Why Do Big Companies Use New Brand Names for New Products?

Big companies often find it beneficial to introduce new products under distinct brand names. This article explores several reasons why these companies opt for this strategy and how it can help them better position their products in the marketplace.

Market Differentiation

A key reason behind using a new brand name for a new product is to achieve market differentiation. By distinguishing the new product from existing offerings, it becomes easier for consumers to identify its unique features and benefits. This helps in creating a distinct identity in the minds of consumers, making the product stand out among similar items in the market.

Target Audience

Companies may also decide to use a new brand to target a different demographic or market segment. This can make the product more appealing to specific groups, allowing the company to tailor its marketing and messaging to better resonate with these audiences. For example, a new brand can be used to appeal to a younger audience or a more tech-savvy demographic.

Brand Strategy

Using a new brand can serve as a powerful tool in a company’s brand strategy. Introducing a new product under a different brand can prevent potential negative associations with the parent brand if the new product does not meet expectations or fails in the market. This separation can also help in preventing the dilution of the parent brand’s reputation.

Innovation Perception

A new brand name can also convey a sense of innovation and freshness. By associating the product with a fresh and new brand, companies can signal to consumers that the product is cutting-edge or significantly different from previous offerings. This can enhance the perception of innovation and keep the product relevant in a rapidly changing market.

Mitigating Risk

Another significant advantage of using a new brand is that it can help in mitigating risk. If a product underperforms, having it under a separate brand can limit the impact on the company’s core brand reputation. This allows for a more controlled and contained risk management strategy, protecting the brand equity of the company’s existing products.

Global Markets

When entering international markets, a new brand name can be tailored to fit local preferences and languages. A brand that works well in one culture may not be as effective in another. By launching a new brand, companies can better adapt to local consumer behaviors and preferences, increasing the chances of a successful market entry.

Strategic Partnerships or Acquisitions

A new brand can also be used in strategic partnerships or acquisitions. When a company merges with or partners with another entity, introducing a product under a new brand can reflect the new ownership or collaboration. This can help in integrating the new product into the existing brand portfolio while maintaining a distinct identity.

Brand Refresh

Finally, using a new brand can be a part of a brand refresh strategy. In an ever-evolving market, companies may need to refresh their brand portfolio to stay relevant. New brand names can be an integral part of this strategy, helping in maintaining brand excitement and relevance among consumers.

Example: Distinct Brand Strategy

Even companies like Kia or Dunkin' donuts are focused on delivering a distinct customer experience, distinct product, and distinct user experience. For instance, Kia has used distinct names like Carnival and Soul for their cars, which are designed to appeal to a broader audience. These brands convey a sense of fun and high value, making them more appealing to customers who are value-conscious and seek a more enjoyable driving experience.

Example: Distinct Competitor Strategies

Other companies have distinct strategies as well. Ford focuses on a more sleek and premium approach, while Mercedes aims for a bold and luxurious image. Rolls Royce, on the other hand, emphasizes luxury and a royal experience. Brands like Adidas, Nike, and Puma also have distinct propositions, from bold and premium to svelte and performance-oriented, or even aggressive and masculine. Each company is trying to win over consumers with a unique and compelling brand promise.

Using new brand names is a strategic decision that can significantly impact the success of a product in the market. By leveraging these distinct brand strategies, companies can better position themselves and their products, appealing to a wide range of consumers and staying competitive in the ever-evolving landscape of the consumer market.