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Tuesday, December 11, 2012

'My main brand is better. Always. Period.'

I came across a couple of news articles recently which talk of how MNCs in India are trying to 'adjust' the relative strength of their portfolio brands to mirror their global situation. What that means is that globally Brand A might be stronger than Brand B, and if the case is reversed in India, the corporate honchos will do all they can to make Brand B weaker than A.

The first example is Coca Cola India, which is (as usual) trying to push brand Coca Cola ahead of its brother brand Thums Up. Link here. The other example is of Volkswagen trying its best to prove to Indian customers that the VW brand is actually superior to Skoda. Link here.

Neither company is trying this for the first time. Coke has been attempting fratricide on Thums Up for over a decade now, and VW has been after subsidiary Skoda's brand equity since they entered India in 2007. Both have failed spectacularly - and yet they continue their efforts. Why?

The articles highlight some of the management thinking that goes behind such decisions: "We need our brands to be consistently positioned across the globe", "We want to offer our consumers the same experience world over", so on and so forth.

Maybe I don't understand long term multinational branding strategy too well, but it looks like these companies are actually going away from what customers are telling them about their brands. The current strategy of keeping Coke prices lower than Thums Up prices is still ok - at least it isn't actively hurting Thums Up. But Coke did exactly that a few years back when it famously stopped ALL marketing support for Thums Up while egging the Coke brand on. As a customer did you or I care? We still drank Thums Up by the droves and kept it a clear No. 1 in India. Today thankfully Coke gives brand Thums Up good marketing support, though the itch is always there to support brand Coke more (from the article: "...Vision 20:20 as it's called internally, most critical markets have been asked to show volume growth for the flagship brand")

The VW-Skoda story may not have such a reasonably happy ending though. Skoda entered India early (in 2001, vs 2007 for VW), and has built some tremendous brand equity here over the last decade. VW is forcibly trying to put Skoda 'in its place' - as a 'budget brand' below brand VW. Therefore all Skodas are now ~5-10% cheaper than VWs. There are two things to consider here.

One, the Indian customer's love and respect for brand Skoda is driven by the core product offering - the Octavia, Laura, and Superb have all been massive hits here. And all play in the 'premium' space, so lower pricing may not matter for customers. They may simply see Skoda as an even better deal - strong brand with great pricing.

But two, there are fears Skoda quality may go down to ensure the lower price points can be met. Now that would be a tragedy. And an ironic one at that. Skoda is a brand on the move, shedding its legacy quality issues in Europe and become a truly strong player. If these same legacy issues cause it to forever remain an underling brand to VW (with poor quality at that), then we would have come a full circle!

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