Ever wondered why a same company launches products under different brands? Yes there are benefits of being able to differentiate between target audiences but the benefits just do not stop there. There’s more you can achieve by having different brands working under the same umbrella, working towards fulfilling the same goal
It was in the month of May 2021 that an organization outnumbered Maruti Suzuki in terms of sales. What happened first in the history of India involves Hyundai and Kia selling approximately 3,000 more cars than Maruti Suzuki, and how does that relate to the business of electronics? Well, the answer lies in strategy that relies on not just a parent organization, but brands that stem out of a particular parent brand. In terms of electronics, one such clear example is China headquarters BBK Electronics. BBK owns consumer electronics brands including Oppo, Vivo, Oneplus, Iqoo, Realme and more.
Today, the smartphone sales of these brands put together outnumber sales of smartphones done by any other brand, and not just the Chinese, even Korea-headquartered Samsung has followed the same strategy longer than one can remember. JBL and Harman are two among various other brands that Samsung owns have been doing quite well for the company. What’s the strategy all about? We found out!
The target audience
The key to understanding or formulating a plan towards going one parent different brands strategy probably revolves around the target audience one wants to address. Taking BBK and the brands it operates in the country, it becomes evidently clear that each of the company’s brands serve different target audiences.
Starting with Realme, this brand was originally launched to compete in the price sensitive smartphone segment in the country. On its first launch, it locked horns with the likes of Mi and other smartphone models priced under Rs 15,000 in India. Realme’s first smartphone in the country was launched at a price of approximately Rs 10,500. It then took on the rising Xiaomi and already settled Samsung budget friendly smartphones in the country. The marketing and sales strategy that the brand followed in India has been quite similar to the ones followed by its closest rival Mi.
The market share of Realme during 1Q21 (in terms of shipment volume) was close to just 5.1 per cent (IDC Report). It’s direct competitors Samsung and Mi, held close to 19 per cent and 27.2 per cent market share during the same quarter respectively.
“BBK has one of the best strategies when it comes to targeting different segments of consumers.There is at least one brand positioned in every segment and the best part is that all these brands follow different marketing strategies,” says an analyst not wishing to be named.
Oppo and Vivo, BBK’s other smartphone brands, which were probably initially launched to target the Rs 15,000 to Rs 25,000 smartphones segment in the country, held 4.7 and 6.6 per cent market share during the same quarter, respectively. The smartphones launched by these two brands have been locking horns with other mid-range smartphones in India from the very beginning.
The combined sales figures of Vivo, Oppo and Realme for the quarter stood at around 15.4 per cent of the total market share. Comparing these with the market share of the Xiaomi and Samsung answers how well the strategy of having multiple brands catering to different target audiences has worked out for BBK. It is worth mentioning here that the sales figures of OnePlus and Iqoo are not included in these numbers.
BBK’s OnePlus has been projected as a flagship smartphone brand, from the beginning. Tech gurus have been comparing OnePlus smartphones with the flagship models offered by Samsung and Apple in India and in other countries as well. Several reports by Counterpoint Research and IDC have coined OnePlus as the clear winner. Iqoo, the newest brand on the block from the house of BBK
“You can breach both the online and offline channels using the same products whitelabel into different brands. The same helps penetrate online via a different strategy then the offline despite the products being quite similar to each other,” says the analyst.
Evolution beyond the target audience
The other advantage of having a multiple brands strategy is getting the room to play and extend your target audience. For instance, Oppo and Vivo both have forayed into the flagship smartphone market, and have started offering smartphones that cost above Rs 50,000. The step, from the house of BBK, came right after the organization was able to to create dedicated fan following and communities for these two brands. There is a high chance that consumers already using models from these brands would upgrade to flagships from these brands due to customer loyalty.
Oneplus, which has till now been known as the flagship smartphone brand from the house of BBK, started offering its first below Rs 30,000 smartphone in 2019-20. The move might have helped BBK to score consumers who were looking for a flagship name without having to spend flagship amounts. It is also rumored that OnePlus will also be launching a below Rs 20,000 smartphone this year.
“Once you have successfully created a brand image, it becomes easier to launch new product categories under the same brand name. This is generally done keeping the loyalty of consumers in mind. Moreover, if you can give them a good product, it also becomes essential for the brand to give them more such good products,” says the analyst.
Xiaomi, one of the competitors to possibly all the smartphone brands in the world, has also done something similar with its sub brand POCO. The latter, which was originally introduced as a flagship brand years ago, has now started to launch smartphones for the budget friendly market. Several users have even posted comments noting that POCO smartphones are whitelabelled smartphones from Xiaomi.
And if playing and extending the circle of target audience was not enough, these smartphone brands have now started to evolve into complete consumer electronics brands. Oppo and Vivo have now started to offer smart bands and other wearables in the market while OnePlus and Realme now have smart TVs under their product portfolios. Similarly, Xiaomi is one of the market leaders in the smart TV market in India, and the company keeps on adding one or more product categories every now and then.
“If you associate a brand with a flagship image, you are bound to respect the brand when it launches a product in the affordable or less expensive segment.A lot of brands have followed this strategy earlier,” says the analyst.
