Posted: March 24th, 2023
Companies are using sub-branding strategy to reinvent their operations in the market. For instance, in the motor vehicle industry, the Toyota Company employs this model to respond to market demands across the world. The approach considers social status, geographical landscape, and the nature of the business conducted by consumers when developing responsive products. Although corporations employ sub-branding as a market penetration model for differentiating products and boosting sales, sub-brands might remain unprofitable, adversely affecting parent companies’ trademark, leading to market failure.
Sub-branding has 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, increasing revenues. Although majority of 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. The advantages of sub-branding can lead to significant growth and 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. In addition, sub-branding requires additional financing systems during implementation. Therefore, a company must reorganize and refocus its resources to the new division, which may affect other operations. Besides, sub-brands can be unsuccessful during their launch, leading to adverse effects on companies’ trademark, which might affect customers’ trust and loyalty. Therefore, before the implementation of sub-branding, it is imperative to consider underlying disadvantages to avoid losses and product failure, which may lead to possible closure of an organization.
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