The marketer's dilemma: Same brand, sub-brand or new brand?

One of the biggest dilemmas a marketer faces during a new product launch is whether to launch the product under the main brand, as a sub-brand, or as a new brand altogether. The cost of failure for such decisions is very high, but the reward for making the right call is equally tempting. We know this first hand from Maruti Suzuki, a low-cost Indian auto manufacturer, who turned their premium segment aspirations into reality through the Nexa sub-brand. 

In this article, I will introduce a simple framework that can aid marketers in making such calls. Let's start by introducing the two critical factors which should be considered for determining the positioning of a new product launch:

1. Brand Power: The penetration of the brand in the market where it wishes to build its presence.
2. Distance from Category Image (DCI): The distance of the new product's intended perception from the current perception of the existing brand.

These factors allow us to quantitatively evaluate the recommended positioning of a new product. For example, Maruti Suzuki has a very high brand power in the Indian personal vehicles segment, but the new line of premium cars (Ciaz, Baleno), which they wished to launch, was very different from its current portfolio. Examining the positioning framework in the illustration below shows us that creating a sub-brand was their best move.

As you would have figured by now, Maruti was in the top right corner of this positioning framework; hence it made sense for them to create a sub-brand. This allowed them to benefit from Maruti's brand power without letting its current portfolio dilute the new product line's premium quotient.

Measurement:

You may be wondering how on earth can we quantify abstract factors such as Brand Power and DCI. Luckily, semantic scales, a commonly used tool in market research, resolve our problem. Semantic scales allow marketers to quantify perceptions through questionnaires. Questions such as the following will enable us to gauge the brand power and DCI quantitatively:

• Brand Power: "How likely are you to pick 'insert current brand name' for your next personal vehicle purchase?"
• DCI: "To what extent do you associate the 'insert intended product details' to the 'insert existing brand name' brand?" 

Word of Caution:

Note that this framework may not provide a definitive explanation in all scenarios. For example, Audi is a new brand altogether, even though its parent Volkswagen's brand power is very high. According to the framework, Audi should have been a sub-brand under the parent brand. However, in this specific scenario, Audi's distance from the category image of Volkwagen is much higher than the brand power of VW; hence, the scales tip more towards the new brand side. Ideally, a sub-brand should be launched if the Brand Power and DCI hold the same weightage.

Abhishek Thakur | [email protected] | PGP student at the Indian School of Business