How To Remodel Your House of Brands

Too often, the mistaken assumption is made that brand strategy involves the creation and management of a strong brand like HP, IBM, 3M, Lexus or Tide.

Virtually all firms have multiple brands in their brand portfolios. The sad reality is that for too many of these organizations the management of that portfolio is often nonexistent despite the fact that there is often a huge competitive upside to managing it more effectively.

As I suggest in my latest book Brand Portfolio Strategy, this results in a variety of brand portfolio problems (and corresponding opportunities), which can handicap a business and inhibit it from realizing its potential. The following ten questions will help you determine if you are facing any of these problems.

Are you underspending on brands that will drive future sales and profits, overspending on mature or struggling brands and lacking an effective management system or structure to identify and correct resource misallocation?

Too often brand-building resources are budgeted and spent by autonomous business units. A system of accountability and empowerment means that mature brands will use their profits to protect their business and that future brand stars, which have relatively low sales, will likely have inadequate resources to build for the future. One solution is to have an organizational entity that can identify the key brand platforms that will support the future business strategy and examine resource allocation over these brands with a firm-wide strategic view. Such an analysis is credited with playing a role in P&G’s resurgence.

Do you have too many brands and offerings resulting in a diffusion of brand-building resources?

With brand-building vehicles becoming both fragmented and expensive, it can be fatal to attempt to build and manage too many brands. Resources simply get spread too thinly. Each brand within the portfolio needs to be evaluated with respect to the sales it can support, the differentiation it offers and its strategic role. The goal is to identify those brands that should be eliminated or targeted to exist without brand-building support. During the process, brands that can be leveraged to cover more product marketing should also be identified. One such brand is the corporate brand that can often be assigned a larger role. Because the corporate brand represents an organization with heritage, values, citizenship programs and assets/capabilities, it can provide a point of differentiation.

Do you lack brand assets to support the business strategy going forward and also lack a strategy to create or enhance brand equities to remedy the situation?

Eventually, virtually all organizations run into a wall and need to find new sources of growth. Any growth option needs to be enabled by brand assets. The portfolio task is to create strong brand platforms and then make them work harder by increasing their impact in their core markets and extending them into new product markets as endorsers or master brands. Dove soap created a two-billion-dollar business by leveraging its brand platform.

A brand can often be leveraged further by using sub-brands such as Good News (disposable razors), which helped stretch the Gillette brand.

Are your offerings losing relevance because of emerging categories and subcategories for which the brand is not well positioned?

Most markets are affected by trends driven by customers, technology, distribution channels and the introduction of new competitive offerings. The brand portfolio needs to be capable of adapting existing brands. Companies can do this by adding sub-brands, endorsed brands or new brands, to support new offerings needed to maintain relevance. A static brand portfolio is likely to invite relevance risks. Relevance can be an opportunity for those firms that can define a new category or subcategory, thereby reducing the relevance of competitors who are unwilling or unable to compete in the new arena.Asahi Dry Beer, IBM’s e-Business, Schwab OneSource and PowerBar are among the brands that have defined a new arena and then dominated it with their respective brands.

David Aaker shared the key elements of successful brand portfolio strategy at an AMA Current Issues Breakfast on June 17 at AMA’s Executive Conference Center in New York City. Following the program, attendees found some one-on-one time with “the guru of branding.”

Are your brands lacking differentiation as markets mature?

Over time, points of superiority are increasingly difficult to maintain and communicate. The result is margin erosion. One portfolio solution is to create or enhance a branded differentiator—a branded feature, service, program or ingredient that is meaningful to customers and will differentiate the offering. For example, Westin Hotels have differentiated themselves by creating and branding a truly superior bed—the “Heavenly Bed.”Westin has since extended the brand to the “Heavenly Bath” line, the “Heavenly Online Catalog” and even the “Heavenly Dog Bed,” thereby becoming a moving target for competitors.

Are some of your key brands bland and tired?

