WHY DO FIRMS DELETE BRANDS?

To tackle the ever increasing competition sometimes it becomes necessary to introduce a

new brand under already existing brand portfolio. Which raises the question what is brand
portfolio and why it is important to manage the different brand lines efficiently in
oligopolistic market scenario where the market is highly competitive.
Brand portfolio:
Brand portfolio is nothing but the summation of brands a company handles or simply put
together it is the number of brands under an umbrella company. As a company can produce
or manufacture different kind of products, let say from stationery to food to equipment’s or
machine tools or it also could be software services and now a day some software companies
are also looking forward to grow their business in making electrical equipment ex-wipro.
Product lines:
Suppose a company produce four kinds of goods for which they maintain 4 brands in the
market which are sufficiently well managed and reputed too. Then we will say the company
has 4 product lines.
Length, Depth and width of the product portfolio or frontier:
Suppose in the same company under discussion has 4 products under brand A, 3 products
under brand B and 5 products under brand C the we can claim the company’s product line
length is 12.
Now the width of the company’s portfolio is 4 as they are handling 4 types of brands. And
finally the width of the brand portfolio or total product line is 5 as under one brand the
highest number of products are 5.
Why so many brands?
Suppose a company has been producing detergents in a particular market may it be
nationwide or they have done a particular geographic segmentation or psychographic
segmentation or demographic segmentation. again they must have done targeting before
launching the already existing brand. now we may assume that the market is becoming
highly competitive and the particular brand we are talking about was predominantly serving
the high profile or upper class people of the society. Now this statement has several
repercussions as to which it means the essence of the targeting.
Targeting and segmentation
As discussed earlier they have already done the targeting psychographic and particularly
focused on upper level people in the market. which means they were providing high quality
material while manufacturing and also they were putting lot of money and efforts in
research and development while manufacturing and distributing the product.
The oligopolistic market scenario
Normally it is becoming an oligopolistic market provided curtail or group of companies are
not formed to intentionally increase the price. In this market in cost of entry is less but in
some cases as research and e=development cost is high entry cost and also in some case exit
cost is also high
Commoditization and price war
For normal goods having brand elasticity less than 1 if the completion in the market become
very intense the everyone tends lower the market price so as to sell more quantity. Now
arise the question what if it is a curtail like OPEC (organization of petroleum’s exporting
countries)?
Role of third party distributor and reseller
Then the answer would be there must be regulatory board to keep the price in check and
balance. As the competition increases and provided the product is abundant in market so
that it is easily available to procure and does not require much manufacturing processing
which means it could be easily produced and delivered to the retailer, promoter the third
party distributor then the product becomes a commodity and no longer attracts premium
charge
Premium charging concept
In our case the company under discussion has 4 brands under its portfolio having brand
depth of 5 and brands width 0f 4. Now as this company was providing service to the upper
society people their product Was also of good quality. Now as people are acquainted with
this good brand they have chosen this quality well we can tell this particular brand as their
most often used brand or normally known as MOUB. Now the company can charge premium
or higher price as they have established the brand.
Where the necessity occurs?
Now in our case the company under discussion have been doing good business in the
marketplace. They only targeted the upper class people or in some cases the upper middle
class people who can afford to purchase the premium charged detergent which promised to
keep their clothes as new as possible with their colour intact.
Competitive marketplace
Now in the marketplace as the competition arises the market share of the company under
discussion decreases. Their revenue slides down the chief financial officer(CFO) the chief
executive officer(CEO) and the branding strategist are under pressure as to what should be
the strategy to tackle this kind of mammoth competition
Change in strategy
The company thought of changing their strategy.
1. First they want to diversify their business as to get more foot on the road.
Sometimes there are places and people untapped by the existing strategy and distribution
system. So to increase the market share more people should buy this product which will
come from the following strategy
a. They have to find new uses of the product, so that people can use their product not
only on existing uses but also on other things
b. they have to ask people for using the product again and again it’s like the same users
are acting as multiplier and the revenue growth takes place although the number
people using the brand has not increase
The low awareness problem
Sometime it is very much possible that the company has not effective campaign and people
rather than the already existing people has not really bothered about this advertisement as
the price is very high or may be the company did not advertise at all with the level that other
competitors are doing this in the market place. Now the company thinks of extending its
reach to other category of people also.
Change in manufacturing strategy
Now the company under discussion as intended to provide services or extending their reach
to middle class as well lower idle class also has to make change in the manufacturing process
and somewhat lower quality raw material has to be used to qualify for the same
Distribution strategy
The company was previously suppling for the metropolitan cities not as some middle class
people also resides in rural and semi urban areas those areas has also to be brought under
reach for the strategy to be successful. More rural and semi urban areas has to be covered
and distribution of this new product has to take place which calls for lots incentive or free
sample distribution also.
Extending the reach
Expanding the market share means more footfall in the market place more areas to cover
and lower middle class and upper lower class has to be serviced for.by doing so if the
product is launched under same brand then following problem arises
1. People already buying the particular brand under discussion can move away to
another brand has brand become diluted
2. 2.as brand value become diluted instead of the original intention of increasing
market share the market share decreases
3. 3.the brand loyalty no longer remains intact as people gets confused as the focus of
the company or the positioning in the minds of the consumer becomes invalid
There arises the necessity of introducing new brands.
Suppose a company was involved in manufacturing a particular product let’s say pens now
the company is thinking of diversifying the business want to produce cigarettes and shoes.
Now although these business are not their DNA or they are not expert on these they
decided to venture their capital into this now it will be foolish to launch these products
under same brand as in that case
a. They brand image will be diluted and the original buyer will be lost rather than
attracting new customers
b. By introducing new bran one god thing can happen that negative brand
cannibalisation will not take place
c. It is not necessarily that company has to let know everyone about the main brand
umbrella if it is kept secret then while introducing low priced product and low
inferior quality product also all the band can sustainable growth successfully.
The negative impact
Expanding the already existing brand portfolio the create a heavily dense portfolio although
in an extent lead to short time success but many companies fail to manage these portfolios.
1. As they tend to internationalize their company some operation in 30 or 45 countries
may lead to generation of more than hundred brand
2. These enormous size of operation requires huge no of offices and product and brand
mangers
3. The coordination between the various offices become difficult
4. Thus it leads to loss of revenue and less information sharing
To avoid these difficulties in operation and maintain standard worldwide the companies tend
to curtail their brand s and tend to maintain minimum or optimum number of brands.