National brands (or manufacturers’ brands) have long dominated the retail scene. In recent times, however, increasing numbers of retailers and wholesalers have created their own store brands (or private brands). Store brands have been gaining strength for more than two decades, but recent tighter economic times have created a store-brand boom. Studies show that consumers are now buying even more private brands, which on average yield a 25 percent savings.36 More frugal times give store brands a boost as consumers become more price-conscious and less brand-conscious.

In fact, store brands have grown much faster than national brands in recent years. In a recent survey, 65 percent of consumers indicated that they buy store brands whenever they are available in a supermarket. Similarly, for apparel sales, department store private-label brands have shot up. At Kohl’s, for example, private-label sales account for more than half of its annual revenue.37

Many large retailers skillfully market a deep assortment of store-brand merchandise. For example, Kroger’s private brands—the Kroger house brand, Private Selection, Heritage Farm, Simple Truth (natural and organic), Psst and Check This Out (savings), and others—add up to a whopping 25 percent of the giant grocery retailer’s sales, nearly $25 billion worth annually. At thrifty grocery chain ALDI, more than 90 percent of sales come from private brands such as Baker’s Choice, Friendly Farms, Simply Nature, and Mama Cozzi’s Pizza Kitchen. Even online retailer Amazon has developed a stable of private brands, including AmazonBasics (electronics), Pinzon (kitchen gadgets), Strathwood (outdoor furniture), Pike Street (bath and home products), and Denali (tools).38

Once known as “generic” or “no-name” brands, today’s store brands have shed their image as cheap knockoffs of national brands. Store brands now offer much greater selection, and they are rapidly achieving name-brand quality. In fact, retailers such as Target and Trader Joe’s are out-innovating many of their national-brand competitors. Kroger even offers a Kroger brand guarantee—“Try it, like it, or get the national brand free.” As a result, consumers are becoming loyal to store brands for reasons besides price. In some cases, consumers are even willing to pay more for store brands that have been positioned as gourmet or premium items.

In the so-called battle of the brands between national and private brands, retailers have many advantages. They control what products they stock, where they go on the shelf, what prices they charge, and which ones they will feature in local promotions. Retailers often price their store brands lower than comparable national brands and feature the price differences in side-by-side comparisons on store shelves. Although store brands can be hard to establish and costly to stock and promote, they also yield higher profit margins for the reseller. And they give resellers exclusive products that cannot be bought from competitors, resulting in greater store traffic and loyalty. Retailer Trader Joe’s, which carries approximately 90 percent store brands, largely controls its own brand destiny rather than relying on producers to make and manage the brands it needs to serve its customers best.

To compete with store brands, national brands must sharpen their value propositions, especially when appealing to today’s more frugal consumers. Many national brands are fighting back by rolling out more discounts and coupons to defend their market share. In the long run, however, leading brand marketers must compete by investing in new brands, new features, and quality improvements that set them apart. They must design strong advertising programs to maintain high awareness and preference. And they must find ways to partner with major distributors to find distribution economies and improve joint performance.

For example, in response to the surge in private-label sales, consumer product giant Procter & Gamble has redoubled its efforts to develop and promote new and better products, particularly at lower price points. “We invest $2 billion a year in research and development, $400 million on consumer knowledge, and about 10 percent of sales on advertising,” says P&G’s CEO. “Store brands don’t have that capacity.” As a result, P&G brands still dominate in their categories. For example, its Tide, Gain, Cheer, and other premium laundry detergent brands capture a combined 60 percent of the $7 billion U.S. detergent market.39

Most manufacturers take years and spend millions to create their own brand names. However, some companies license names or symbols previously created by other manufacturers, names of well-known celebrities, or characters from popular movies and books. For a fee, any of these can provide an instant and proven brand name. For example, consider the Kodak brand with its familiar red and yellow colors, which has retained its value even after the company went bankrupt and discontinued its consumer products:40

Consumer products carrying the Kodak name are no longer made by Eastman Kodak, which now focuses exclusively on printing-related commercial equipment and technology following its bankruptcy a few years ago. But the Kodak brand name and associated “Kodak moments” still resonate powerfully with consumers. So even though Eastman Kodak has dropped its consumer lines, we’ll still be seeing a lot of Kodak-branded consumer products made by other companies under licensing agreements with Eastman Kodak. For example, Sakar International now makes Kodak cameras and accessories, and the Bullitt Group will soon launch a variety of Kodak electronics, including an Android smartphone and a tablet computer. Video monitoring company Seedonk makes and sells a Kodak Baby Monitoring System.