Coming to the giant of the consumer electronics industry, Samsung is a story which needs more than one OTT series to explain what all it does. While most of us know Samsung as a big consumer electronics giant, only a few of us are aware of the fact that a lot of its competitors use display panels and other key components used on TVs, smartphones, smartwatches and other products sourced from Samsung. The Korea-based tech giant however does not supply these key components under one brand name, but different brands that operate under the umbrella of the parent brand called Samsung Electronics.
Some not so popular yet critical for the electronics industry brands owned by Samsung include Prismview which targets the manufacturing of light-emitting diode displays, Novaled which specializes in the research and development of organic materials and technologies for superior OLED displays, Nexus which is health care equipment maker, Harman International which is engaged in the development, manufacturing and marketing of audio products and electronic systems, among others. Samsung also operated into the semiconductors arena under the Samsung Semiconductors brand name.
Now not so famous in the smartphone arena, LG is one another parent company that has its wings spreading over to supplying components ranging from display panels to ones used in the automobile industry. As a matter of fact, both LG and Samsung are known to be amongst the biggest suppliers of display panels used by Apple in iPhones and other products it offers in the market.
Even the likes of Xiaomi and BBK are known to source components from the likes of Samsung. The ‘one umbrella different brands’ reach has actually enabled these competitors in the end consumer market to do business with each other in the B2B market.
The greatest examples from India of how an electronics parent brand can evolve using different brands can be drawn from two organizations namely Super Plastronics Private Limited (SPPL) and Videotex International (Videotex). Both these organizations sell smart TVs under different brands in India. While SPPL retails Thomson and Kodak branded TVs in the country, Videotex retails TVs under Shinco, Telefunken and some other brands.
The USP for these parent organizations revolves around the fact that these can and have positioned different brands in different channels. One can easily find one brand going heavy in the online market and the other going heavy in the offline market.
Refer to these statements made in a report by IDC, and one will find how Vivo (from the house of BBK) scored well in the offline market and Realme (also from the house of BBK) scored well in the online market. Both the statements refer to the same quarter performance.
First statement goes, “Vivo was at the third position, with shipments declining by three per cent YoY. However, it continued to maintain its lead in the offline channel with a 29 per cent share, ahead of Samsung. It regained its title sponsorship for the IPL cricket league, ensuring high decibel promotional activities around newly launched models in March and April of 2021.”
Second one continues, “realme slipped to the fifth slot after falling four per cent YoY in 1Q21. It continued to be the third-largest online brand with a 16 per cent share and more than two-thirds of its shipments going through the online channel. The company also launched the most affordable 5G model, the Narzo 30 Pro in 1Q21, expanding deeper into the 5G space.”
There have also been instances where a parent organization has used a smaller, less known brand to test features of a product among users before embedding those features into the bigger and better known brands. For example, while OnePlus is said to be the flagship brand from the house of BBK, it never rolled out the gimbal camera feature in smartphones that were OnePlus branded. BBK, till now continues to launch smartphones with gimbal cameras that are Vivo branded. It is anticipated that the OnePlus will come with a gimbal camera embedded on it anytime soon.
“Not all the brands have the capability to manufacture all the components used in a product. More often than not, new brands rely on established businesses like Samsung and LG to source components like memory semiconductors and display panels,” says the analyst.
The tax slabs
Entities registered with separate credentials in the country pay taxes according to the earnings they make irrespective of the parent organization that owns them. For instance an electronics organization originating from China but operating different brands in India will have to pay taxes in accordance with the sales made by these different brands.
For example if a parent company named A owns two brands by the name of B and C will pay taxes for these two brands if both of them are registered under name A in the country. However, if the brands B and C are registered in different capacities in the country, then both B and C will end up paying taxes for themselves.
“The tax slabs and the amount of taxes paid by companies depend on the amount of sales and profits they make. A company earning less than Rs 10 crore has to pay less tax than a company which is earning more than Rs 10 crore,” says CEO of a tax consulting firm not wishing to be named.
He continues, “Now if brand A has managed to earn over 10 crores then the organization will have to pay more taxes than what it would pay if two brands, registered separately would have paid or earning Rs six crore each.”
This simply means that two smartphone brands operating under the same parent brand might end up paying less tax if these were registered under different capacities. However, if the parent brand has to file taxes for them, it will end up paying more as the figures might attract higher tax slabs.
The other advantage of the strategy can be in the form of closing down the not so good functioning brand economically. For example, if one of the smartphone brands of a parent company is not working out, the parent brand can choose to cease operations of the brand without affecting how its other brands are doing in the market.
There are a handful of consumer electronics brands in India which have ceased operations in terms of launching new products or categories but have partnered with international companies owing to the big channel of sales they were able to develop during the good times. Micromax, in 2019, had announced partnership with Huawei where the latter was looking to leverage the former’s channel of sales to expand in the country. Micromax, at that time was suffering from poor smartphone and other consumer electronic segment sales.
There have also been instances where a parent organization has used a smaller, less known brand to test features of a product among users before embedding those features into the bigger and better known brands. For example while OnePlus is said to be the flagship brand from the house of BBK, it never rolled out the gimbal camera feature in smartphones that were OnePlus branded
It is evidently clear that the advantages of having a different brand strategy can work out for a lot of companies out there but the same requires very high details of planning. From appointing heads and teams that cater to different brands, to making sure that the brands complement each other and not compete with each other, it can be a perilous task, but time has proved that it is not an impossible task.