What are the problems generally faced by the companies going for multibranding?
The strategy of multibranding has both advantages and disadvantages. As the advantages suggest, multibranding by companies offer the consumer more choices from one central location where, let's say in the fastfood industry, where multibranding is actually going on in real time. Fast food operators expands their operation to include more than just the fast-food count, but adds a diner with a menu where all kinds of foods can be ordered.
This is actually a strategy that McDonalds is using.
"The time appears to be now, as McDonald's began in 2003 to experiment with new concepts in existing restaurants. Eleven units in Indiana have added a diner, and one unit in Nebraska has a three-in-one concept with a McDonald's traditional menu, an upscale sandwich shop, and a separate treats area with baked goods and desserts." (21)
One problem that could occur is if sales don't increase dramatically, which is what is needed in order to operate a multibrand facility, and the results are flat, operating the multibrand facility becomes unsustainable financially because it does not provide an increase in sales revenue.
Multi-branding refers to the practice of one company having more that one brand for products in same category. Companies use multiple brands to satisfy the needs of and attract customers from different market segments. One prominent example is multiple branding is the the practice adopted by General motors to sell cars under different brands such as Buick, Cadillac, Chevrolet, Oldsmobile, and Pontiac.
Multiple branding enables a company to increase its sale by targeting multiple segments of market. It also enables a company to counter competition from other companies. However multiple branding, when practiced inappropriately may impact the performance of a company negatively.
The first and foremost potential problem of multi-branding is the cost. The cost of company in promoting and building brand increases as the number of brands increase. Therefore, a company must ensure that the cost of additional brands is justified by overall improved performance of the company. If the different brands are not clearly differentiated the then the customers may be confused about the quality of products represented by these brands. This will result in reduction in sale. Also some time the impact of one brand may overflow to impact the image of another brand, For example if a company selling very expensive range of perfumes to persons seeking prestige value may hurt the image of the premiere brand by introducing another brand of cheap cosmetics. Also, a new brand introduced by a company may win market share at the expense of sale of products under existing brands.