Multi-Brand Strategy For The Parts And Accessories Industry

As parts and accessories brands grow, inevitably the idea of launching new brands comes up. New brands can often be a good way to increase revenue, but there are risks.

At the 2024 E-Motiv Miami conference, Spork Marketing’s Jason Lancaster gave a presentation about multi-brand strategy from the marketing perspective. That presentation – as well as some key notes from that presentation and some additional info that didn’t make it into the deck – are shared below.

This post is inspired by Jason Lancaster’s presentation at EMOTIV Live Miami on September 6, 2024, as shown above.

First, Why Do Parts And Accessories Companies Go Multi-Brand?

A multi-brand strategy makes it easier to broaden the range of customers. For example:

• Offering a premium version of an existing product will boost margins
• Offering an economy version of an existing product can increase sales
• Creating channel-specific brands – like a “pro” brand that’s only available to business customers – can open up sales opportunities with minimal impact on existing brands

Regardless of the approach, the goal of going multi-brand is to increase revenue by leveraging an established supply chain (and data). The “trick” is to understand how new brands will increase sales. When multi-brand strategies fail, it’s often because the new brands are not meaningfully different, and/or because the brand strategy isn’t well understood.

Creating A Channel-Specific Brand

One of the simplest multi-brand concepts is to go channel-specific. For example, a direct-to-consumer (DTC) brand wants to expand into B2B. Because B2B customers have different needs and wants than individual end users, a B2B brand is created.

The B2B brand in this example is effectively a clone of the existing DTC brand, but with some key differences:

1. Product features are more compelling to B2B buyers (premium warranty includes labor reimbursement, for example)
2. Product messaging is tuned for the B2B audience (emphasis is on coverage and quality controls that reduce come-backs, for instance)
3. Pricing is lower, but B2B buyers must meet annual minimum order requirements

Of course, a dedicated brand for a specific channel might not be necessary…many brands are available across multiple channels. But there are advantages to offering channel-specific brands:

• Clearer and simpler messaging
• Clear differentiation minimizes overlap (channel specific brands are less likely to cannibalize sales from one another)
• Separate brands are stand-alone assets that can be sold off at a later date

Keys to Creating Channel-Specific Brands:

1. Make sure the brand needs its own channel. Creating a brand just for eBay or Amazon might be a good idea, but only if you can establish how Amazon and eBay brands must be differentiated.
2. Make sure the brand has channel-specific features. An Amazon-only brand should be developed to leverage the FBA program, whereas a DTC brand might not want to use FBA. A B2B brand should have different return and warranty policies.
3. Think about the exit as part of the strategy. A new DTC-only brand could be the key to the long-term growth of the company, or it could become an operational headache that isn’t worth the effort. Whatever channel-specific brand(s) you create, develop them with an exit plan.

<< Read Multi-Brand Strategy For The Parts And Accessories Industry >>

Creating Up Or Down Market Brands

Another multi-brand concept is to move either “up” the market (higher cost, higher margins) or “down” the market (lower cost, lower margins). Here’s a chart that’s central to this up-market vs. down-market concept:

Most businesses are described as either:

1. High margin, low volume, or
2. High volume, low margin

If a business is low margin, there’s an opportunity to move up-market to improve margins. If a business is high margin, there’s an opportunity to move down-market and increase revenue.

Keys To Moving Down Market

1. Don’t disclose the relationship between brands. Down-market brands will be cannibalistic if they’re perceived as “basically the same” as the parent brand. Avoid this possibility by keeping the down-market brand as separate from the main brand as possible.
2. Emphasize value rather than economy. Few people like buying the cheapest option, but everyone enjoys getting a good deal.
3. Focus on marketplaces. Low-margin brands often thrive on Amazon, eBay, and Walmart.com.
4. Focus on reviews. Economy/value brands don’t support robust marketing budgets, so customer reviews are critical to growth.

The marketing and branding requirements for a down-market brand are pretty minimal. In a perfect world, a move down-market borrows messaging that’s working from the main brand along with:

• A new logo and brand name
• A one-page website
• 1 or 2 brand social media accounts

TIP: Before launching a down-market brand, consider offering existing B2B partners a white-label. White label programs offer many of the benefits of moving down market, but require less effort.

