Multi-Brand Business Model – How Does It Work? (Explained)

Most companies prefer to keep a simple business model and target a specific market. These companies produce goods or services that cater to a specific set of customers. However, some other companies have ventured into other markets. These are companies that want to expand their business as much as possible and attract customers from various fields of life.

Among these companies, the multi-brand business model is prevalent.

What is the Multi-Brand business model?

Companies that have multiple products and services under various brand names use the multi-brand business model. These companies don’t limit their products or services to a single industry or sector. They can have multiple product brands that cater to the needs of their customers. Through these, a company can make more profits and generate higher revenues.

For the multi-brand business model, companies need to have strong financial backing. As most companies don’t have the resources to venture into new markets or brands, they cannot use the multi-brand business model. However, some companies utilize it to make goods or services for a wide range of customers.

Some companies may also use the multi-brand business model within the same industry or sector. For these companies, having various brands under their name allows them to create value for customers. These companies also ensure that they are not competing internally. Therefore, they position their brands in a way that appeals to different segments of a market.

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How does the Multi-Brand business model work?

Companies that use the multi-brand business model have various products or services. For each product or service that they offer, they use a unique brand name. It allows them to differentiate their products or services. Similarly, it provides these companies with a way to increase profitability. All these brands come under the company’s direct control.

There are various strategies that companies using the multi-brand business model may use. These companies use the business model to differentiate their products from competitors based on the brand name.

Similarly, they can use a strategy to create various products for different classes of customers. It allows the companies to charge customized prices for each brand of product or service.

Some companies may use the multi-brand business model to create distinct products under various brand names. However, most of these brands may keep the parent company’s name. This strategy within the multi-brand business model is prevalent in the telecommunications industry.

Some companies use this business model to differentiate their products from the parent company. In this case, the company’s brands won’t use the parent company’s name. Therefore, each product or service can be separate.

There are various benefits of each strategy within the multi-brand business model. Of these, which one a company uses depends on its requirements. However, almost every strategy is practically successful within various real-life examples.

What are the advantages and disadvantages of the Multi-Brand business model?

There are several advantages and disadvantages to using the multi-brand business model. Among these, some are below.

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Advantages

The multi-brand business model allows companies to gain an advantage over competitors. Through multi-branding, companies can leave less shelf space for competitors. In other words, they can use various brand names to dominate the market.

Similarly, multi-brand strategies allow companies to differentiate their products. It further allows them to charge customized prices for each product. In the absence of this strategy, customers may not tell the difference between the various products or services they offer.

Similarly, the multi-brand strategy allows companies to build on their successful brand names. If a company’s initial business succeeds, it can develop another brand without heavy expenses through the franchise. Overall, it can increase a company’s revenues and profits.

Disadvantages

The multi-brand strategy can also link various brands to a single company. If the parent company, or one of its brands, gets a negative opinion, all brands under the company can suffer. Similarly, the whole business model can get affected due to failure of the company’s management or poor decision-making.

Similarly, some customers may also view the multi-brand business model as a profit-oriented model. It is true that the business model increases profitability. However, if customers see the company as profit-oriented rather than the customer- or quality-oriented, it can harm the company and its brands.

Lastly, the multi-brand business model requires companies to have strong financial health. For smaller companies, adopting this business model may not be an option. Similarly, managing multiple brands under one parent company requires time and costs.

Examples

Nestle, Coca Cola and Procter & Gamble (P&G) are some companies that use the multi-brand business model. These companies have products that use multiple brand names.

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Similarly, Facebook, Google, Amazon are some names in the technology industry using the multi-brand business model.

Conclusion

The multi-brand business model allows companies to separate their products or services using unique brand names. The model is most common among multi-national companies that want to expand to various markets or industries.

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