#18 - The "illusion of choice" business model - be your own competitor
Did you know Oppo, OnePlus and Vivo are brands are owned by the same company?
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This is Edition #18 of the newsletter. You can find the previous editions here.
In one of the conversations recently, I learned that OnePlus, Oppo, and Vivo are owned by the same Chinese company, BBK Electronics. On further research, I found out that Audi & Porche are owned by the same company - Volkswagen Group.
In this edition, I try to analyze this business model where huge brands either launch new product lines or acquire competitors and let them operate as different brands - which are perceived as “options” by the customers.
The Illusion of Choice
Here are some examples of companies that own competing brands for the same product:
FMCG brands by Unilever and P&G
Lifebuoy, Lux and Dove. Lifebuoy is comparatively cheaper and aimed at the low-income section of society. Lux is mid-ranged and conveys a message of being beautiful. Dove is high priced and talks about the experiment of a moisturizer in a soap. Similarly, Ariel and Tide are both owned by P&G. Even Pantene, Head & Shoulders & Olay are owned by P&G.
Coca Cola and Pepsico Drinks
Coca Cola Company owns Sprite, Fanta and Coca Cola. The different flavors or fizz-level appeal to different sections of buyers. Similarly, Pepsico owns Pepsi, 7-up, Mirinda and Mountain Dew.
BBK Electronics Corporation
BBK Electronics markets smartphones under Realme, Oppo, Vivo, OnePlus and iQOO brands. On the other hand, mi has launched Poco in competition to BBK.
Automobile
Volkswagen Group markets its cars targeting different buyer groups under Audi, Lamborghini, Porche, Bentley, Bugatti, Skoda and Volkswagen brands.
Brewery Ownership
AbInBev, Diageo, Heineken and Carlsberg Group control some of the largest brands of beers globally. When you order your next pint, although you think you have too many choices, you are really just ordering a product made by one of the leading 5 brands!
Beauty & Cosmetics
7 Companies control ownership of 182 beauty brands. Some of the leading brands like Garnier, Biotherm, YSL, Lancôme etc. are owned by L’oreal.
Fashion & Luxury
Just 6 companies own more than 40 competing fashion and luxury brands. Coach and Kate Spade are owned by the same parent company. So no matter where you buy your $500 purse from, Tapestry makes money :)
Why do companies create competing brands?
More space on the retail shelf: There is only enough shelf-space at the retail outlet. If Reliance Fresh sells 5 types of Shampoos, P&G is better off by providing 3 out of the 5 - Head & Shoulders, Pantene & Olay - rather than selling just 1 type of Shampoo. Also, P&G can experiment with the pricing and marketing of these 3 shampoos to let them find their own niche.
Control price movement in the market: If you own most of the brands selling a product (eg. Mid-range mobile phones: Oppo, OnePlus & Vivo), you can control the pricing while keeping competitors at bay. This is a sweet oligopoly.
Consumer Segmentation: This is the most important reason. Different brands market themselves to appeal to different consumer segments. Companies like Unilever, LVMH, AbInDev create competing brands to market themselves to these target segments without losing the brand image. Also, since the consumer is mostly unaware of the parent brand, they have an “illusion of choice”.
This trend of large conglomerates owning competing brands is more prevalent in B2C fast-moving goods space given the volume, frequency of purchase, and wide-ranging customer segments.
Can you think of other industries where this model might apply?
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