Growth is the ultimate goal of every business. As you launch your venture, you have a dream of expanding it to cover different markets. Maybe your plan is to open new stores or add other products to your website. For many businesses, crafting a niche market is their growth strategy. They want to serve a given market that has specific needs and wants.
Other businesses cast their nets wide and venture into other markets outside their primary scope. For you to realize your expansion goals, you need to have a business model supporting them. Multi-brand is one of the business models that enterprises employ in enhancing their business growth. But what does it entail?
What is the Multi-Brand Business Model?
A multi-brand business model is an approach where a business offers multiple products and services from various brands and covering different industries and niches. The business does not restrict its scope to a given sector or brand. For instance, you can find a business offering footwear, toys, fashion, beauty accessories, and jewelry from different brands.
Multi-brand businesses focus on offering all products that are in line with every customer. They offer luxury and cheap products to allow customers to find ones fit for them. This model enables a business to maximize its revenue by leaving no customers out.
Some companies combine efforts and manufacture products for different market segments under their brand. This way, they enhance their market share and returns.
How Does Multi-Brand Business Model work?
Companies utilizing the multi-brand business model aim at having their presence in every market category. These companies can be manufacturers or intermediaries. The manufacturing businesses create various products under their brand design for specific market niches. They offer products for the upper, middle, and low class with distinctive brand names. This approach allows them to have distinctive prices for each category, enabling them to maximize their profits.
Alternatively, a business can be intermediary offering products and services from various brands. For instance, a company can be offering footwear from Puma, Adidas, Nike, and Gucci among others. Also, it would have footwear from other small brands at lower prices. However, these businesses cannot rebrand their products. They must retain the trademark of the parent company.
In some cases, a business can rebrand its products without retaining the original brand name. This aspect allows them to price the products differently and curb public perception of particular brands. In a word, this model aims to offer multiple brands that serve every customer’s needs in the market.
Examples of Multi-Brand Business Model
Many renowned brands use the multi-brand business model in their operations. The model enables them to reach out to different customer clusters and meet their specific traits.
One of the companies using this model is Coca-Cola. This beverage company has multiple brands for different customers. For instance, they offer Coke, Fanta, Sprite, Krest, and other soft drinks. In each of these brands, they offer a variety to serve the need of the various customer categories.
Facebook also uses this model in its operation. The social media giant is the home of Instagram, Messenger, Facebook, and WhatsApp. All these brands focus on content sharing and are aligned to the varying needs of their users. Google, Amazon, Nestle, and P&G are other renowned brands that utilize a multi-brand business model.
Pros and Cons of the Multi-Brand Business Model
This model is a good idea for businesses seeking to have a presence in various fields. It helps them maximize profits. However, the concept has its share of benefits and shortcomings. Here they are:
Pros
Offer a competitive advantage
The success and sustainability of any business is having a competitive advantage. Your venture must have an edge to offer your competitors to remain in business. Getting this edge can be a challenge at a time. For companies using the multi-brand model, scoring a competitive advantage is easy.
Since they focus on multiple markets, these companies leave no space for competitors. The companies serve all customer categories giving competitors a run for their money. Hence, the model is essential for enabling your business to dominate your target market.
Opportunity to maximize returns
Multi-brand businesses promote more than one brand. This approach enables them to build several brands at the same time. The success of each brand boosts business revenue.
Also, when the company wants to introduce a new brand, it will have little challenges in marketing it. Lowering marketing expenses lead to additional returns. So, it is a perfect model for businesses seeking a chance to maximize their returns on investment.
Enhance differentiation
The multi-brand model allows you to serve different customer clusters. The concept enhances differentiation without affecting customers’ perception. Through offering different brands at different prices, you eliminate the perception of some products being of low quality. This allows you to offer personalized prices without customers suspecting the difference between various products.
Cons
Requires huge capital to implement
Operating a multi-brand venture is not a simple affair. It requires an investor to commit a huge amount of money to develop different brands. So, it can only work for giant brands and not for small businesses.
Single brand can impact the entire lot
In this model, no brand is independent. A small impact on a single brand will affect the entire brand of the company. A negative view of the company will hurt the sales of all brands. Hence, it poses a high risk than businesses focusing on single brands.
Possibility of bad customer reputation
When customers notice that your business is offering different brands at varying prices, they start to view it as profit-oriented. The customers start to question the authenticity of your brand quality. If this happens, your brand can suffer from a lousy customer reputation that would hurt your profitability.
Conclusion
In a word, a multi-brand business model is a perfect option for businesses seeking to expand their market by targeting different customer clusters. The model enables these businesses to use different brand names to create unique in their niche. This approach is perfect as it enhances separation without creating a negative perception of quality. However, it requires a huge investment. As such, small companies cannot afford to utilize it.
