2. Although multinationals have invested in the 'natural', organic, and vegetarian markets,
this has tended to be through standalone brands rather than sub-brands. This may be
changing.
'Natural', organic, and vegetarian brands have not tended to be international in their
scope, but some companies are building economies of scale through the common
ownership of niche brands.
Many marketers have introduced sub-brands with greater sensory appeal, be it
heightened fragrances, better design, or even a designer name.
Some companies are now segmenting their sub-brands based on the level of
engagement that different consumers have with the product category.
Need states and dayparts
More NPD is being targeted at particular need states, but to get brand loyalty and
premium pricing the needs have to be specific and valued by consumers.
Sub-brands are increasingly targeting the largest health need states – heart, bone, and
gut health – as well as putting together ranges of products that between them cover a
number of functions.
Some international brands are emerging to serve common niches, including lactose
intolerance, gluten intolerance, and diabetes. Indeed, products that meet a need during a
specific daypart – such as a morning wake-up drink – can be very successful.
Conclusions
The most important lesson of this report is to get the segmentation right. It is important to
target a distinct, specific, addressable segment rather than trying to serve too many
segments.
In a crowded marketplace it is increasingly necessary to educate consumers about how a
product might fit into their lifestyle: they need to understand the benefits of the product
and if necessary its key ingredients.
The potential of the niche might be greater than you think. Plus there could be further
opportunities for customizable products and direct sales, both offering the potential of
even higher margins.
Introduction
Targeting the individual versus broad marketing initiatives
The long-term trend among Western consumers, now being repeated in emerging markets, is
towards greater individualism. People are demanding products that are more tailored to their
needs and lifestyles, resulting in ever-more specific offerings from manufacturers. At the same
time, those manufacturers have expanded internationally, resulting in even more new brands on
supermarket shelves.
The effect has been a proliferation of brands and stock-keeping units in consumer packaged
goods. For example, in the US Hershey found itself in the habit of launching new pack types and
flavors, creating what was, from a consumer's point of view, "a bewildering sea of choices on the
store shelf" rather than "the exciting array of products and packaging it imagined for its offers"
(Ivey Business Journal, March/April 2012).
3. This has also been expensive for manufacturers. Marketing budgets have been pushed up by the
need to support a number of different brands, sometimes with different names in different
countries. This process has been reversed in recent years, and multinationals are increasingly
focusing their attention on mega-brands – existing brands that consumers already know and trust
– rather than on creating new ones. For example, Procter & Gamble (P&G) "is throwing its weight
behind fewer, bigger ideas" (Women's Wear Daily, November 2012). This allows for economies of
scale in their marketing efforts.
Companies are now finding that treating a mega-brand more as a marquee (or as an umbrella)
allows them to develop niche-oriented sub-brands that satisfy individualistic consumers while at
the same time retaining many of those economies of scale. This is 'brand multiplicity', described
as "multiple products and services from one brand, multiple target audiences, multiple need states
and different insights communicated and connected across multiple channels and touch-points"
(Journal of Brand Management, December 2012).
Such brand multiplicity reflects consumer multiplicity. "There [can be] a single consumer who at
different dayparts or at different need states, different stages in the development of their life will
consume for different targeted reasons" (Zein Abdalla, president of PepsiCo, quoted in Fair
Disclosure Wire, September 2013a). PepsiCo refers to these combinations of different target
groups, cohort groups, need states, dayparts, and occasions as 'consumer demand spaces'.
Companies are increasingly developing products that are targeted at these consumer demand
spaces. If they are executed well then they sit at a sweet spot that balances the umbrella brand
with the demands of the niche. Such niches of consumers can be price-insensitive and brand-
loyal, and therefore extremely profitable.
There is also an international element to this. If companies can identify consumer demand spaces
that are common across countries then it might be possible to generate some economies of scale
in market research, new product development and marketing campaigns, even without the benefit
of an umbrella brand.
About this report
How do you balance market demand for more specific products with the dangers of product
proliferation? This report shows how consumer packaged goods companies do it with a
combination of carefully structured brands based on distinct consumer segmentations. The
content offers an analysis of how multinational corporations are creating sub-brands and
independent companies are creating niche brands that target different demographic and
psychographic segments, need states, consumption occasions, and dayparts.
