brand portfolio optimization

8/10/2019 Brand Portfolio Optimization

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Can you have too much of a good thing? When it comes to brand portfolios the answer is yes.

Brands can be among a companys most valuable assets but too many brands and sub-brands canlimit growth and productivity.

In the past year alone, we have seen the likes of P&G, GE, Microso and Mondelez trim theirportfolio of brands for the purposes of getting back to their core, stream-lining or driving eciencyand eectiveness through their business. This is no easy task but the results of optimizing brandportfolios oen has a dramatically positive impact on the future success of the corporation. A.G.Laey summed up things well when he shared his view on P&Gs plans to divest some of theirbrands to optimize their portfolio, he said:

Im not interested in size at all, Im interested in whether we are the preferred choice of shoppers.

This paper outlines our thinking about managing brand portfolios and brand architectures andoutlines our approach to Brand Portfolio Optimization.

The Challenge the danger of over-proliferation

Over the last twenty years brand owners hunting growth have bought, created and extended moreand more new brands and sub-brands. Some are still buying, but more have announced plans to

streamline and prioritize ever burgeoning portfolios. Rather than deliver the growth they desire,too oen the results have been an over-proliferation of smaller brands and sub-brands creatingcluttered portfolios and over-complicated architectures.

This over-proliferation makes strategic brand management much more complex and time-consuming. Too many brands and a plethora of sub-brands encourage a lack of focus.

Every brand manager will want to defend their brand but businesses need to make the oenemotionally dicult decision to focus on fewer brands. The dangers are primarily two-fold:

P&Gs principal brands are down to 60. Its top

10 brands provide 50% of sales

LOreal has concentrated its eorts on tenmajor global brands which are responsible for87% of cosmetic sales

Colgates strategic focus is on 6 global brands

which provide 70% of sales

Danones top 5 brands contribute 60% of sales


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A. Too much focus on building the minor brands, at the expense of the key strategic ones.A signicant and very real danger is where there is so much emphasis being placed on the minor orlocal jewel brands that the more important strategic, international and global brands get reducedresources budget and time.

B. Lack of clarity for consumers (and sta)For consumers, an over-proliferation of brands can lead to situations where a company is

increasingly competing with itself where brands lack dierentiation and so are ghting it out forthe same consumers. Consumers dont really understand the dierences and so simply switch tobuying on price or promotion.

For sales and marketing teams, selling a portfolio of fewer truly powerful brands to your customersis easier and more eective. As in most instances the paradox of choice comes into play, customersappreciate choice but not chaos.

The solution

The objective of Brand Portfolio Optimization is therefore to help structure and prioritize yourportfolio of brands to best deliver your business objectives. The best way to achieve this is to deploythe smallest number of brand properties to eectively and eciently occupy the biggest possiblespace in the market.

Companies need an approach that marries their business strategy with an evaluation of eachbrands potential. They need to simplify as much as possiblebut no more. There is a role formultiple brand portfolio but not for the increasingly complex and confused stamp collections thathad been emerging.

Our approach to Brand Portfolio Optimization

At The Value Engineers weve had the privilege of helping some of the worlds leading brands, like Unilever,McDonalds, Fonterra, Nestea, Walmark and Alliance Boots avoid or reduce proliferation, helping them tonavigate their portfolios to gain the largest market share with the fewest possible number of brands.

We use a unique approach that of Brand Portfolio Optimization.

Getting to such a balanced solution requires a rigorous approach that should start with a situationalassessment and the construction of a future-facing market framework.

It must identify which brands are most suitable to own your prioritized territories, based on theircompetitive relevance and strength, and your core competencies, to deliver a portfolio solution that isanchored in your brands current and future positioning. It should explore what is the smallest numberof brand properties needed in a category or categories to potentially occupy the biggest market space(share of market) now and in the future. Within each positioning territory it should explore the optimalbrand architecture conguration for each of the key brands, so that they control the maximum footprintwithout over-stretching.

This rigour provides the platform creating realistic and achievable road-maps for organizations seeking todrive greater eectiveness and eciency from their portfolio of brands.


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BRAND PORTFOLIO OPTIMIZATIONOver the years we have worked with numerous organizations helping themto review and optimise their portfolios and have developed a tried and testedapproach based on seven stages:

Identify businesscompetencies andbrand strengthsto identify whichbrands are mostsuitable to own aterritory.

