Strong Brands Not Product Differentiations Help Firms Become Market Leaders
A good product portfolio with
strong brands are help for companies to take leadership positions rather than
having many products with differentiations.
Ahmet Kirca, lead author and professor of Michigan State University said that this is not an effective strategy for managers as it can confuse customers as they don't see any reasons to pick one product over another and might end up going somewhere else. The study was based on an analysis of US automotive industry between 2007 and 2013.
"The more products you have in your portfolios might mean you're selling more products, but if you are making so many versions of the same product with different brands -- like an auto manufacturer making four different trucks and five different sedans that are priced similarly and are catered to the same kind customers with different brands -- it isn't the smartest strategy," Kirca said.
"Companies that have lots of different products in their portfolio will do much better if they have high-quality brands to help generate sales and market share" Kirca said. "For instance, BMW can afford to have the deepest portfolio in full-size car and small SUV categories along with a number of other types of vehicles like motorcycles because they have a high-quality positioning in the marketplace."
Lastly, Kirca's research revealed that innovation -- in today's market more than ever before -- is a critical asset for a brand's strategy and can make or break its performance.