In previous blog entries I have discussed the concepts of a branded house and a house of brands.
A branded house is where one brand name is spread across a wide product portfolio. A house of brands is where different brand identities are used in different market segments and for different product categories.
The firm I used use as an example of a branded house was Heinz. But circumstances have changed. Last year, Heinz merged with the American food conglomerate, Kraft Foods. Heinz has gone from a position as a branded house and has become part of a house of brands. Heinz has become part of a brand family which includes Philadelphia, Oscar Meyer, Cadbury, Planter’s Peanuts and Maxwell House coffee. Heinz is now part of a multi-brand portfolio.
So what principles must you apply when managing a multi-brand portfolio?
Brand portfolios require strong management above brand level. You do not want brands within a portfolio to duplicate their product offers. You can end up competing against yourself. Each brand may duplicate innovations doubling research and development costs.
To manage a multi-brand portfolio, you need a brand coordinator or a brand committee to avoid the duplication of effort and cost.
In some sectors, such as pharmaceuticals, independent duplication of effort may be necessary. Scientific peer review may be required so teams independent of each other may have to carry out the same experimental work simultaneously. There is only a single particle accelerator loop at CERN and the cost of building a second is prohibitive, so two teams of scientists carry out the same work to maximise the efficiency of the accelerator and to provide peer review evidence of each others work.
It is also true that a bit of organised competition may accelerate product development and innovation. But note the word organised.
Innovations should be allocated to brands according to their market position. Innovation is the lifeblood of brands which grow through extensions and product renewal. These maintain brand relevance as the market changes and allow brands to differentiate themselves from their competitors.
You must develop clear brand charters which describe the brands identity and which clarify the main lines of development and innovation for the brand.
This allows innovations to be allocated according to a brand’s values and not under pressure from sales departments who want every brand to have the same advantages.
It is important to differentiate between innovations which are to be offered exclusively for one brand and those which are to be phased-in over the whole portfolio. It is no accident that car firms apply innovations to their luxury models first before applying them in stages down to their base models. If you are to phase in innovations throughout your brand portfolio, you must clearly establish the order in which innovations are to be allocated
In certain circumstances, innovations may have to be introduced across a portfolio simultaneously. It may be more cost-effective to spread the cost of an innovation across a brand portfolio, e.g. battery technology for electric cars or for manufacturing innovations.
In managing a brand portfolio, you shouldn’t ‘rob Peter to pay Paul’. You want a portfolio of strong brands. You don’t want a few stellar performers and other brands which struggle, sucking up hard-fought income. Mars recently took steps to streamline its portfolio focusing on those brands which it considered market leaders.
It is standard practice to position brands so that they don’t compete with one another. Brands must be designed to fit particular market segments. Thus, each brand in a portfolio should be able to grow strong. Citroen Peugeot has to mass brands and innovation is key to both. To focus innovation budgets on one brand would destroy the other. There are no non-innovative brands in the car market.
A brand portfolio should not represent a history of product development and acquisition. They represent a strategy of global market domination. Why did Coca Cola pay a billion dollars for the Orangina brand; a geographically local brand. It wasn’t because Coke lacked an orange soft drink (they own the Fanta brand). Coke bought Orangina because Pepsi didn’t have an orange soft drink in their brand portfolio and to cover this gap relied upon a distribution deal with………….Orangina. Coca Cola’s purchase of Orangina denied Pepsi a foothold in the Orange-flavoured soft drink segment.
Your brand portfolio is like pieces on a chessboard and it should be used strategically to defend your market position and to attack your competitors. Each brand should stick to its defined strategic role. Fighter brands are like pawns defending your king; your star brand.
Some brands will have a financial role providing income for other marketing activities. Others will be banner brands which are closely related to, and bear the name of the brand owner.
Flanker brands, your knights and rooks prevent your opponents attacking your star brand indirectly.
Some brands will be attack brands taking on your competitors. On the chessboard of competition these are your Queen and Bishops.
Some firms design their portfolios as parent and child brands. Each child brand has a specialised role. Nivea have their traditional face cream but they also have thirteen child brands each with its own strategic intent. It can be disastrous to purchase a parent brand and not to purchase its children.
All brands have a tendency to duplicate innovations and strategies. This can erode brand identity as effort is applied to create economies of scale. This tendency must be avoided. Brands are designed to target particular customer segments within a market. If brands become indistinguishable from one another, that targeted appeal may be lost.
For firms such as Volkswagen Group. Volkswagen, Audi, Skoda and Seat vehicles all come off the same production lines and share the same platforms. Seat and Skoda have been pushed up market. To ensure that each of these brands retains its individuality visual attributes have to retain distinct difference. Design is playing an increasingly important role in brand management.
Managing a brand portfolio is a game of three-dimensional chess. It takes continuous supervision and strategic control to ensure and maintain success.