Create a futurefacing frameworkof the marketand identifywhich territoriesexist within thismarket.

Using theframework,prioritize theterritories inwhich you wantto and are ableto compete mosteectively.

Within eachpositioningterritory, explorethe optimal brandarchitectureconguration foreach of the keybrands.

Identify which ofyour brands aremost suitable toown your prioritizedterritories, and thesmallest number ofproperties needed tooccupy the biggestmarket space.

Within eacharchetype,develop a strongidentity andbrand positionwhich clearlycommunicateskey dierences.

Create a roadmapto plan themaximumfootprint withoutover-stretchingthe brand.


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Brand Portfolio Optimization in action

Fonterra

Fonterra is a global dairy business, co-operatively-owned, headquartered in New Zealand, whichcollects and uses over 20 billion litres of milk each year. The team at Fonterra realised they had aproblem - a portfolio with too many brands that was increasing confused and unruly to manage.Working with Fonterra across their 250+ brands we were able to signicantly slim-down theportfolio of brands and help them deliver a structured portfolio which requires signicantly lessmanagement time. Speciality parts of the business now had clear reasons to exist and globallybrands were aligned so that Fonterra could operate across the largest possible markets with theleast number of brands.

Walmark

Walmark is the largest producer of vitamins, minerals and supplements in CEE. It has over 40brands across its core markets. The Value Engineers worked with Walmark to optimize theirportfolio helping them to develop and deliver strategies focussed on fewer brands. In 18 monthsseveral of these focus brands are already number one across the markets in which they are sold withothers following suit.

Find out more about our approach

When individual brands face the pressures of over-proliferation (too many sub-brands and toomany opportunities) we work with brand owners using similar approaches and techniques to delivermore focused and eective brand plans.

To talk with the Value Engineers about your brand portfolio or to nd out about our approaches tohelp optimise the impact of individual brands please contact:

Owen Williams, Group CEO in the UK - [email protected]

Alex Waters, President in the USA [email protected]

Giles Lury, Chairman in the UK [email protected]

Chris Potts, EVP in the USA [email protected]


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MANAGING SUB-BRAND PORTFOLIOS-

MANAGING MULTIPLICITY

Looking into the history of marketing, the emergence of sub-brands can perhaps be traced back toHenry Ford, or rather to General Motors response to the Model T Ford. While Henry Ford actually saidYou can have any colour as long as its black, he might as well have said You can have any car aslong as its a Model T Ford. The Ford approach was based on maximised standardization, maximumeconomies of scale and a one brand size will t all.

General Motors response was known as the Sloan Ladder. It was based on the identication ofve dierent segments, ve distinct price grades oering A car for every purse and ve distinctendorsed sub-brands the ve dierent marques. It was a move that heralded the importance of

segmentation and sub-branding all in one strategic thrust.

Since then there has been an explosion of brand portfolios to the extent that a confused consumerrecently lamented on a blog about the confusion of too much choice.

I went through the shelves and counted them, and its total madness. In addition to the originalColgate Great Regular Flavor toothpaste, they have the following versions to choose from:

Colgate Tartar Protection toothpaste, Baking Soda & Peroxide, MaxClean with Whitening, MaxWhitewith Mini Bright Strips, MaxFresh with Germ-Fighting Strips, Total Whitening with Stand Up Cap,Total Advanced, Total Advanced Gentle Care, Total Advanced Fresh & Whitening (New!), Total

Advanced Gum Defense, Sensitive Multi-Protection, Sensitive Enamel/Protect, OpticWhite

And in each of the above categories, you get to choose your avor. Theres.

Crystal Mint, Polish Rush, Intense mint, Clean mint, Gel, Paste, Clean mint paste, Mint strip pastegel, Gentle mint, Fresh mint, Sparking mint, Cool mild mint.

And then many of them come in two or three sizes.

The combinations are so complex that Im sure they oer even more than 43 choices

Source: www.thebigquestions.com

The truth is that brands need to nd a balance between conformity and chaos; avoiding botharchaic, overly-simplistic monolithic approach of yesterday to the anarchic over-proliferation ofsub-brands that has spread like a virus through many companies.

