Brand Portfolio Rationalization: Five Steps to More Efficient Brand Management
By Denis Riney, Principal
Too many companies have too many brands that cost too much money to support. Product brands, service brands, business unit brands and the corporate brand – companies often lose track of the vast number of brands they own and the money they spend to maintain them.
What’s worse is that many companies allow their “zombie brands” – struggling brands exploited for their equity – to live on beyond their useful lives, consuming scarce marketing dollars that should be reallocated to higher-growth opportunities. Organizational inertia and an unwillingness to admit defeat often prolongs the agony. Combined with the reality that research shows more than seven out of ten new brand ventures fail, it’s easy to see how this is an expensive problem.
So, what can companies do?
The answer often lies in strategic brand portfolio rationalization, an exercise that can help companies cut their losses and spend more time investing in a smaller number of winning brands. Portfolio rationalization is more than a simple brand architecture re-shuffling exercise. It involves taking a hard-nosed look at whether some brands can be extended or revitalized, which need to be eliminated, and if new brands need to be created to take advantage of new growth opportunities. In many cases, brand portfolio rationalization can help to reduce overall marketing spend by up to 15 percent while at the same time opening up new sources of growth and simplifying the customer buying experience.
What are the keys to accomplishing a brand portfolio rationalization? At a high level, there are five steps:
First, create a current-state market map that plots brands against market segments.
The map usually takes the form of a matrix that matches supply dimensions (price or quality levels) against demand categories (customer types with different buying habits). This step should be informed by fresh insights about the company’s approach to customer segmentation, future sources of growth, and competitive actions.
Second, strategically position each of the current brands in the portfolio on the market map.
This is a non-trivial step that requires collaboration with internal teams to uncover the often conflicting opinions about the current state of each brand. Once completed, the map helps surface gaps, overlaps, and potential opportunities for consolidation.
Third, using information gleaned from the market map, determine each brand’s appropriate roles and responsibilities in the portfolio.
This step involves determining whether the company wants to adopt one of three models:
- Branded house: The company is the brand with products or services acting as subsets of the master brand (ex. FedEx, Virgin, Apple).
- House of brands: Individual products or companies are marketed under separate brands while the primary brand gets less attention (ex. P&G, Newell, Nestlé).
- Hybrid model: The parent brand, which often shares its name with a signature product, offers credibility to a broader portfolio of unique sub-brands (ex. Coca-Cola, Amazon, Marriott)
Defining the roles of the masterbrand, sub-brands, product brands, and other branded elements is important. It provides the necessary structure in which to test their viability against future scenarios.
Fourth, develop future-state scenarios that help define or eliminate brands.
This process can be accomplished in a workshop setting, in which key stakeholders from sales, marketing, operations and other functions can provide relevant input. For each of the scenarios, the team creates an economic impact analysis, potentially including customer research and validation, along with a high-level brand transition plan.
Fifth, once a final scenario is agreed upon, develop policies and guidelines to govern future brand creation.
These are typically biased toward investing in a smaller number of powerful brands. The final policy needs to be enforced using a formal brand management process that can include a branding decision tree, training sessions, and an ongoing measurement and compliance process.
The legacy of the rationalization process is not a static portfolio, but a clear strategy that directs a dynamic brand management process that is able to adapt to the changing needs of both the company and the customer. The money saved from such an exercise, along with the resulting efficiency and agility, can be redeployed into more fruitful marketing activities, setting the stage for future growth.
Questions to ask when considering brand portfolio rationalization
- Does our portfolio cover all our potential markets?
- Do brands in our portfolio overlap across markets and customers?
- Do we understand future market segments and how to meet their needs?
- Where are we innovating and how will it allow our portfolio to expand?
- Do we have brands that could be expanded across our portfolio?