The concept of Brand Portfolio Strategy has been around for a while. However most companies do not manage their brands very well, and a lot of them do not do it all. This is often because of the silo structure within many organisations.
Whatever the reason, there is significant room for improvement and some worthwhile pay-offs in getting it right.
There are five main ingredients to effective brand portfolio strategy:
The two common pitfalls that reduce the clarity of a brand portfolio are an unclear brand mission and the presence of too many brands. If a company changes its business strategy, the brand strategy must follow.
UPS is a glowing success story of how clarifying the mission and product offering can deliver business results. In the mid Nineties UPS was perceived as the small package delivery company with the brown trucks, despite its global logistics and delivery capabilities. UPS’s image was a barrier to success. To close this gap UPS introduced a host of new products and services to provide substance behind the new UPS, under a new umbrella sub-brand – UPS Supply Chain Solutions. To communicate its position as a global business, UPS created another two sub brands: UPS Sonic Air, the next-plane-out delivery service; and UPS Global Advisor, an information resource for shippers. Together UPS Sonic Air, UPS Global Advisor and UPS Supply Chain Solutions fuelled the repositioning of UPS. The challenge for UPS now is to manage these brands as part of its portfolio.
Brand portfolio rationalisation is a well-known yet under-leveraged concept. Many firms simply create too many brands, leaving them with organisational paralysis, an inability to fit a new offering into the overall portfolio, and brandbuilding activities that are randomly budgeted.
Nobody knows which are the major strategic brands of the future that will deliver against business objectives.
Unilever has experienced what it is like to be in this danger zone. Its response was a reduction in the number of brands from 1,600 to 400. But much more importantly, they provided a focus within those remaining 400 brands as to which were going to be the truly strategic brands for the future.
How can a brand asset be leveraged to create larger and stronger business entities? I believe there to be many brands in the UK that are under-leveraged. The Dove brand provides some inspiration.
In 1955, Dove started as a soap, a beauty bar containing moisturiser. In the early Nineties it was extended into body wash, where it captured market leadership with a price premium of 50%.
Having proved the strength of the Dove brand, it has since been extended into body refreshers, deodorants and shampoos.
There is a lot we can learn from this. First of all, if you have a strong brand platform with a leveragable, strong attribute (in this case, moisturising), you have the opportunity to build a big business. Dove sales went from $200 million to $200,000 million.
Second, it is critical to extend the brand gradually and attack each marketplace separately. Each successful market entry will further strengthen the brand, enabling it to enter more markets.
Third, extending the brand into new categories may fuel growth in the original business. After establishing the brand in body wash and body refreshers, Dove’s soap business rose by 30%.
Fourth, branded ingredients can be important means to drive new associations with the core brand but they have to live up to their promise.
Dove’s nutrient ingredients were crucial to getting the body wash right just as the weightless moisturiser was essential for the shampoo.
However, the Dove story does not imply that you can put a successful brand on any new innovation that seems to fit. If we know anything in marketing, we know that most new products fail. And not only that, we know why they fail – because most are not differentiated, providing no new customer benefits. An undifferentiated product extension will fail and possibly damage the core brand in the fall.
It is a rare brand that doesn’t need a little energy.
One product category after another is maturing and becoming boring and lifeless – think of Nokia and Volvo. The concept of the branded energiser, which I define as a sub brand or brand that energises and enhances a parent brand, addresses this. It can take many forms, including products, promotions and endorsers.
Heinz Ketchup is a boring product with a venerable brand. In 2000 the people at Heinz discovered that the ketchup category was seen as tired. They conducted research among kids, finding they couldn’t get ketchup out of the bottle, that they liked colourful foods and that they liked to play with food. These revelations may not seem startling but Heinz knew what to do with them. They launched EZ Squirt ketchup in colours like Funky Purple and Blastin’ Green.
It’s disgusting but the kids loved it, and that energised Heinz. Its sales rose 15% in the first year and the whole category rose 5%.
