Forget the Tradeoff: Drive Business Growth Using Your Master Brand
Growing a business and brand is never easy – especially when consumers are fickle and the economy uncertain. But look on the bright side: while consumer and business spending are tenuous, major confidence indices are at a five-year high and still climbing. We’re at an economic inflection point that historically has created tension for marketers: Should they tightly manage spending, riding out weaker economic times, or invest more to help drive growth in new areas?
The reality, however, is that a tradeoff isn’t actually necessary. Most companies can simultaneously manage budgets and invest in their growth by strategically extending their master brands into new categories. Why? For one, the assurance of a familiar brand provides comfort and inspiration in times like these. Plus, consumers are seemingly more comfortable letting brands extend into new categories than most brand managers are. Finally, investing in a master brand is typically more efficient for the business than allocating limited budgets across a stable of brands.
Samsung and Lululemon are two cases in point. Samsung, historically a leader in a wide range of heavy electronics, has emerged as arguably the number one player in the smartphone handset category – rendering Nokia and HTC less relevant to the mobile-dependent younger segment and giving Apple a run for its money. In the active apparel category, Lululemon has gone beyond its core “women in yoga” history to leverage equity in fit and fashion in its premium line for men. These now account for 12 percent of its quarterly sales volume; with a goal of reaching 20 percent of overall sales volume.
A strong master brand strategy can both enable growth today and build “elasticity” into the brand that can drive future growth. Creating a strong master brand strategy requires marketers to execute against several key success factors:
1. Clarify the portfolio role of the master brand. Strategic clarity must be established both within the company and among customers. Master brand strategies come in a number of varieties; no one-size-fits-all strategy exists.
Virgin deploys a “branded house” strategy. All products generally use the same master brand identity: Virgin Atlantic, Virgin Records, Virgin Mobile, Virgin Racing, etc. CEO Sir Richard Branson has used this strategy to help build a stable, diversified business model. With the Virgin brand, Branson has created more billion-dollar companies in more sectors than any other company.
The Ralph Lauren brand portfolio follows a master brand “endorsement strategy.” The various product lines within the Ralph Lauren portfolio display a clear connection to the Ralph Lauren master brand: Polo Ralph Lauren, RLX, Rugby Ralph Lauren, etc. Even those product lines that do not have Ralph Lauren in their names are linked to the Ralph Lauren master brand in the market. Ultimately, Ralph Lauren has leveraged the strength of its master brand to grow its consumer volume. In recent decades, the brand has extended into active wear, special occasion and denim.
2. Know strengths and improve weaknesses.
Effective management of a master brand requires an intimate understanding of the brand’s current equities- both positive and negative. Obtaining this understanding requires information from customers, prospects and other constituencies such as suppliers and analysts. Fielding current, well-designed tracking surveys; monitoring social media and customer conversations; and analyzing customer service data helps marketers understand where the brand is helping drive growth and where it needs to be shored up.
Over the years, Swarovski created numerous B2B and B2C brands in an effort to grow its business and appeal to a broader consumer base. By leveraging its strong heritage and reputation, the brand became attractive to a broad range of consumer audiences. However, brand research confirmed that consumers’ perceptions of Swarovski had become inconsistent within and across the B2B and B2C markets. It led Swarovski to clarify its master brand strategy and the role of each brand in its portfolio. Several of its mid-tier brands were redefined as ingredient brands or independent brands to avoid diluting the equities of Swarovski’s consumer-facing master brand. As a result, Swarovski was able to refresh its identity as a premium lifestyle brand.
Several years ago, Cisco entered the consumer technology market with its acquisition of the company that developed the Flip Video camera. Though Cisco had already expanded beyond its core enterprise customer base with Linksys routers and other in-home products, a careful analysis of its brand equity revealed that the Cisco master brand – one of the most venerable in B2B technology – had weak associations with consumers. This disconnect forced senior management to reflect on the viability of the company’s forays beyond the enterprise. Ultimately Cisco pulled out of the consumer market to focus on building its business in fast-growing, higher-margin B2B spaces.
