Monday, June 28, 2010
Brand strategy of Hindustan Unilever Ltd
The 1980s witnessed a revolution in the understanding of the working of the brands. Marketers depict brands as a reflection of customers’ own personalities, so that they can relate to their products well. In fact the distinguishing aspect of the modern marketing has been its focus upon the creation of differentiated brands and using them as weapons for launching multi-level attacks on competition. Market research has been used to help identify and develop bases of brand differentiation. A brand identifies a product and its sources, but it does even more. Along came brand extension. Today brand extension strategies are widely employed because of beliefs that they build and communicate strong brand positioning, enhance awareness and increase profitability.
Brands are often extended beyond their original categories to include new product categories. Research has proved that the success of brand extension depends on the transfer of parent brand awareness and associations to the extension. The transfer of these quality perceptions is the key in umbrella branding. An umbrella brand is a brand that covers diverse kinds of products which are more or less related. It applies also to any company that is identified only by its brand and history. It is contrasted with individual branding in which each product in a portfolio is given a unique identity and brand name.
Mr. K.R.Senthilvelkumar, a professor at Jansons School of Business offers the most pragmatic of reasons behind an umbrella brand strategy, “with scarce financial resources, firms cannot afford to allocate huge budgets for building and maintaining several brands”.
Nowadays consumers have become quite unpredictable in their newspaper-reading or TV-viewing habits, it is very difficult to assure the reach of messages to the target audiences. The advertiser has to use many broadcast and print media with high frequency to create the desired effect for every brand, which ultimately puts huge burden on the budget. Hence, companies consider it wise to maintain a minimum number of brands in their portfolio so that they can do justice to each by effectively distributing their investment for promotion purpose.
Yes, umbrella branding is widely practiced. The Confederation of Indian Industry's second FMCG (fast moving consumer goods) conclave in 2003 almost declared that umbrella branding was the way to go in a competitive market environment. In an interesting anecdote, R S Sodhi, GM Marketing (Gujarat Cooperative Milk Marketing Federation l), compared the umbrella brand and individual brands to an Indian family, where in umbrella brands - like the Indian family, the father is the head, looking over the children. When they grow up and become independent, they hold the umbrella for the family. Individual brands on the other hand are like a western family, who grow up fast and leave the father behind. Amul’s strategy of using “umbrella branding” has really paid off. Amul’s advertising and marketing spend has never exceeded 1% of its revenues. Most other food companies spend 6-7% of revenues on advertising and marketing. They (GCMMF) are not big spenders compared to Britannia or Nestle. Despite a limited budget, Amul’s creatives—in the form of billboards or the Taste of India campaign—have always managed to evoke a larger-than-life brand feel, consistency and spirit of Indian culture in a contemporary way.
Companies phase out the brands which have become redundant and retain one or two umbrella brands for every category with necessary variations under each. For example consumer goods major Reckitt & Colman India Ltd. chalked out an expansion strategy to introduce 20 new brands in the year 1999-2000. The strategy also involved repositioning its existing brands and consolidating sub-brands under its main umbrella brands - Dispirin, Dettol, Harpic and Cherry Blossom. The strategy was designed to vault Reckitt & Colman, in terms of sales, into the big league. With the launch of new brands and the repositioning of its existing brands, the company aimed to achieve expected sales growth. The strategy worked well as Dettol as an antiseptic lotion provided brand support to Dettol soap, which was re-launched in a fragrant form called Dettol Fresh to take on HLL's Liril. Cherry Blossom acted as a mother brand for several easy-to-use home products.
Hindustan Unilever Ltd’s (HUL) beverage brands have been amalgamated under two umbrella brands – Brooke Bond and Lipton and in the fabric wash category, the company has retained only Rin, Surf and Wheel, HUL has withdrawn brands such as Sunlight, 501, Dalda and Nihar; it plans to withdraw some more brands and group them under a few umbrella brands. HUL is currently focusing on 35 power brands.
