Posted: March 23rd, 2023

The Advantages and Disadvantages of Sub-Branding

Companies are using sub-branding strategies to reinvent their operations in the market. For instance, Toyota Company employs this model in the motor vehicle industry to respond to market demands worldwide. The sub-branding approach considers social status, geographical landscape, and the nature of consumer business when developing responsive products. Although corporations are employing sub-branding as a market penetration model for differentiating products and boosting sales, sub-brands might remain unprofitable, adversely affecting parent companies’ trademarks and leading to market failure.

Sub-branding offers several advantages for companies. Firms prioritize products based on specific market segments, allowing them to expand their niche market. The model also enhances awareness and boosts sales for sub-brands, and hence, increases revenues. Although most sub-brands rely on the goodwill of the parent product for market penetration, customer loyalty is enhanced in both new and traditional markets. Companies can diversify investments to enable stakeholders to spread risk across a broader spectrum, which is advantageous for risk management. As a result, the advantages of sub-branding include significant market penetration growth and an improved revenue base.

Furthermore, sub-branding as a marketing strategy has various disadvantages. Independent sub-brands require an advertisement strategy, which escalates promotion and maintenance costs. Sub-branding requires additional financing systems during implementation. Therefore, a company must reorganize and refocus its resources on the new division, which may affect other operations. Besides, sub-brands can be unsuccessful during their launch, adversely influencing companies’ trademarks, affecting customers’ trust and loyalty. Therefore, before sub-branding implementation, it is imperative to consider underlying disadvantages to avoid losses, product failure, and possible closure of an organization.