3. Know how to measure and manage brand value. Brands are cash-generating entities that can produce economic value over time. Hence, a transparent brand valuation method grounded in both finance and accounting principles is vital to effective brand management. But valuation does not merely produce a number. Rather, it helps brands understand their future potential, the impact of industry factors and how to overcome structural barriers. By knowing the drivers of brand value, companies can understand the key levers to pull and build playbooks to drive performance against these key levers.
Energy Industry Leader
A Fortune 10 utility needed to optimize its long term brand portfolio strategy for three regionally-specific fuel brands, all acquired through mergers and acquisitions. A slumping gasoline market and mounting competition from new retail players had complicated the category landscape. The company’s brand valuation technique integrated projections of economic profit generated by each of the three brands, the contribution of each brand to profit generation and the equities and perceptions surrounding each brand relative to its competitors. The final brand valuation enabled the company to identify levers, such as targeting new segments and rebalancing the brand portfolio, to ensure the master brand could help defend the company’s competitiveness even in a difficult market landscape.
4. Understand the brand’s ability to stretch.
Master brands tend to be more “elastic” than management believes. Customers often give brands permission to extend into new categories.
Offering one million titles when it launched in 1995, Amazon.com proclaimed itself “the world’s biggest bookstore.” The success of an online bookstore seemed unlikely as the Internet retail landscape was just evolving. However, Amazon founder Jeff Bezos never actually planned to focus on books alone. Courting customers with low prices and a simple user interface, Amazon expanded into new product categories, and today is a powerful master brand that can sell virtually anything – from MP3s, instant video, and software to food, toys, and even industrial equipment. Along the way, new site features like One Click purchase and Amazon Prime have kept consumers interested and satisfied. Ultimately, Amazon remains a leader through its relentless focus on building and delivering what the customer wants.
5. Get brand into the M&A conversation.
Given the importance of driving growth through acquisition, brand and marketing need to be involved in the M&A process. Companies should consider brand strategy before, during and after deals to help drive more consistent decision-making and execution. In the end, the master brand equity will grow while the equity of acquired assets is leveraged.
Google’s acquisition-focused growth strategy (the company made a record 79 deals in 2011) – coupled with a branded house approach – means that it tends to rebrand acquisitions or merge acquirees’ capabilities into existing Google products. This enables Google to maintain clarity and navigability within its portfolio. For example, after being acquired by Google, GrandCentral became part of Google Voice, and Keyhole became the platform for Google Earth. Had Google not brought a strong perspective to the table about the potential range of its master brand, its acquisition strategy could have led to fragmented investments and weakened brand equity.
Avis Budget Group/Zipcar
Having secured plans to acquire the car-sharing trailblazer Zipcar, Avis Budget has chosen to maintain the Zipcar brand to leverage and scale Zipcar’s positive equities around fun, convenience and localness. Avis’ CEO Ronald Nelson vows to position the Zipcar brand for growth by enabling it to leverage Avis’ cost advantage in vehicle purchases. This decision will enable Avis to play in the car sharing category (growth) and realize fleet efficiencies (operating improvement) without the risk of damaging either legacy brand. Zipcar’s fresh, young brand character is appealing and accessible to younger audiences and the growing category of sustainability-oriented consumers. Had Avis decided to migrate away the Zipcar brand, it would have failed to fully leverage the value of the acquisition.
What does this mean for you?
The following questions will help you consider how to more strongly leverage your organization’s master brand. If you can answer “yes” to most of them, then you likely have a clear, strong master brand strategy.
1. Strategic Clarity. Does your brand represent what your company does in a way that informs, influences and inspires customers?
2. Honest Assessments. Are you aware of your brand’s key equities, and also of the areas where it falls short? Are you prepared to invest to close the gaps?
3. Brand Value and Extensibility. Do you know what your brand is worth, and whether you are fully leveraging the value your brand has in the minds of consumers?
4. Voice in M&A. Does your brand have a voice in the acquisitive growth process? If not, could it?
Driving growth is no easy task. However, if you develop and maintain a strong master brand, a clear and actionable strategy, and a robust understanding of your consumers, you can get a lot of bang for your buck, no matter how unpredictably the external winds are blowing.
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