Keys To Moving Up-Market

1. Leverage the existing brand. Unless the existing brand has a poor reputation, premium brands should always be linked to the low-cost brand as a “better” or “best” version. And if the premium brand cannibalizes sales? That’s a good thing!*
2. Differentiate up-market brands with obvious features, extras, and a premium warranty. Premium brands should have more “stuff” in the box and/or obvious differences. Premium brands should also have a longer warranty than the current brand.
3. Invest in everything the customer sees and touches. Premium brands will fail if they don’t appear premium; Product photography and video production must be top-tier. Packaging should set the standard for the niche. Installation instructions should be branded and high quality. And so on.
4. Focus on direct-to-consumer (DTC). While premium brands can be sold on marketplaces, it’s often difficult for a high-margin brand to obtain enough consumer reviews to thrive on a marketplace. As a result, most premium brand sales will come from a DTC website.
5. Reduce coverage. Premium products often aren’t available for every fitment, as the costs of stocking premium parts for low-volume fitments can destroy profits. Premium products should only be available for popular makes and models (additional fitments can always be added later).
6. Set prices high. Premium products often command double or triple the price of a cheap or low-cost product, dramatically increasing margins. At these higher margins, even low sales volumes can have a significant impact on net profit.

*B2B salespeople don’t view cannibalization as a good thing as it affects their compensation. Be sure to plan accordingly.

If there’s a downside to moving up-market, it’s that the marketing and branding requirements for an up-market brand are substantial:

• Find a premium brand to benchmark; WeatherTech and ACDelco both provide excellent benchmarks for creating a premium brand experience
• Message testing and marketplace positioning are critical; A premium brand that isn’t carefully targeted at a niche will struggle
• Invest in packaging: Doubling or tripling the cost of a box would be bad business for an economy brand, but it’s smart for premium brands (packaging has an outsized impact on perceived quality)
• Build a top-tier DTC website, with top-quality content (not just copy – images and video)
• Commit to posting regularly to YouTube, Facebook, and Instagram
• Invest in influencer marketing, as influencers can raise perceptions of products better than any marketing or advertising

The high cost of developing a premium brand is often a deterrent. However, the large up-front investment can be earned back relatively quickly if margins are high enough.

Two Final Keys To A Multi-Brand Strategy

1. Each brand has a clear and easy-to-explain focus
2. Everyone in the company understands why and how the new brands will help the company grow.

To the first point, brands should be clearly and easily differentiated to succeed. If the end user can’t understand why they should (or shouldn’t) buy a product from one brand vs. another, the brands aren’t positioned correctly. It should be simple and easy to explain the brands to anyone who asks. If it isn’t, it’s not a good plan.

To the second point, everyone in the company needs to understand a multi-brand strategy for it to succeed. At Spork, we’ve seen several multi-brand strategies sabotaged by individual sales staff or executives over the years. To avoid problems:

• Make sure all staff understand the products are different. If sales or support staff believe the products are identical except for the packaging, they’re going to undermine the whole enterprise.
• Don’t let staff sabotage long-term goals for short-term gains. When a new brand is first launched, there’s a temptation to drive some short-term growth by selling a new premium brand too cheaply, or by allowing a retailer to link a new low-cost brand with an existing premium brand. These actions violate the fundamental reasons the new brands were created and can have long-term effects.
• Monitor B2B sales staff. B2B sales staff will often fight a multi-brand strategy, as they tend to perceive incremental sales as inevitable. eg “We would have gotten these new brand sales if we’d just stuck with one brand and ________ instead.”

In our experience as an agency, multi-brand strategies work best when they’re championed by a senior exec with a firm grip on the entire organization. Usually, that’s the CEO or a senior sales executive.

Conclusion

Over the last 20 years, parts and accessories companies have seen an explosion in viable sales channels. Gone are the days of being dependent on a handful of B2B partners for growth. Now, parts and accessories companies can sell directly to consumers with their own Shopify website, by listing products on Amazon or eBay, or by dropshipping for individual retailers.

But the explosion in new sales channels like Amazon.com has not been all great for established companies. Up-and-coming DTC brands are rapidly taking market share from established brands by exploiting many of the concepts outlined in this post. As a result, adopting a multi-brand strategy is vital to the long-term success of established parts and accessories companies and new companies alike.