Most brands could use more energy. A portfolio solution is to create a branded energizer—an actively managed branded product, sponsorship, symbol, endorser, program, promotion or other entity that, by association, significantly enhances and energizes a target brand over an extended time period. Heinz Catsup’s EZ Squirt, with colors like Funky Purple and Blastin’ Green and a container that is so kid-friendly that it can be used to draw catsup pictures, is an ongoing branded energizer for Heinz.

The problem is that many products are inherently boring and lack product news that will realistically add energy. In that case, the goal should be to find a brand with energy and attach it to the parent brand. It can be a brand controlled by the firm such as the Ronald McDonald House, the charity that provides housing for families with children who have serious illnesses, which has provided energy to McDonald’s. Or, it can be a brand controlled by other organizations. The Michelin man and the Snoopy characters have been branded energizers for Michelin and Met Life, respectively.

WHY BUILD A HOUSE OF BRANDS

In his book Brand Portfolio Strategy, David A. Aaker, vice chairman of Prophet and professor emeritus of marketing strategy at the Haas School of Business in the University of California, explains the difference between a “branded house”—which uses a single master brand to span a set of offerings operating with only descriptive sub-brands (e.g., Harvard, Virgin, Toshiba)—and a house of brands that contains independent, unconnected brands. Why build a house of brands?

Aaker explains that a house of brands enables a company to target niche markets with functional benefit positions. In addition, it enables a company to:

Avoid a brand association incompatible with an offering. For instance, Budweiser’s association with the taste of beer would prevent the success of Budweiser Cola.

Signal breakthrough advantages of new offerings. Toyota’s decision to introduce its luxury car under the separate Lexus name signaled that the car was truly different from any predecessor Toyota cars.

Own a new product-class association with a name reflecting a key benefit. Gleem toothpaste and Reach toothbrushes are examples of this approach.

Avoid or minimize channel conflict. L’Oreal has cosmetic brands that are channel specific, like L’Oreal and Maybelline sold through drugstores and mass merchants, and Lancome and Helena Rubinstein that appear in high-end department stores, and Redken which is sold to professional hair stylists.

Target multiple and conflicting product lines or segments.

For instance, Nestle and Purina (foods and pet foods) need brands with no connection between them.

Does your core business face overcapacity and margin pressures in the face of a healthy, growing super-premium subcategory in which you are not participating?

Often the super-premium subcategory entails high margins and also energy, vitality and a buzz. To participate in this market, a brand platform is needed which can involve a new brand, an endorsed brand or an existing brand with a sub-brand.Marriott, however, decided that a superpremium entry, the Ritz-Carlton, needed to be separated from Marriott in order to maintain its credibility. GE participates in the super-premium appliance market with GE plus sub-brands: GE Profile (super-premium) and GE Monogram (ultra-premium) designer appliances.

Is it imperative to develop or activate an offering in the value market because it has become an important growth part of the market?

Significant growth frequently occurs in the value segment, and participating in that market is often strategically important in order to remain economically viable and healthy. Moving an existing brand into this space will sometimes negatively affect its equity. As a result, a new brand is often the choice. GE uses the Hotpoint brand to enter the value end, thus protecting the GE brand.

When a new brand is not feasible, the only choice might be to use a sub-brand or endorsed brand.

Is your offering so confusing that customers and sometimes employees cannot figure out which offering meets their needs?

The result is not only frustration and confusion, but also wasted resources. Reducing confusion and enhancing product offering clarity should be a portfolio goal. This can be achieved in part by reducing the number of brands, especially the important driver brands.

When Safeway reduced its portfolio from 24 brands to four—Safeway Select, “S”, Mrs.Wright’s and Lucerne—the meaning and roles of each brand became clear. When Schlumberger replaced a host of product and service brands with its corporate brand, Schlumberger, plus a descriptor, the offering became simpler and conveyed the important going-forward strategy of delivering systems solutions with a Schlumberger team.

The goals of the portfolio are qualitatively different from the goals of individual brand identities and positions. Creating an effective and powerful brand is still a prime goal, but there are others as well, the achievement of which will be key to achieving business success. 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. Effective brand portfolio strategies will lead to competitive advantage and a positive impact on the bottom-line.

Follow Dave on Twitter: @davidaaker and visit his blog at davidaaker.com