They need to embrace and manage multiplicity they need to simplify as much as possible but nomore.


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The case for expansion

There are a number of good reasons for the creation of sub-brands, they include:1. Stretch into new sectors economically2. Help re-energize an existing masterbrand by positively building, modifying or changing at

tributes and associations of the masterbrand3. Ward o targeted competitive threats4. Increase visibility for new or dierentiated product ranges5. Provide clarity for the consumer and aid their purchase decision making and simultaneously

help guide the brand team in their allocation of resources

1. Stretch into new categories economically

The rst and perhaps most oen used reason for the creation of a sub-brand is to stretch a strongexisting (master) brand into a new sector or category by adding values that are not present in thatbrand. The sub-brand thereby acts as a bridge to those new markets or market sectors where themaster brand values are not sucient.

An example might be the Gillettes Venus sub-brand. Here the need was to ensure no loss ofbusiness. The Gillette masterbrand was re-focused on a specic sub-set of its total market whilebroadening its positioning away from shaving from men to women in order to focus on menspersonal care so it could expand into new sectors. It needed to ensure and indeed build its businesswith women, hence the need for the Venus sub-brand.

2. Help re-energize an existing masterbrand by positively building,modifying or changing attributes and associations of the masterbrand

The second route is in many ways the inverse of the rst. It is where a sub-brand is launchedto help reinvigorate a weak or weakening masterbrand. It may be a situation where consumersknow a brand well (and indeed may well trust it), but where that relationship may be in dangerof being taken for granted or is a little tired. A strong sub-brand cannot only be successful in itsown right but can cause consumers to take a fresh look at or indeed have a re-assessment of themasterbrand.

3. Ward o targeted competitive threats

Many large masterbrands cover whole categories, like Sony and electronics and so have an over-arching proposition which is oen focused on the center ground of their category. While thisprovides a strong and economically ecient core for the brand, there can be a danger that theproposition is too category generic and not sector specic enough for certain key sub-segmentswhich might be particularly protable or competitive. Here the development of a sub-brand can beused to ward o competitive threats from more targeted competitive brands.

For Sony the development of Vaio and Luminera have been extremely successful in this regard.


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4. Increase visibility for new or dierentiated product ranges

Many brands go through regular product and/or service upgrades which are communicated byan increase in the number attached to the brand or by reference to the year in which the upgradehappened.

In situations like this it can be appropriate to introduce a sub-brand when the new product is muchmore than a yearly upgrade, where it is a step change in performance. In other words the role of asub-brand in this instance is to signal that this new oering from the existing brand is particularlynewsworthy, dierentiated or novel.

Examples can be found in many markets but are not surprisingly prevalent in high-tech marketswith both Intel and Microso Windows adopting this strategy.

5. Provide clarity for the consumer and aid their purchase decision makingand simultaneously help guide the brand team in their allocation of

resources

The nal reason overlaps to some degree with some of the other routes described above and isperhaps a summation of an overall reason for a portfolio of sub-brands. Namely, a portfolio of sub-brands should aim to provide the guidance and signposting for consumers deciding what do I wantto buy? It can then simultaneously provide some internal clarity about the strategic importance ofkey sub-ranges and thereby provide guidance for allocation of brand building, marketing resources,and budget.

Muller Yoghurts has a set of sub-brands which helps signal the dierent ranges within its portfolio

Muller Corner, Muller Light, Mullerice, Muller Amore, Muller Little Stars and Muller Vitality.

However, like with most things in life it is possible to have too much or many of a good thing and oneof the greatest problems facing companies nowadays is an over-proliferation of sub-brands.So while there are many reasons for creating sub-brands there are almost as many good reasons forlimiting their use too:

A. Too much focus on building the sub-brands/endorsed sub-brands and not the masterbrand

B. Too many (costly) sub-brand building programmes diluting resources

C. Lack of clarity for consumers (and sta)

D. Trying to enter into sectors that are contradictory to the masterbrand


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A. Too much focus on building the sub-brands/endorsed sub-brands andnot the masterbrand

A signicant and very real danger is where there is so much emphasis being placed on the sub-brands that (over time) the masterbrand is denuded of meaning and becomes little more than a

quality endorsement stamp. Whilst this may sound an unlikely outcome, it is something that hasoccurred on number of occasions in the UK market.