Nivea cosmetics brand has a presence in huge number of product categories and countries. Once upon a time Nivea's performance prompted a yahoo.com news article to name it the 'Queen of Mega Brands.' This title was appropriate since the brand was present in over 14 product categories and was available in more than 150 countries. Nivea was reportedly believed to be a brand of local origin - having been present in them for many decades. This fact went a long way in helping the brand attain the leadership status in many categories and countries. According to analysts, the brand was the single largest factor for the 4.4% increase in the company's (Beiersdorf) revenues (€ 4.74 billion) and 10.7% increase in after-tax profit (€ 290 million) for the year 2002. Beiersdorf never tried to disturb the umbrella branding of Nivea and got fruitful results.
Today as organized retailing is gaining popularity, we can see that popularity of private labels owned by retailers. Retailers do not feel the need to develop many brands for various categories because it is the loyalty towards their store name which draws and retains the customers. Hence it is the umbrella retail store name which will be the brand for various product categories and not individual names for each. Customers prefer these brands over that of manufacturers, due to the fact that they address their functional needs well. The retailers also enjoy high margins for private labels. Today a retail chain like Shopper’s Stop’s 20% apparel section is driven by private labels. There are others like Trent from the TATAs which has developed its business model purely on private labels.
From Asian Paints in 2003 to Electrolux, Onida and Airtel in 2004, they have all made a move from individual product branding to umbrella branding. Just a few year ago Bharti Televentures had brand Airtel for mobile services, Touchtel for land line and India One for long distance calls. But with Airtel dominating the group's ad spends, the company figured that the other brands were hardly making their presence felt. The unified licensing regime in December 2003 - which means that only one license is required to offer fixed, mobile and other services - acted as a catalyst (new Airtel logo/ Airtel outlets). So come September 2004 and the company started selling all its services under one brand name - Airtel. It claims that the move not only upped brand visibility but also charged up its distribution network.
No doubt, umbrella branding has a number of advantages over individual brands in terms of low promotional costs and easy acceptance in trade but umbrella branding imposes on the brand owner a greater burden to maintain consistent quality and brand equity. If the quality of one product in the brand family is compromised, it could reduce sales of all the others. Single umbrella branding works relatively better for services like telecom; it may not be feasible in cases where there is a lesser degree of cohesion between categories, product values and target customers. So, maintaining a few umbrella brands is better option. For instance, suppose LG, a tech brand as far as Indian consumer is concerned, wants to sell you talc or toothpaste or detergent under that name. Consumers would find it very difficult to say what is transferred value from LG TV sets which they’re now going to put on their skin.
Nokia, a moralist for single umbrella branding dropped their single umbrella brand strategy in 2006 in naming it’s products. The company believed it needed to have a look at its competitors’ book. After the roaring success of the Moto RAZR, PEBL, SLVR and ROKR series, the Finnish mobile handset manufacturer felt that consumers found names easy to remember compared to the usual mundane numbers. Even LG launched its popular Chocolate range of phones under the Black Label series. For Nokia, barring few exceptions, numbers have been the only way its phones have been branded so far - remember 1100, 2600, 3310, 6020?
In 2006 they launched Nokia 8800 Sirocco Edition (a mixture of names and numbers). Nokia introduced this approach to make it easier for customers to navigate across their range of phones. They also launched E-series phones (which serve business users) and N-series (which have multimedia features).
While some players say that the naming trend will be restricted to the high-end, feature-led phones(for example- LG is also banking on the name game but in that case it is confined to the high-end range of designer phones), others like Motorola are banking on names irrespective of price slabs. Motorola believes that consumers don't look at these names in an abstract manner and therefore names convey a message to consumers.
A few umbrella brands or individual brands? According to experts, independent brands only make sense when the product clearly has a different proposition from the company brand; like Lexus from Toyota and Swatch from Omega. In the case of Asian Paints, there were so many sub-brands, there was a reduction of media weights for advertising each entity. Then, the company shifted to a brand-centric portfolio, which involved a change of logo, product names, packaging and advertising. But the response from the trade and consumers has been positive, overall brand synergy and shop presence have increased, and the advertising is more effective.
Most probably in near future the media environment will make it impossible to create newer brand names and the conditions at the consumer level, as well as the environment. So unless the product is clearly different in the mind of the consumer, umbrella branding is the way to go. Umbrella brands are going to rule!