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Pricing Strategies from the multinationals that can be used in your business and any business

Article 3 Using Multiple Brands at different Price Points: with examples from Sony, Ford and Tesco

This article is mainly concerned with using different brands or sub-brands at different Price Points in order to capture different sectors of a market.

Within a company there are often various brands: some of which may be related and some of which may have little relation such as at Procter and Gamble who have diverse brands including Pringles, Duracell and Gillette, there may also be sub brands such as with Nivea which includes Nivea for Men and Nivea Lip Care ranges.

Separating brands out within a company’s range has advantages but there are also advantages to having a number of brands associated or using the company’s name as a brand covering all the different brands it has.

Which option to use depends a lot on the similarity of the products, the different brands that Procter and Gamble have don’t necessarily benefit from the same brand values. Many of the brand values associated with Pampers nappies may have no value or become negative when associated with Pringles crisps. A company such as Heinz on the other hand which just produces food has brand values associated with the Heinz brand which add positively to the whole range.

One area of a brand can be the associations with quality and value that it has and therefore the brand can affect the perceived value and quality of a product upon launching a new product; for example a range of Heinz sauces, can by using the Heinz brand instantly communicate to the customers that the sauces will have the same high quality as the rest of the brand and they can therefore command a higher price. This strategy works very well assuming that this new product is as good as the rest of Heinz’s products however if the quality was lower than customers expected this could damage the entire Heinz range of products as people would start to loose the assumption that all Heinz products were good quality.

In some cases a company may want to have some products which are lower quality on offer and different companies approach this in different ways in terms of how they brand their product.

Our first example is from Sony, the Sony brand is known for being very high quality and all products branded as Sony are kept at a high quality to maintain this brand value, they therefore can continue to ask premium prices for Sony products. However the premium end of the market for electronics is only a certain size and is competitive; the middle and cheaper end of the market is valuable so when Sony took over Aiwa which was already more of a volume producer they kept it aimed at a different point in the market, the products weren’t as good quality and weren’t usually as advanced and featured, they tended to be of a good quality still though, and were aimed towards the middle of the market in terms of price points and quality. In the 2000s Sony’s own brand started to be less defined in order to be more competitive across more sectors of the electronics market and Aiwa suffered from poor sales it is likely that a more overt association with Sony would have boosted sales of Aiwa products but Sony avoided this worrying that it would damage the Sony brand and also perhaps cannibalise sales.

Ford Motor Company uses a similar strategy and owns several car brands; in the United States Ford has three separate brands: Mercury, Ford and Lincoln.

Mercury was setup in 1939 when Ford had already bought Lincoln which had become its luxury brand with Ford in the middle and Mercury originally as an entry level brand, their separate marketing aimed them at different market sectors. Since the 30s and 40s each brand has developed to some extent separately keeping separate brand identities with Mercury becoming a ‘near luxury’ brand with Ford aiming more at a lower priced area of the market.

Supermarkets such as Tesco take a different approach to having brands at different price points and use their main brand across all own brand product but also have sub-brands with different associations in terms of the price and quality customers expect from these brands.

Tesco have three main sub-brands aimed at different price points they are the Tesco Value range at the cheaper end of the market, the Tesco Finest range at the high end of the market and then standard Tesco products which have no specific brand name but simple carry the Tesco brand name. All three are established and regular Tesco customers know what to expect from each range, often there will be products with three variants one in each range. Tesco carefully manage all brands to avoid damage to the main Tesco brand where one major brand value is ‘Value for money’ therefore products in all ranges must be good value as well as meeting a minimum level of quality even within the Tesco Value range, where the product will be fit for purpose and aimed to meet the expectations of the purchaser who will be conditioned by the price they have paid.

Supermarkets such as Tesco with their value and finest ranges and Sainsburys with their basics and Taste the Difference ranges mean that customers are now used to having options from the same business but at different price points, this means that if within your business you market a ‘Simple Quality’ or ‘Cut above the rest’ range customers will know what to expect therefore the customer can easily select the product they want based on what they need and can afford, a customer coming to your shop and looking for, lets say in this example, high quality velvet curtains upon seeing basic cotton curtains marked up as ‘our value range’ will understand that that is at a separate price point rather than assuming than the shop they have walked into offers poor quality items at low price, likewise the customer looking for basic cotton curtains won’t walk into a shop and assume it is aimed at people looking to spend more than them if they understand that the expensive velvet curtains are part of a more expensive range.

Having different ranges then works well if your primary brand value is Value for money but if your brand is all about low cost or is all about very high quality and high costs but you want to move into another section of the market then having separate brands may work for you though you may not benefit from the same economies of scale and some costs such as promotion can double. If you have a shop or other retail establishment it may be necessary to have two premises for two different brands.

In Eastbourne, Sussex, where Trig-Point Marketing is based, there are two restaurants next door to each other: both Italian restaurants, one aims at the lower to middle of the market in terms of price the other is more up market however both have the same owners and a shared kitchen. The clientele are different however expecting different quality food at different prices, there is therefore in this case little cross over or cannibalisation of sales between the two and the two brands can share costs still, therefore this strategy works well for them. Having two separate brands would also be likely to work well for manufacturers who can produce similar products in the same factory but aim them at different points in the market using different brands at different prices.

In the case where there is little saving in having two brands under one company the case for using this strategy is diminished but can still be a good strategy if you are an expert in a field and would like to help yourself to more of the total market without damaging what you already have.

This article was written by Dave Cousin of Trig Point Marketing Consultancy-helping you take a step back and look at where your marketing strategy is taking you.

Next time: Pricing low and charging for the extras: with examples from Easyjet.