Interbrand Variant Overlap: Impact on Brand Preference and Portfolio Profit

Firms often carry a portfolio of multiple brands within a product category to target different quality tiers in the market. Furthermore, to satisfy heterogeneous consumer preferences within each quality tier, these firms also offer several variants for each brand. A natural outcome of this practice is interbrand variant overlap that could occur across tiers or within a tier. In this paper, we show that across-tier variant overlap is likely to diminish the preference of an upper-tier brand and enhance the preference of a lower-tier brand. We also find that variant overlap within a tier is likely to increase preferences of a brand belonging to the tier. Such variant overlap effects have important brand portfolio management implications for a multibrand firm. Specifically, we demonstrate that such a firm can enhance its portfolio profit under certain conditions by pruning its variants to reduce variant overlap. Because our paper relies on aggregate data, future research should investigate variant overlap at the individual level using panel or experimental data.