It is interesting to note how organizations introduce brands and then dispense with them. The trigger for this thought was provided by HP's decision to consolidate most of its PC line around Vectra. Not that HP is the only organization to dispense with several of its brands. In the consumer goods sector, Godrej too has been looking at putting all its might behind just six or seven brands which make up for most of its revenue. The two situations are of course quite different.
Why does one introduce a new brand in the first place? The idea is to help differentiate your product and position it appropriately for a particular target segment. So you create separate messages for different people based on what you think will appeal to them. It helps you direct your energies to satisfy that target audience.
It was therefore a little unclear why HP should want to combine most of its PC brands under one umbrella. The fact is that the segments for which it had introduced those brands, which it now proposes to withdraw, do exist. Is it that it does not consider the volumes that it has been able to generate from those brands as good enough? By choosing to rally around Vectra, it is clearly passing a message that this original brand still happens to be its best bet. So what it is probably counting on is to retain its market share in the segment in which Vectra sells, and hopefully extend that same appeal to other segments.
Vectra has always been an up market brand. HP's new brands like Brio were obviously aimed at helping HP expand its presence to the more price conscious segment. Could there have been a problem in that approach? The FMCG sector is full of examples of successful deployment of such strategies. For instance, Wheel detergent was supposed to counter the onslaught of Nirma that was giving Surf sleepless nights. So could there be some other factor, which needs consideration while deploying such strategies? We'll come to it in a moment. But let's also cast a glance at what Godrej is trying to do, and how it is different from HP's stance.
By declaring that it is going to concentrate on just six or seven brands because these constitute almost eighty percent of the revenues, Godrej has accepted up front that the other brands have not been successful, and that there could be possibilities of dropping them altogether! There could be any number of reasons why these other brands have not done well. This stance is very different from saying that it will consolidate these brands under the name of the more successful brands.
HP too could have decided to discontinue the brands, which it proposes to amalgamate with Vectra. By not choosing to do so, it has indicated that it wishes to continue with its presence in those segments. So Vectra is likely to undergo line extensions to cater to various segments like the corporate, SOHO and the home segment. What HP will probably do is to come out with various model extensions of Vectra in lieu of the completely different brands. Will it work? Difficult to say!
To answer that question, it may be worthwhile exploring why the earlier strategy of multiple brands did not succeed. After all several other PC makers have been successful with multi-brand strategies for different segments! Is it possible that the manner in which HP promoted the other brands created a perception in the buyers mind that these were 'lesser' brands? If so, it would surely be a recipe for disaster! But then, aren't FMCG companies successful with similar strategies? Like Surf and Wheel! So why should it not have worked for an IT company?
Well, there could be several reasons. But I would like to limit myself here to the marketing angle. (Besides the fact that it is a great lesson not to assume that what works for one will work for some one else!) One of the key differences to my mind is the manner in which a brand is positioned in the buyers mind. The awareness about the IT organization behind the brand is far higher than the awareness about the organization behind the FMCG brand - which means that there is a far greater co-relation between the product and the organization in case of IT as compared to that in case of
So what? What this effectively means is that the buyer perceives the product's brand proposition in the case of an FMCG product as the primary driver of his purchase decisions. In the case of IT, he is driven considerably by the organization's brand recall and perceives the product brand as subservient to the organization brand. (That is not to say that other factors become completely redundant!)
Well, by that logic whatever product a successful IT company comes out with should do well! Not necessarily. As I said there could be several other factors that complicate the outcome of a strategy. But let's revert to our sphere of discussion.
When an IT company introduces a second brand of PC, and somehow creates a perception that it is a lesser brand for the more price conscious, it conveys a message that the organization itself does not value the new brand as much as it does the older brand. In a situation where the parameters for product differentiation are rather hazy, the buyer draws his own conclusions and decides that the second brand is not 'good enough'. He would rather buy a product, which is solidly backed by the organization, than a product, which the organization itself rates as second! The opposite could happen too. In a hazy product differentiation situation, if the buyer perceives the second brand to offer nearly as much value as the first, the original brand could suffer too! Compaq's Deskpro and Prolinea models had this problem!
The problem, therefore, is not whether you have several brands or one. The issue is of correct positioning and backing each of your brands as the best! Simply amalgamating lesser brands under one successful brand may not necessarily help! That way, brands have a painfully human character - they are sensitive to how you treat them!
Sumit Sharma is an IT industry veteran of over 20 years and author of the book titled 'The Corporate Circus'.