Brand portfolio and architecture
Brand architecture
Brand architecture is the way in which the brands within a company’s portfolio are related to, and differentiated from, one another. The architecture should define the different leagues of branding within the organisation; how the corporate brand and sub-brands relate to and support each other; and how the sub-brands reflect or reinforce the core purpose of the corporate brand to which they belong.
“But surely the more established brands you have the better?”
The brand portfolio includes all the brands and sub-brands attached to product-market offerings, including co-brands with other brands. In order to distribute your investment most effectively it is important to look at the relationships between all the sub-brands and their strategic importance in overall brand building. This will help you answer the following questions:
> What is the logic of the structure?
> Does it provide clarity to the customer rather than complexity and confusion?
> Does the logic promote synergy and leverage?
> Does it provide a sense of order, purpose and direction to the organisation?
> Or does it suggest ad-hoc decision making that will lead to strategic drift and an incoherent jumble of brands?
Why managing a brand portfolio is important
Lack of focus means that energy and resources are dissipated. Focus, in contrast, ensures that people and resources are concentrated where they can add greatest value.
Musubi’s approach to portfolio management will influence the following areas:
Resource
Resources such as R&D and marketing spend need to be allocated to areas of best return. Each brand requires brand-building resources. Without a clear picture of the portfolio, it will be harder to identify how best to support the brands that will bring the best returns. If each brand is funded solely according to its profit contribution, high-potential brands with modest current sales could be starved of resources.
Efficiency
Create synergy with your brand portfolio – strong associations can not only benefit all the brands but also be cost efficient by creating economies of scale in both manufacturing and communications. Looking at brands as stand alone silos is a recipe for confusion and inefficiency. Are there too many or too few brands? Could some be consolidated, eliminated or sold?
Growth
There are six ways in which portfolio management enhances growth:
Clear prioritisation of future focus by major market
Prioritisation by brand and product
Concentration of spend on priority market, brands and products
Operational cost savings through simplified business
Disposal of brands which don’t fit
Gap filling by product development and acquisition
Leverage
Leverage your brand equity. Leveraging brands makes them work harder. A proper portfolio analysis can highlight which brands are best suited to extension, for instance. The more effective and powerful your brands, the stronger your leverage and the bottom line.
Clarity
Clarity of product offerings will underpin a consistent brand identity with all the stakeholders.
Brand relationships within a portfolio
There are three generic relationships between a master brand and sub-brands:
Single brand across organisation
Examples include Virgin, Red Cross or Oxford University. These brands use a single name across all their activities and this name is how they are known to all their stakeholders – consumers, employees, shareholders, partners, suppliers and other parties.
Endorsed brands
Like Nestle’s KitKat, Sony Playstation or Polo by Ralph Lauren. The endorsement of a parent brand should add credibility to the endorsed brand in the eyes of consumers. This strategy also allows companies who operate in many categories to differentiate their different product groups’ positioning.
House of brands
Like Procter & Gamble’s Pampers or Unilever’s Persil. The individual sub-brands are offered to consumers, and the parent brand gets little or no prominence. Other stakeholders, like shareholders or partners, know the company by its parent brand.
Characteristics of the ideal brand portfolio
There is a clear analogy between managing a brand portfolio and a football team [Davidson, 2002 b]. The football pitch is the market map. You have to decide in which areas you will dominate – whether, for example, the midfield or the flanks. The players, represented by brands, have to cover the priority areas. Each will have a specific role but will still contribute to the team.
The manager will avoid players who duplicate – for example, two small fast strikers – or who detract from team effort. Some players are stars (superbrands) while others have a more pedestrian role (support brands).
Companies, unlike football teams, are not restricted by any fixed boundaries, and may enter any market they wish. And they are not limited to products or brands – though perhaps they should be. The biggest mistake is to allow each brand to be managed in isolation because what is right for an individual brand may be wrong for the portfolio. So the ideal portfolio:
Fits the company’s future vision and destination
Prioritises markets and key segments
Efficiently covers those priority segments
Ruthlessly prunes out those that do not fit
Fills gaps through new or extended brands and acquisitions
Major mistakes in portfolio management
The biggest mistake is to allow each brand to be managed in isolation because what is right for an individual brand may be wrong for the portfolio in terms of:
Too many brands in too many segments: there may be too many brands in relation to consumer needs, retailer space and company ability to promote
Duplication and overlap
Gaps in priority market segments
Inefficiencies in operations and the supply chain
Diffused and therefore ineffective resource allocation.
To return to the football analogy, this approach will result in bunching and poor coverage of the playing area
Prioritising segments
Prioritise in the context of the company vision Jack Welsh of the US company General Electric outlined the vision he had for GE in 1981:
“We will become number one or two in every market we serve and revolutionise this company to have the speed and agility of a small enterprise.”
Taking a stricter look at marketing resources forces companies to look more critically at their portfolios. There are a number of issues to address:
On what basis should brands be invested in for future growth?
Which should be maintained as local players, which should enter the global arena? And if they should, how?
What can be extended?
What market should we prepare for?
What should be sold off or killed?
Develop a brand framework
Ask six key questions:
How do the brands relate to the corporate brand?
What do the brands derive from the parent brand? And what do they give back?
What role does each brand have in the portfolio?
Are the different brands and sub-brands sufficiently differentiated?
Does the consumer understand the differentiation?
Is the whole brand architecture greater than the sum of its parts?
Criteria portfolio analysis
A product with a high relative market share in a growing market is a ‘star’. A minor product in a falling market is a ‘dog’. In between are ‘cash cows’ with high market shares in mature markets, and ‘problem children’ with low shares in fast-growing markets. A balanced portfolio would take advantage of the relative strength of each type of brand to support others.
1 Brand profitability
2 Relative consumer value
3 Relative brand share and trend
4 Market sector position
5 Sales level and trend
6 Differentiation
7 Distribution and trade strength
8 Innovation record
9 Future potential (extendability)
10 Awareness and loyality
11 Investment support (advertising , R&D)