Sub-Branding: How Many Brands Do You Need To Get A Profitable Return?

What happens when a successful brand fails to impact within a new market or market segment? When despite best efforts, the brand cannot make itself relevant to a new market? Is introducing a sub-brand the answer?

There are instances when sub-brands hold the key to expanding market share and broadening profit opportunities. However, sub-branding also runs the risk of jeopardizing the strength of the parent brand if implemented without due diligence and careful analysis.

Effective Sub-Branding Strategies

1. Entering Markets That Are Closed To The Parent Brand

Air Canada recently launched Rouge, a low-cost sub-brand airline created as a means to serve new market destinations that the existing model could not serve on a competitive basis. Air Canada’s original brand value structure would be compromised if the parent brand cut their prices and changed the quality of their value proposition. Rouge aims to be a proactive manoeuvre by the brand against new low cost carriers operating within Canada.

Disney releases Certified 18 movies under their Touchstone brand as doing so under the Disney name would be incongruent with the Disney brand identity and what it stands for; magic, fun, wholesome family experiences full of happy memories and happy endings!

2. Satisfying Segmented Customer Needs

Hoteliers segment their market by brand type and frequently introduce meaningful sub brands to serve new customer needs and enter new markets. By separating the hotels into sub-brands, Hoteliers can highlight the different value bundles offered under each brand. It provides clear distinction for the customers on the level of service to be expected from each sub-brand, providing an obvious choice for the business or luxury customer versus the family on a budget.

3. Industry Norms

Sub-brands are part of the culture of some industries. Car manufacturers frequently release cars under sub-brands. This is particularly effective when each sub-brand has a particular focus and value proposition that does not overlap with other sub-brands within the family. Toyota’s Prius has a very definite brand identity and serves a focused target market. It allowed Toyota to create a leading position within the environmentally conscious market segment and made the Toyota brand more relevant with that customer group.

Sub-Branding Risks

Sub-brands have been known to help companies thrive, capturing new market segments and introducing a parent brand to a wider audience. However sub-branding can come at a cost too.

1. Reduced Impact of Parent Brand

Establishing and marketing a sub-brand demands a considerable investment of capital and resources. In most cases sub-brands move resources away from the core brand, risking potential sales of the parent brand itself. The success of the Coors Light beer came at the expense of a loss in market share of the parent Coors brand due to the reduced marketing budget available to advertise Coors.

2. Create Competition

Sometimes sub-brands can invite competition within a sector, creating obstacles that previously did not exist. American Express had established itself as the premium brand within the credit card market. Then it decided to introduce sub-brands: the American Express Gold Card and American Express Platinum. Suddenly it opened up the opportunity for competitors to launch their own products aimed at the high-end customer, forcing American Express to fight for its premium position.

3. Over Stretch Marketing Resources

As with any strategy, introducing a sub brand offers both pros and cons. The general consensus is that companies should operate with as few brands as possible to maximize the impact of limited marketing resources.

Marketing will appear weak and ineffective if it is spread too thinly. Economies of brand, strategic focus and clear efficient internal operations can often give the parent brand the support it needs rather than employing a sub-brand strategy.

While sub-brands can help to upscale or downscale a brand offering, without clear differentiation a sub-brand can cause real confusion with customers as to the value proposition and unique offering of each sub-brand.

Remember, if your core brand is failing to make an impact within a market there are other strategies that may serve your corporate goals. Identifying the possibilities at hand such as expanding core values, evolving the brand structure or reinterpreting existing brand values could have the desired effect and impact with your target customers. 

Before you explore developing sub-brands ask yourself this: how many brands do you need to get the job done?