a growth strategy. Every brand needs its own positioning, identity, marketing, distribution, trademark protection and long-term investment.
Large companies may have the resources to manage many brands, but smaller businesses need to be more careful. Without a clear strategy, creating multiple brands can result in several weak brands instead of one strong brand.
Entrepreneurs often start a new product or business by asking, "What should we name it?" But there is a more important question that should come first: "Do we actually need a new brand?"
Should the new offering use the existing brand, become a sub-brand, carry an endorsement or have a completely independent identity? This decision should ideally be made before choosing the name, designing the logo or filing the trademark.
The lesson from Nataraj and Apsara, Toyota and Lexus, and the large brand portfolios of companies such as P&G is clear: good brand strategy is not about putting the same name on everything, nor is it about creating as many brands as possible. It is about giving each brand a clear role and a clear position in the market.
Sometimes, the smartest competitor for your successful brand may be another brand you own.
(The author is a business and brand consultant and a registered trade marks agent)