Thus, the venerable old Kodak name still has value to both Eastman Kodak and the licensees who put it on their products. For Kodak, brand licensing agreements earn the company upward of $200 million a year. In turn, licensees get a name that’s immediately familiar and trusted—it will be a lot easier to market a Kodak phone than a Bullitt phone or a Kodak baby monitoring system than a Seedonk one. “It was difficult to find a brand that resonated—family values, taking care of loved ones,” says a Seedonk executive. “Then the Kodak opportunity came up. Kodak Moments, these are things that are important to our customers.”

Apparel and accessories sellers pay large royalties to adorn their products—from blouses to ties and linens to luggage—with the names or initials of well-known fashion innovators such as Calvin Klein, Tommy Hilfiger, Gucci, or Armani. Sellers of children’s products attach an almost endless list of character names to clothing, toys, school supplies, linens, dolls, lunch boxes, cereals, and other items. Licensed character names range from classics such as Sesame Street, Disney, Star Wars, Scooby Doo, Hello Kitty, SpongeBob SquarePants, and Dr. Seuss characters to the more recent Doc McStuffins, Monster High, Frozen, and Minions. And currently, numerous top-selling retail toys are products based on television shows and movies.

Name and character licensing has grown rapidly in recent years. Annual retail sales of licensed products worldwide have grown from only $4 billion in 1977 to $55 billion in 1987 and more than $259 billion today. Licensing can be a highly profitable business for many companies. For example, Nickelodeon’s hugely popular SpongeBob SquarePants character by itself has generated some $12 billion worth of endorsement deals over the past 15 years. Disney is the world’s biggest licensor with a studio full of popular characters, from the Disney Princesses and Disney Fairies to heroes from Toy Story and Star Wars and classic characters such as Mickey and Minnie Mouse. Disney characters reaped a reported $45 billion in worldwide merchandise sales last year.41

Co-branding occurs when two established brand names of different companies are used on the same product. Co-branding offers many advantages. Because each brand operates in a different category, the combined brands create broader consumer appeal and greater brand equity. For example, Benjamin Moore and Pottery Barn joined forces to create a special collection of Benjamin Moore paint colors designed to perfectly coordinate with Pottery Barn’s unique furnishings and accents. Taco Bell and Doritos teamed up to create the Doritos Locos Taco. Taco Bell sold more than 100 million of the tacos in just the first 10 weeks and quickly added Cool Ranch and Fiery versions and has since sold more than a billion. More than just co-branding, these companies are “co-making” these products.

Co-branding can take advantage of the complementary strengths of two brands. It also allows a company to expand its existing brand into a category it might otherwise have difficulty entering alone. For example, Nike and Apple co-branded the Nike+iPod Sport Kit, which lets runners link their Nike shoes with their iPods to track and enhance running performance in real time. The Nike+iPod arrangement gave Apple a presence in the sports and fitness market. At the same time, it helps Nike bring new value to its customers.

Co-branding can also have limitations. Such relationships usually involve complex legal contracts and licenses. Co-branding partners must carefully coordinate their advertising, sales promotion, and other marketing efforts. Finally, when co-branding, each partner must trust that the other will take good care of its brand. If something damages the reputation of one brand, it can tarnish the co-brand as well.

Line extensions occur when a company extends existing brand names to new forms, colors, sizes, ingredients, or flavors of an existing product category. For example, over the years, KFC has extended its “finger lickin’ good” chicken lineup well beyond original recipe, bone-in Kentucky fried chicken. It now offers grilled chicken, boneless fried chicken, chicken tenders, hot wings, chicken bites, chicken popcorn nuggets, a Doublicious chicken-bacon-cheese sandwich, and KFC Go Cups—chicken and potato wedges in a handy car-cup holder that lets customers snack on the go.

A company might introduce line extensions as a low-cost, low-risk way to introduce new products. Or it might want to meet consumer desires for variety, use excess capacity, or simply command more shelf space from resellers. However, line extensions involve some risks. An overextended brand name might cause consumer confusion or lose some of its specific meaning.

For example, in its efforts to offer something for everyone—from basic burger buffs to practical parents to health-minded fast-food seekers—McDonald’s has created a menu bulging with options. Some customers find the crowded menu a bit overwhelming, and offering so many choices has complicated the chain’s food assembly process and slowed service at counters and drive-thrus. In response, McDonald’s has recently begun efforts to cut items and simplify its menu, especially at its drive-thrus, which account for 70 percent of sales.42

At some point, additional extensions might add little value to a line. For instance, the original Doritos Tortilla Chips have morphed into a U.S. roster of more than 20 different types of chips and flavors, plus dozens more in foreign markets. Flavors include everything from Nacho Cheese and Pizza Supreme to Blazin’ Buffalo & Ranch, Fiery Fusion, and Salsa Verde. Or how about duck-flavored Gold Peking Duck Chips or wasabi-flavored Mr. Dragon’s Fire Chips (Japan)? Although the line seems to be doing well with U.S. sales of more than $1.3 billion, the original Doritos chips now seem like just another flavor.43 And how much would adding yet another flavor steal from Doritos’ own sales versus those of competitors? A line extension works best when it takes sales away from competing brands, not when it “cannibalizes” the company’s other items.