B. Too many (costly) sub-brand building programmes

Similar to this is where there is an over proliferation of sub-brands which results in there beingtoo many (costly) sub-brand building programmes rather than fewer more focused, and morestrategically important ones. The issue here is one of prioritisation, not just masterbrand versussub-brands. This can be manifested in a situation where each years new sub-brand is given alaunch budget in year one, but then abandoned in year two as the next years new sub-brand isgiven that support. Known jokingly as the L.A.P.D. Launch, Abandon, Panic, Delist - its worthinvestigating whether your brand could be charged with this.

C. Lack of clarity for consumers (and sta)

An over-proliferation of sub-brands can lead to a situation where the size of the portfolio and itsstructure can become too complex and where the only people who really understand it are thebrands marketing department as it can get to a position where it lacks resonance with consumers,and how they shop. This can be particularly evident if the sub-brands dont relate to consumers

needs and drivers, if there are too many sub-brands that overlap, or where there are sub-brandsthat are not clearly dierentiated / do not have a unique reason to exist.

One brand where there is a danger of this happening is Nivea. Nivea has some very good and cleartargeted sub-brands but is now getting to a stage where over proliferation leads to the dangerof confusion. For example Nivea Sun and Men are clear but the increasing number of variationstargeted primarily at women is where there may be an issue Crme, So, Visage, Vital, Body,Beautie, Bath care, Hair Care and Body Care.

D. Trying to enter into sectors that are contradictory to the masterbrand

Though not a particularly frequent problem it is still an occasional one - where a sub-brand isused to try and stretch an existing masterbrand into a category or sector where the link to themasterbrand is tenuous at best and completely inconsistent at worst

Tips on managing your portfolio.

How then do companies make this work; how do they avoid the dangers of over-proliferation whilsttaking advantage of the benets strong sub-brands can provide. Three tips are:


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i) Ensure there is a common understanding of the relevant terms internallyEven in the most experienced of marketing teams it can be amazing to nd the dierentunderstanding and denitions of what is and isnt a sub-brand. So dening the terms, makingsense of the soup of possible confusions by creating a common vocabulary and denitions is animportant rst step what is a sub-brand, an endorsed brand, a product descriptor?

ii) Having a clarity of purpose a clear rationale for the brand architecture

It is relatively easy to make at least a supercial case for a new sub-brand when segmentation andconsumer insight are so important to all marketers, but brand architecture decisions need to beobjectively assessed against- the business strategy - what do you want to achieve and where do you want to take/drive

the brand- the brand strategy - what do you want the brand to mean/stand for- what are the

parameters of this

The business strategy and economics oen suggest a more monolithic structure with less sub-branding whilst marketing may veer towards a more segmented approach. Like most things in

marketing there is no one right answer but the tension between the two is important and ensures abalanced judgement is made.

iii) Creating and maintaining a manageable portfolioFollowing on from the above, it pays therefore to have an agreed process for selection (andretention/culling) of sub-brands.

Companies need a process and agreed basis on which each candidate should be assessed - againreecting both business and brand strategy needs. The sorts of criteria might include:Is it suciently commercially attractive to justify its creation or maintenance?Does the sub-brand help drive business that ts strategically with the overall brand (re)positioning?Does it help build a category/sector or key brand attribute (value or personality) that is central to thefuture brand development?

Finally regular reviews need to consider not just new candidates for inclusion but also candidatesto be pruned, downgraded, or migrated into other properties. It may not be a case of one in oneout but if the only decision is whether to add more and more sub-brands, it would suggest over-proliferation is only a matter of time.

It is worth remembering that given the increasing restrictions on launching new (master)brands,launching a new sub-brand is one way for ambitious brand managers to make their mark, and so

companies need to guard against unnecessary empire building. In short the need is not too over-simplify, not too over-proliferate but to manage a commercial and consumer relevant multiplicity ofoers.

To talk with the Value Engineers about your brand portfolio or to nd out about our approaches tohelp optimize the impact of individual brands please contact:

Owen Williams, Group CEO in the UK - [email protected]

Alex Waters, President in the USA [email protected]

Giles Lury, Chairman in the UK [email protected]

Chris Potts, EVP in the USA [email protected]

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