Bajaj Auto’s branding strategy. What does management theory say?

Yesterday, in my post I had suggested that analyzing the new branding strategy adopted by Rajiv Bajaj of Bajaj Auto would be a great learning experience. I had suggested that we will analyze it from two perspectives. First, I will discuss it from the point of view of what management theory says.

Positioning refers to how the brand is perceived in the mind of the customer. In other words, what does the customer think of the brand. Perception of the brand can be created in the mind of the customer or the customer develops it on its own taking his experience with the brand into consideration. Positioning is what you do to the mind of the customer and not what you do to the product in the factory.

In simple terms, a brand should mean one and only one thing to the customer. In other words, a brand can have just one positioning. The positioning that each brand occupies in the mind of the customer has to be one, preferably unique. So, what Rajiv Bajaj is trying to do is exactly right because today the Bajaj brand means too many things to too many people. Even in the Rahul Bajaj Group, it means too many things to too many people, that is, finance, insurance, auto rickshaw, high-end and low-end bikes. As such, Rajiv is correct when he says that the Bajaj brand has been diluted and stretched beyond what is logical.

The other part of the branding and positioning theory that needs to be discussed is the issue of brand extension or the use of an umbrella brand. Brand extensions by and large do not work. It has financial and some marketing logic on its side but not the logic of the mind of the customer. Remember, it is the mind of the customers where all the marketing battles are lost and won and not in the retail stores. The financial logic behind adopting brand extension strategy (trade acceptance, consumer acceptance, lower advertising costs, corporate image) is so overwhelming that it is very difficult to counter it.
Because of the overwhelming financial logic in favor of brand extensions, a large number of companies adopt the strategy. Colgate has adopted brand extension as a strategy. They have Colgate toothpaste, Colgate toothbrushes, Colgate Dant Manjan, Colgate powder and more. But if you visit a Kirana shop and say, “Please give me a Colgate,” the shopkeeper will either hand you Colgate toothpaste or ask you what do you want (toothpaste, toothbrush or talcum powder). Colgate was positioned as a toothpaste and that is the positioning that the customers remember in their mind.

I recently noticed that the only TV commercial that ones sees on the TV is of Colgate toothpaste and not for the brand extension products. This clearly suggests that either the brand extension products of Colgate are not very successful or they are so popular that they do not need any advertising. I will let you decide which is the case. However, I am sure that Colgate toothpaste is the highest selling and the most profitable product under the Colgate brand. The reason-Colgate is positioned in the mind of the customer as a toothpaste.

In the mind of the customer, Colgate is perceived as a toothpaste and not as a toothbrush or talcum powder. So when the customer thinks of talcum powder, Colgate is not part of the evoked set. We all know that when a brand is not part of the evoked set, the probability that the customer will buy or ask for the brand at the retail outlet is zero.

On the other hand, lets look at some of the most successful companies like Procter & Gamble (P&G) and Hindustan Unilever that follow single-brand-single-positioning strategy (SBSP). In the case of these companies, one brand means just one thing. Each brand occupies a unique niche in the mind of the customer. For example, Tide brand makes clothes “white.” Cheer brand makes them “whiter than white” and Bold brand makes them “bright.” All these three detergent brands are very successful brands of P&G.

Also, even when market conditions change, no effort is made by these companies to change the positioning of the existing brand. Rather, these companies introduce a new brand. These companies believe, and rightly so, that it is easy and cost effective to introduce a new brand than to change the established positioning of an existing brand. This is absolutely true and this is what is suggested by the concept of positioning. In fact, these companies would kill an old brand rather than try to change its positioning. Let’s discuss the example of Ivory soap. Ivory was a soap and is still a soap for over 100 years. When laundry detergents were introduced, obviously there was pressure to extend the brand and come out with Ivory detergent. But this would have meant changing the positioning of Ivory in the prospect’s mind which is not only a very difficult task but also carries with it the risk of diluting the original positioning of the original brand. So the company introduced a new product under the Tide brand. Now the new concept and the new product had its own new brand name with its own positioning. It had its own identity. Tide became an enormous success. Ivory is still growing even though it over 100 years old.

There are many like Rahul Bajaj who have misunderstood the concept of branding and positioning. For instance, Godrej was trying to change the positioning of its Cinthol soap brand for the third time. Cinthol brand was introduced in 1952 as the first deodorant soap. It was initially positioned as a “soap for men.” Later it was repositioned as a “family soap.” Now Godrej wants to position it as a “soap for the youth” with the help of a costly campaign starring Hrithik Roshan. In 1980, Cinthol was a leading brand with double digit market share and its market share today is a measily 2.5% of the Rs. 6000 crore soap market. Let me assure you that Cinthol is going nowhere. This third effort to reposition the brand will end up confusing the customers even more. Men will think it is for the family. Family will think it is for the youth. Youth will say that they will not use the soap as their family is also using it. The positioning of Cinthol has been messed up so badly that there is no hope for it. Do you think that customers are so stupid that they will keep on changing what they think about the product based on what the company keeps telling them? Godrej should have followed SBSP strategy. They should have let Cinthol remain with its original positioning of “soap for men.” Later they could have introduced a “soap for the family” under a new brand. Now they could have used Hrithik Roshan to introduce a new “soap for the youth” with a new brand name.

There is another mistaken belief that the brand gets its strength from the company name or the umbrella brand. This is not true. In fact, company gets it strength from its brand(s). We all know that big and famous companies like Coca Cola, Pepsi, GM, Tatas and Ford have introduced products that have failed miserably.

The essence of branding and positioning is to distinguish the product from other products. You don’t want another product to have your product’s name as it will create confusion. If you don’t want other products of other companies to not have similar brand name as your brand name then logically your own other products should also not have the same name. It doesn’t matter who owns the other products. As such, a number of products having the same brand name whether owned by the same company or another company is illogical.

It is because of the above logic that brand extensions or umbrella brands do not work. Brand extensions give one brand too many meaning which from the customer’s point of view is confusing. A brand is like a rubber band. It will stretch but break if stretched beyond a certain point. The Bajaj brand has been overstretched. It is time to change course and that is what it seems Rajiv Bajaj is doing.

Brand extensions may work when the competition level is low and the number of products are few. When the competition level is low one can still get away with brand extension. But in a highly competitive environment like the motorcycle market, it would be a disaster. Also, the number of products is increasing in the motorcycle market. The pace of introduction of new models has been increasing because of fast changing technology and increased competition. A separate branding and positioning is a must for every new product introduction for the purpose of communication with the customer otherwise some good products will disappear in the crowded market place.

Brand extension names are also forgettable because they do not have an independent positioning of their own in the mind of the customer. In fact, they dilute the positioning of the original brand.

Companies like P&G and HLL have got it right. They have correctly understood the theoretical basis behind the concepts of branding and positioning. Taking the above into consideration, it seems that Rajiv Bajaj is absolutely on the right track.

Avinash Narula

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Dear Avinash,

I found the article interesting. You are advocating independent brands – which looks like an expensive and ideal thing. But Aaker (Brand relationship spectrum article) was open to having any position in the spectrum. In my opinion, What matters is how you implement it. You could use Endorsed brands or Sub brands strategy also quite effectively. I think Bajaj’s strategy of using sub brands was quite ok. Sometimes, people have make changes for the sake of making changes. rather than the cosmetics, i feel Bajaj should focus on how to connect & engage with the customers. How he could leverage on the potential Hero Honda – Honda split? I eagerly await your feedback to guide me on this topic.


Good to see real expertise on display. Your courbitntion is most welcome.


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