A brand extension extends a current brand name to new or modified products in a new category. For example, Nest—the maker of stylish, connected, learning thermostats that can be controlled remotely from a phone—extended its line with an equally smart and stylish Nest Protect home smoke and carbon monoxide alarm. It’s now extending the Nest line to include “Works with Nest,” applications developed with a variety of partners that let its smart devices interact with and control everything from home video monitoring devices, smart door locks, and home lighting systems to home appliances and fitness tracking bands. All of the extensions fit together under Nest’s smart homes ­mission.44

These days, a large majority of new products are extensions of already-successful brands. Compared with building new brands, extensions can create immediate new-product familiarity and acceptance at lower development costs. For example, it’s not just any new wireless charging mat for your mobile devices, it’s a Duracell Powermat. And it’s not just a new, no-name over-the-counter sleep-aid, it’s Vicks ZzzQuil. Extensions such as the Duracell Powermat and Vicks ZzzQuil make good sense—they connect well with the core brand’s values and build on its strengths.

At the same time, a brand extension strategy involves some risk. The extension may confuse the image of the main brand—for example, how about Zippo perfume or Fruit of the Loom laundry detergent? Brand extensions such as Cheetos lip balm, Heinz pet food, and Life Savers gum met early deaths.45 Furthermore, a brand name may not be appropriate to a particular new product, even if it is well made and satisfying—would you consider flying on Hooters Air or wearing an Evian water-filled padded bra (both failed)? And if a brand extension fails, it may harm consumer attitudes toward other products carrying the same brand name. Thus, a company can’t just take a familiar brand name and slap it on a product in another category. Instead, a good brand extension should fit the parent brand, and the parent brand should give the extension competitive advantage in its new category.

Companies often market many different brands in a given product category. For example, in the United States, PepsiCo markets at least eight brands of soft drinks (Pepsi, Sierra Mist, Mountain Dew, Manzanita Sol, Mirinda, IZZE, Tropicana Twister, and Mug root beer), three brands of sports and energy drinks (Gatorade, AMP Energy, Starbucks Refreshers), four brands of bottled teas and coffees (Lipton, SoBe, Starbucks, and Tazo), three brands of bottled waters (Aquafina, H2OH!, and SoBe), and nine brands of fruit drinks (Tropicana, Dole, IZZE, Lipton, Looza, Ocean Spray, and others). Each brand includes a long list of sub-brands. For instance, SoBe consists of SoBe Teas & Elixers, SoBe Lifewater, SoBe Lean, and SoBe Lifewater with Coconut Water. Aquafina includes regular Aquafina, Aquafina Flavorsplash, and Aquafina Sparkling.

Multibranding offers a way to establish different features that appeal to different customer segments, lock up more reseller shelf space, and capture a larger market share. For example, although PepsiCo’s many brands of beverages compete with one another on supermarket shelves, the combined brands reap a much greater overall market share than any single brand ever could. Similarly, by positioning multiple brands in multiple segments, Pepsi’s eight soft drink brands combine to capture much more market share than any single brand could capture by itself.

A major drawback of multibranding is that each brand might obtain only a small market share, and none may be very profitable. The company may end up spreading its resources over many brands instead of building a few brands to a highly profitable level. These companies should reduce the number of brands they sell in a given category and set up tighter screening procedures for new brands. This happened to GM, which in recent years has cut numerous brands from its portfolio, including Saturn, Oldsmobile, Pontiac, Hummer, and Saab. Similarly, as part of its recent turnaround, Ford dropped its Mercury line, sold off Volvo, and pruned the number of Ford nameplates from 97 to fewer than 20.

A company might believe that the power of its existing brand name is waning, so a new brand name is needed. Or it may create a new brand name when it enters a new product category for which none of its current brand names is appropriate. For example, Toyota created the separate Lexus brand aimed at luxury car consumers and the Scion brand targeted toward millennial consumers.

As with multibranding, offering too many new brands can result in a company spreading its resources too thin. And in some industries, such as consumer packaged goods, consumers and retailers have become concerned that there are already too many brands with too few differences between them. Thus, P&G, PepsiCo, Kraft, and other large marketers of consumer products are now pursuing megabrand strategies—weeding out weaker or slower-growing brands and focusing their marketing dollars on brands that can achieve the number-one or number-two market share positions with good growth prospects in their categories.