Second brand strategy

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Question - are 'second brands' always price-fighting brands?

Answer - they can actually be premium brands, or brands that are simply so different from the main brand as to require separate articulation

Key Points

A second brand strategy is where a company with an existing brand (or brands) finds another segment of the market to address with a different brand proposition.

At least, this should be what happens. In practice, it is often when an existing premium brand owner decides to discount its values into a second brand in order to penetrate a larger share of the market.

However, the second brand need not be a discounted brand. Nestlé launched its Gold Blend® brand at a premium to its Nescafé® brand. Johnny Walker’s Black Label is at a premium to Red Label. Concorde was at a premium to British Airways.

Given that brand marketing companies tend to own many brands in the same sector, there is often a carefully segmented hierarchy of brands, from Ford’s Premier Brand Group (Jaguar, Aston Martin, Volvo etc.) to Ford Mondeo; from Six Continents’ Garden Court to the Holiday Inn Express.

Key do’s:

1. Have a differentiated compelling brand proposition that you can uniquely deliver

2. Address a market segment that is profitable
3. Use a different sales and marketing team as a guardian for the different brand proposition
4. If you are undercutting your existing premium brand(s), find the magic operational formula that will deliver the brand proposition more cheaply

Key don’ts:

1. Simply discount your existing premium brand, as “premium brand, but cheaper”
2. Use the same sales and marketing team
3. Apply your existing overhead costs to the new brand

In more detail.....

Multi-brand strategies

Many, if not most, brand owners run several brands in tandem. These can be:

• Different brands into different product categories – e.g. chocolate bars and tooth paste
• A carefully defined hierarchy of brands – see, for instance the hotel chains Six Continents and Accor. Car companies work the same way – BMW 3 vs. 5 vs. 7 series; Ford Premier Brands Group vs. the main Ford brand; VW vs. Skoda

• A move upmarket – Gold Blend vs. Nescafé; Johnny Walker’s Black Label vs. Red Label

• A move towards the mass market – Hilton International vs. Hilton National; Sony vs. Aiwa; BA vs. Go and KLM vs. Buzz (before they were both sold); Mercedes E vs. A class
• A proliferation of brands – each time you develop a new product technology, you create a new brand name. This is less a brand strategy than a brand pile-up

Second brand strategies

• Offensive – by successfully launching new brands into the same market space, albeit targeted at different customer segments, you force your competitors out of the market. This is the opposite of the classic Japanese strategy of launching into a niche-of-a-niche and expanding out. Here you are expanding into the niches, and driving competitors out of the market
• Defensive – when it became clear that the easyJet low cost strategy would work, other airlines had to respond. BA launched Go as a second brand in order to directly confront easyJet, but BA did not know how to run a cheap airline. KLM followed the same strategy with Buzz, to the same effect. Go now belongs to easyJet (and is fazing out the Go brand name), and Buzz has been acquired by Ryanair (who are killing the Buzz brand). British Midland took the whole company into the price-competitive section of the market, recognizing that there is no middle ground between the low cost airlines and the premium positioning. BA itself is offering competitively cheap flights, so long as they are booked sufficiently in advance, under the BA brand. The lesson appears to be that defensive second branding does not work; there has to be a clearly thought out strategy, as with Levis and Dockers
• Opportunity-led – this is the strategy whereby second brands are launched or acquired because there is a realistic opportunity for them in the market place. IKEA can co-exist with Habitat. Hotel chains work well in brand hierarchies. Fanta would not benefit from being called Coke

How to set up a second brand

Done correctly, setting up a second brand should be identical to setting up a first brand. There needs to be:

1. A profitable business model (so that it does not matter which brand gets the business)
2. A clearly differentiated and compelling brand proposition
3. A precise target customer segmentation
4. A determined delivery of the brand proposition in the market
5. A strategy of brand protection and exploitation

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