Branded outlets vs. Multi‐brand Stores

Branded outlets and Multi brand stores are just not about the preference of the company. There is a lot more to it like availability of financial resources, the customers, the brand itself and of course the overall marketing strategy adopted by the company among others. The authors have identified a few parameters and compared the two formats on these parameters.

Financial Resources: Multi brand store format is always a relatively cheaper and a less risky option than the branded outlet. This is because the owner of the store is able to leverage his costs among many brands, thus reducing the overall risk on his investments. The break even is achieved faster in multi brand stores due to more public coming to store.

Brand: The single branded outlets contribute dedicatedly to the perceived value; the exclusivity factor helps a premium brand command a separate image in the minds of the consumer. The brand image can be reinforced easily in a branded outlet with the outlet complimenting the brand personality, communicating brand identity to the customer. This also helps brand create strong position in the minds of the consumer.

On the other hand, in a multi-brand store there are a lot of brands, the exclusivity of the brand is lost in such a scenario. However, this is an ideal condition for me-too products and value-for-money brands as consumer can compare the products before making a final decision. Multi brand store can come up with its own private labels, thus cannibalizing the brands.

Consumer: A consumer usually has a few brands in his/her consideration set when he goes to shopping. A multi-brand store gives the customer an opportunity to compare the brands in the consideration set on the parameters important for him/her. This helps in making better choices, as a customer may perceive all the brands in his consideration set to be at par in terms of the quality and performance, thus the decision making criteria is value.

On the other hand, a single brand store may not help a consumer compare different brands. But at the same time, consumer will not defect to other brands. Brands which follow imagery approach to differentiate their product from others may benefit from single brand store. Also, single brand store helps a company to cross sell and up sell.

Experience: When the products do not have much difference in their physical attributes, the services associated with the product helps in differentiating the product. A company may be able to give a better experience in a single brand store than in a multi brand store. It makes it easy for the consumer to take decisions. The experience in the store helps in creating brand association with the customer which contributes to the brand equity. The company can get personal feedback from the customer who comes to store, also a relationship with the customer helps in increasing lifetime value of the customer to the company.

On the other hand, in a multi brand store, personal attention does not contribute to the brand, in fact it adds to the equity of the store. Also, it is very difficult to give the same experience due to large number of customers in the store at a given time.

Communication and Promotion: Communicating to customer and brand promotion in a single brand store is relatively cheap option for the brand. However, it is more effective in multi store brand. With multiple brands, timely communication and promotion helps a brand to differentiate itself, thus gaining more number of trails. However in a single brand store the return may be less than other format.

The authors feel that there is no one best format, the companies follow combination of both the formats, Levi’s jeans came up with a cheap range of product line under a new brand for Wal-Mart, after it realized that it is losing on a big market. Therefore, the premium products are still catered to in single brand store, whereas cheap product is sold in the multi brand outlets. This approach helps a company to maintain its exclusive position while successfully stretching down the product line.

In India, Tier II and Tier III cities may not still afford single brand stores catering high cost, high value products, in these cases multi branded stores will be success. However, in Tier I and Tier II cities, both formats are effective catering to two different segments of consumers.

Special Mention: Sippu Rout co authored this blog.

Business Incubators

Vikas Kedia, barely 21 years old has already turned his back to $100,000 job. He is in much demand for his very own dot-com company. Four venture capitalists still pursue him. A graduate from IIM – Bangalore, Vikas interestingly doesn’t have his own office space. He has a shop in the Rs.130 million business incubator set up in IIM Bangalore.

A lot of management students study entrepreneurship as elective, but how many of them have managed to translate the ideas into actions. Between talk and the walk, lies the hard reality.

For the ideas to stand up, they need funds, space, guidance, contacts etc. It would be so nice for these business toddlers, if they get the experienced hands in the institute itself, when they embark into the entrepreneurship journey. This is how the idea of business incubators took shape.

The idea is simple. Provide the budding entrepreneurs’ basic infrastructure and wherewithal’s for pursuing their entrepreneurship ventures in the college itself.

The idea is actually not new to India. The first business incubator started in REC, Trichi in 1985. Infact, according to one estimate around 80 such incubators are functioning today.

The first B-school incubator in India came up at the Indian School of Business (ISB), Hyderabad in 2001 called the Wadhwani Centre for Entrepreneurial Development.

Then the idea of having alliances came up and the National Entrepreneurship Network, also called NEN was born. It was funded again by US-based serial entrepreneur and CEO of software company Symphony Services, Mr. Romesh Wadhwani. It’s a network of technical and management institutes that incubate. Fortunately, IMT Ghaziabad too has an entrepreneurship cell and is a part of the NEN.

Different b-schools have different approaches. For eg. IIM Ahmedabad chooses its projects through business plan competitions.

ISB works a tad differently. It puts the idea directly in front of industry experts and venture capitalists. If the idea gets through, the project is taken up.

Even after all these efforts, entrepreneurship is still not a very popular career goal for the graduates. Things are quite different in the best b-schools in US and elsewhere. Almost half of the first year students in Stanford business school do not return to complete their 2^nd term. The brightest students prefer to take the entrepreneurial way.

The scenario in India is definitely changing. With premier b-schools and technical institutes going an extra mile to support the budding entrepreneurs, we are surely on the way, if not there.

Our very own, IMT Ghaziabad has taken a step ahead by forming an E-Cell. Though the cell is in infancy and success will depend a lot on how seriously the cause is pursued and the resources are pooled in, it has raised hopes for a lot of budding entrepreneurs.

I would like to end by giving you all a food for thought. With the rising fees of b-schools and most of the student going for educational loans to complete their education, how much feasible it is to take the entrepreneurial way where more resources have to be pooled in. Are we ready?

Vertical Differentiation

Let us assume you are in jeans business. Your company is already present in the premium and super premium segments. Now you are targeting a low cost value for money segment. Your company launches a new brand or extends (stretch down) an existing brand, depending on the decision your company takes. The new brand has been successful in establishing the category membership, your company name or the parent brand has helped this new brand to create a POD in its category. What should you do to ensure that the new low cost jeans range does not cannibalize your premium segments?

This question is relevant because your existing customers may perceive little difference in the two offerings. The answer is: create vertical differentiation between the two segment products.

Valentino Piana wrote in 2003, “Vertical differentiation occurs in a market where the several goods that are present can be ordered according to their objective quality from the highest to the lowest. It's possible to say in this case that one good is "better" than another”.

Usually, vertical differentiation occurs on one feature, apart from price; let us say quality along with price difference in case of our jeans example. Thus your company will have to ensure that the customer is able to see quality difference between the premium category offering and value for money category offering. It is not a rule that vertical differentiation applies to products where there is only one attribute. However, all other attributes should be same and constant (or nearly so) between the products.

Thus it is easy to see the difference between vertical and horizontal differentiation. Vertical differentiation takes place on one feature, whereas horizontal differentiation happens across many features.

This feature is useful when the brand manager wants to maintain a product line which caters to all the segments present. Though to avoid brand dilution, your company may choose to introduce a new brand altogether. Whether to introduce a new brand or stretch existing brand is an endless debate, and I leave it for your company to decide how you go about it… :D