are consultants with IBM Business Consulting Services. They have both worked on many projects on consumer goods marketing and loyalty schemes.

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Many brand manufacturers are facing increasing competition from competitors entering the market with extremely aggressive prices. To face this new competition the branded manufacturers traditionally lower their own prices or do not react to such attacks at all. Both strategies are not optimal. A third alternative is the two‐product strategy which can be successful in many cases. This strategy foresees a second, lower positioned product to be added to the existing higher positioned brand product, which is targeted directly against the low‐priced competitors. The most important aspect for such a strategy is that the two products are differentiated strongly enough to minimize cannibalization. This can be achieved by differentiating brand, quality, price and/or distribution. A two‐product strategy has proven successful in many countries and markets, but can also help in a less competitive environment by opening new distribution channels or offering more customized products for specific market segments.