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 A letter from CEO Michael Dunn We hear a lot these days about the bloat that characterizes most consumer brand portfolios and the resulting proliferation of underperformers. It's not surprising that this has become a huge concern when you think about the trends: on supermarket shelves alone, the number of brands skyrocketed from 15,000 to 45,000 in the 90s. And the issue is not unique to consumer brands; companies in the business-to-business space are similarly struggling to profitably manage a surfeit of brands. Brand portfolio strategy and management have thus become a huge hot button for senior-level marketers. In Prophet's experience, however, there's still a substantial lack of clarity as to what such an undertaking actually involves. For instance, issues many think they can sufficiently address by restructuring the brand architecture, may actually require a more in-depth look at their brand portfolio strategy. Solving a portfolio's shortcomings in driving business value, for example, comes down to the brand portfolio strategy, not simply the way brands are named. In this issue of our newsletter, we focus on various aspects of brand portfolio strategy. We believe Kevin O'Donnell's article will enhance your perspective on how a portfolio strategy will grow your brands' collective value, and you'll gain great insights from David Aaker's article discussing some common brand portfolio problems and solutions. We also offer up some recent articles authored by members of our team that we trust you'll find of interest. As always, we welcome your feedback! Best wishes,
Michael Dunn Building Great Brands and Businesses Ensuring Brand Portfolio's Value, Not Size, Is What Grows By Kevin O'Donnell, Partner When the numbers show that most businesses generate 90% of their profits from less than than 20% of their brands, you know that something's awry in the way brand assets are being managed. Clearly, the challenge marketers face if they hope to fulfill their mandate of driving business growth is to find ways to make the profitable brands even more so, while bolstering those that need to get back on track. Meeting that challenge is best accomplished by looking at the organization's portfolio of brands to find ways to ensure that, in the aggregate, it is doing the job of meeting marketplace needs. Developing a thoughtful brand portfolio strategy will create value by facilitating better management of the relationships between brands, by reducing waste and inefficiencies, and by using the portfolio's power to influence such broader economic issues such as pricing policies, manufacturing scale, and distribution policies. By continuing to look at individual brands in a vacuum, marketers risk continuing the trend of brands being overextended (damaging their equity) or being overprotected (stifling equity growth). Developing a brand portfolio strategy and an ongoing management approach that solidly ties in to business performance is a process. After tightening the portfolio, the brands that remain must be assessed for their potential to drive short- and long-term growth. They must be aggressively managed to ensure the right balance is consistently being struck between over-extension and over-protection of these assets. Companies tend to have an inherent bias towards one or the other but instead should be systematically innovating across the brands in a way that increases the overall value of the portfolio. Finally, an effective brand portfolio strategy is most successful if the right management structures, systems and processes are put into place. A step in the right direction is to appoint a “keeper” of the brand store – a marketer charged with managing and monitoring the portfolio's performance, aggregate spending on brand and marketing support, and provide insights to guide resource allocation decisions. In the end, the best outcome of a brand portfolio strategy is a portfolio that grows in value, rather than in size, over time. Are You Getting the Most From Your Brand Portfolio? By David Aaker, Vice-Chairman, Prophet There's more to brand strategy than creating and managing a strong brand, especially since virtually all businesses have multiple brands in their portfolios. Too many businesses, however, have neither the underlying strategy nor management processes in place to allow their brand portfolios to reach their full potential as an important driver of business performance. Here are five of the most common brand portfolio management challenges and solutions. Issue: You are overspending on brands that will not drive business results - including mature or struggling brands, and/or lacking a management approach to identify and correct resource misallocations. Solution: Brand-building resources are often dictated by autonomous business units, which use profits from mature brands to protect their business, often to the funding detriment of potential stars, with comparatively low sales. As Proctor & Gamble found, this can be solved by establishing an entity with an organization-wide perspective, responsible for identifying the key brand platforms to support future business strategy. This entity also analyzes resource allocation issues – again, with a firm-wide view. Issue: Too many brands and offerings diffuse brand-building resources. Solution: Resources often are spread too thin to successfully build and manage all of a company's brands. Each brand in the portfolio should be evaluated by the sales it can support, the differentiation it offers, and its strategic role in the business. This should help identify which brands should be eliminated, receive limited brand-building support, or be nurtured so they may achieve their full potential. Issue: Your brands' increasingly lack differentiation in a maturing marketplace. Solution: To offset the margin erosion this situation creates, one portfolio solution is to create a “branded differentiator.” This is a branded feature, service, program, or ingredient that's meaningful to customers and will set the offering apart from competitors. Westin Hotel's “The Heavenly Bed,” has led to a wealth of similarly differentiated offerings and heavenly business performance. Issue: Some of your key brands are bland and tired. Solution: One portfolio solution is to create a branded “energizer” – finding an actively managed product, symbol, or endorser that, by association, significantly enhances and energizes a target brand over time. Think of H.J. Heinz' EZ squirt catsup with colors like Funky Purple and Blastin' Green. What if your products are inherently boring and lack anything to qualify as an energizer? Then, seek out a brand with energy and attach it to the parent brand, like the Ronald McDonald House. Issue: Your offering is so confusing customers can't figure out whether it meets their needs. Solution: A portfolio goal should be to reduce confusion and enhance product-offering clarity, which can be achieved partly by reducing the number of brands. For example, Safeway's portfolio reduction from 24 brands to 4 (Safeway Select, “S,” Mrs. Wright's and Lucerne) clarified the meaning and roles of each. Creating an effective and powerful brand is only one goal in portfolio management. More important is looking at what supports the success of all the brands. To that end, the objectives of the brand portfolio are to foster synergy, leverage brand assets, create and maintain market relevance, build and support differentiated and energized brands, and achieve clarity and focus. Brand portfolio strategies designed to meet these objectives will lead to competitive advantage and bottom- and top-line growth. *This excerpt is based on an article that originally appeared in the Summer 2004 issue of the American Management Association's MWorld magazine. For other recent articles written by David Aaker, please Prophet's latest articles Marketing Challenged to Balance Data With Creative Insight Marketing: The New Critical Capability in M&A Three Letters Gain a Personality Most frequently downloaded article from www.prophet.com David Aaker's perspective on the future of marketing Other articles of interest Our Ratings, Ourselves Controlling the Conversation The Rodney Dangerfield of the C-suite
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