What is it and why is it important?
Brand portfolio strategy
Brand portfolio strategy is the management and development of a portfolio of businesses, brands and sub-brands, products and services targeting diverse markets, customers and needs to build equity, maximise returns and minimise risk.
With this you may have heard of:
– Portfolio optimisation: the process of considering the scope and role of each brand/sub-brand to ensure there is comprehensive coverage of the market versus competitors, with minimal overlap and cannibalisation of own brands, and the number of brands that the organisation can manage
– Portfolio rationalisation: the process of removing brands that are poorer performing and/or cannibalising own portfolio more than the market coverage or competitive benefit they provide.
– Portfolio prioritisation: the process of determining which brands or businesses to focus upon at any one time. This may be a longer-term play of prioritising resources on leading brands in a portfolio or prioritising brands per channel, medium-term play to focus resources such as sales teams or marketing investment or shorter-term such as catering to seasonal opportunities
Brand architecture and naming conventions
Brand architecture is the strategic framework that supports the brand portfolio strategy by organising and defining the relationship between the businesses, brands and sub-brands in your portfolio, with the aim to facilitate customer understanding and purchase, build brand equity, maximise returns and minimise risk. Naming conventions are developed to reflect the brand architecture, providing parameters for brand attribution and types of names for existing and new businesses, brands and sub-brands.
There are two key types of brand architecture framework – branded house and house of brands – with variations in between such as sub-brands and endorsed brands, and many examples that are a hybrid of all of these.
Branded house – Masterbrand: like Google, FedEx and GE
This branded house architecture is where one master brand drives customer attraction, brand equity and corporate reputation, whilst the individual business, products and services offer the customer value propositions.
Google primarily uses the master brand with descriptive names for the products such as Google Drive, Google Docs, Google Workspace. Whilst gmail is the odd one out in terms of naming convention, visual identity is used to make it clearly one of the one master brand family. FedEx also follows this framework and naming convention with FedEx Express as their express courier service and FedEx Office as their service for work offices. Similarly, GE brand architecture follows this model at a category level: GE Digital, GE Healthcare.
One of the main strengths of a branded house architecture is maximising investment. All businesses, brands, products and services under the master brand contribute to building brand equity. However, this is also its weakness. Being “one-size-fits-all”, it has less flexibility to target unique customer needs. And if one of the brands or sub-brands has an issue, it impacts the master brand and all other businesses, products and services.
Branded house – Sub-brand: like Microsoft, Apple, Toyota
The sub-brand architecture framework has separate, trademarked subsidiaries sub-brands with a strong connection to the parent brand. The parent brand builds reputation, positioning and credibility, customers are attracted by the sub-brand proposition which also contributes to brand equity. Examples are Apple with iPad, iPhone, Apple TV; Microsoft with Office, Windows and X-box; Toyota with Camry, Corolla, Hilux.
This brand architecture enables new products to gain maximum penetration with the equity in the parent brand. Whilst sub-brands provide targeting opportunities, there is increased marketing investment operating individual sub-brands. As per the master brand framework, if one of the sub-brands has an issue, all sub-brands and the master brand are impacted.
House of brands – Endorsed brand: like Kelloggs, Nestle, 3M
An endorsed brand architecture starts to increase the weight of the sub-brands, to lead with the sub-brand. Sub-brands have distinct target audience, propositions and marketing investment. Consumers are attracted by the sub-brand proposition and the parent provides credibility and quality assurance. Examples are Kelloggs with Special K, Crunchy Nut, Coco Pops; Nestle with Nespresso, Kit Kat, Milo; and 3M with Post-it, Scotch, Command.
With increased marketing expenditure at the sub-brand level, most of the brand equity building for both sub-brand and parent brand happen at the sub-brand level. With multiple brands with different audiences and positionings this can dilute the parent brand. However, the strength of parent brand endorsement does support launching new products to maximise penetration. As reputation is built at both parent corporate brand and product sub-brand level, if there is an issue with the parent brand or the sub-brand, all are impacted.
House of brands – Standalone: like Unilever, P&G, Volkwagen Group
On the other end of the scale, a house of brands architecture is where individual brands with their own customers, positioning and marketing investment, there is a parent brand building reputation at the corporate level which may be more of less visible to customers.
Unilever and Proctor & Gamble are fast moving consumer goods organisations with many brands each with their own target market, positioning and marketing investment. Their portfolio of brands maximises market coverage and equity building whilst minimising cannibalisation across categories, focussing on different markets, price positioning and need-states. In ice cream, Magnum and Streets target different price positioning and need-states. In personal care, Dove and Vaseline target different need-states. In food, Continental brand services Australian consumers whilst Knorr services European customers.
Volkswagen Group is another example with Volkswagen, Audi, Porsche and Bentley to name a few of their brands, each with standalone target customers, positioning and marketing investment.
Brand equity building is focussed primarily at the individual brand level. This means increased brand building capabilities and higher marketing investment is required across the portfolio. It gives the organisation greater agility to innovation and tailor to specific markets, segments and needs.
Historically one of the benefits of a house of brands would be to insulate and protect the parent brand from the individual brands, and the individual brands from each other so that in a brand crisis, none of the others would be affected.
More recently, with customers demanding increased transparency and behaviour as good corporate citizen, visibility of the corporate brand brings credibility, reputation and trust to the individual brands. However, this also means that a brand crisis can have a negative impact on the parent brand, and potentially on other brands, although less likely. It also needs to be balanced with the organisation being seen as an all-powerful conglomerate with reduced preference versus small, local, community-driven businesses.
Of the above example, the Unilever portfolio has benefited from the corporate brand, but has also been subject to boycotts across the portfolio whereas Volkswagen Group keeps their brands very separate.
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