Differentiation is the most important aspect in branding. If you have differentiation, a new offering is likely to succeed, if you lose it, you are likely to fade. But how do you get differentiation?
As soon as you have launched a new product, you’ve got those bad guys copying you and before you know it everybody has the same product as you. One innovative way of achieving differentiation is to use a branded differentiator.
A branded differentiator is an actively managed branded feature, service, programme or ingredient that provides meaningful differentiation to the parent brand. In the US, the Westin hotel chain competes in a space that is about as homogenous as it gets. What Westin did was to focus on core functional differentiation – they invented a better bed. It’s got double the number of springs, it’s smoother and softer, it’s got five pillows, a better duvet: it’s a better bed. Westin didn’t just create a better bed, they successfully branded it ‘The Heavenly Bed.’ They own it – they own the benefit in customers’ eyes – and are actively managing this brand asset extending the brand into The Heavenly Shower, Heavenly Towels, Heavenly Soap and Heavenly Shampoo.
To succeed in today’s fast-moving environment, executives must pay attention to the new – and for the most part unfamiliar – attribute of your company’s brands: their relevance. A brand may seem strong, commanding trust, esteem and perceived quality, but market share may be slipping. Why? The product category may be fading, being replaced by another.
You can make the best people carrier in the world, and customers may tell their friends about it, but if they want a 4x4 it doesn’t matter how much they love your people carrier. If you are primarily known for people carriers, and submarkets like 4x4s and Hybrids emerge, you have to wonder, am I still relevant?
We spend too much time on brand preference –trying to make sure customers buy our brand rather than a competitor’s – and far too little time on ensuring brand relevance. Yet without relevance, preference may not be worthwhile.
We have to spend more time and resources on identifying and making what customers want to buy, especially given the dynamic, shifting and elusive nature of customer segments and needs.
We need a sense-and-respond approach to trends, and the insight and analysis capability to enable that approach. Firms deal with trends differently: some firms neglect them, some respond to them and some drive them. The important thing is to recognise which category you are in and create the systems and processes to manage it.
There are three kinds of trend neglecters. There are the ones that would like to identify, evaluate and respond to trends, but are just not good at it.
There are those who take trends for fads. In 1977, Ken Olsen, founder of the minicomputer maker Digital Equipment Corporation, said famously that there is no way that people would ever want a computer in their home. Then there are the ‘stick-to-your-knitting’ companies, firms that do not stay informed about market trends, believing the recipe for success is to keep on doing things better and better at lower and lower cost.
These track emerging trends closely and take responsive action to keep their offerings current and relevant. Because neglecting a trend is risky and driving a trend is only an option if you have a superb sense-and-respond mechanism, this is a sound strategy.
An effective trend responder requires two capabilities. The first is to recognise and evaluate trends effectively. The second is the ability to modify, reposition and/or rebrand the organisation’s offerings so they remain relevant to the market. The fast-food industry today is a good example of trend response and relevance.
The industry is in a frenzied identity crisis as their customers increasingly opt for healthy foods.
A new sub-category of healthy fast foods has emerged which is rapidly making traditional fast foods irrelevant to a large number of customers.
Finally there are the trend drivers. Do this well, and it’s a home run. These companies drive the creation of new product categories – a terrific capability that very few firms have. IBM was a trend driver during the latter part of the Nineties, creating a new business category with the launch of ‘e-Business’.
As with other success stories, IBM invested heavily in getting it right from the beginning and spent more than $1.5 billion communicating the repositioning of the product class. Now it is trying to do the same thing with On-Demand.
Taking today home
This article originally appeared in British Brands, the publication of the British Brands Group, issue 20. It is based on the 2004 Brands Lecture delivered by David Aaker. The full text of this lecture and the three preceding lectures by Tim Ambler, Jeremy Bullmore and Rob Malcolm are available free in hard copy or pdf from the British Brands Group (Contact firstname.lastname@example.org or telephone 07020 934250).
This article was first published on brandrepublic.com