The specific components of a comprehensive brand portfolio strategy vary based on the company in question and the nature of its business. However, brand strategists agree, most portfolios should (at minimum) address the four key questions outlined and discussed in this post.
1. What Is the Optimal Number of Brands Required to Go to Market?
In general, companies should observe a few general rules regarding the optimal number of brands. First, fewer is better than more, all else equal. The primary reason for this is that brands are expensive assets to develop, launch, and maintain over time. In addition to advertising, promotion, and digital activation costs, brands also require a great deal of time, effort, and oversight to manage.
Considering these investments, it makes sense when new products or services enter the portfolio, whether organically or through an acquisition, that the default response should always be to house the newcomers within an existing brand. If that is not possible, a separate brand is justified. However, the new product or service must make a great case to deserve placement under a new brand.
2. What Is the Strategic Role of Each Brand within the Portfolio?
As assets in their own right, brands need to be managed strategically. There are a variety of strategic roles to consider. Three of the strategic roles that merit mention include financial, customer, and competitive roles.
Financial roles include premium (or value) pricing, opening price point, loss leaders, and cash cows. Some of these pertain directly to pricing, while others are more about profitability and returns, but they all tie to financial goals and objectives. For example, baby and beauty products are the cash cows for Johnson & Johnson. They capture a large portion of market share and do not require substantial investments to promote the products due to the stable market conditions. These items enjoy the economies of scale with high profit margins.
Customer roles, as the name implies, pertain to the types of customers the brand serves. This is a common strategic role for B2C companies to define, as they often align their brands by target segment. The equivalent in B2B may be by industry or vertical, but the premise is the same. This role essentially charges a brand with the responsibility to serve (and win within) a particular market segment.
Patagonia is an example of a brand that serves an important consumer segment in the apparel category. The designer of outdoor clothing and gear resonates with consumers who are environmentally conscious, upscale, and willing to spend more money on quality products that also decrease their impact on the environment.
Competitive brands are charged with taking on a competing brand and neutralizing its advantages or beating it in the market. A fighter brand, for example, is designed to undercut a specific competitor on price to undermine its success or steal market share.
In 2003, to combat low-fare entrant Virgin Blue, Qantas decided to launch their own low-fare airline. Since Qantas only had one brand, it was reluctant to create a new brand. However, after spending considerable time on focus groups across Australia and listening to their customers to validate the planned initiatives, Qantas launched Jetstar in 2004, with 14 planes flying to 14 destinations. The speed at which Jetstar struck took Virgin Blue by surprise and threw it off balance. Jetstar inherited the tourist routes that Qantas previously lost money on and proved profitable on those routes. Thanks to Jetstar, Qantas returned to focusing on its more profitable business routes and increase the frequency of its flights on those legs.
3. What Is the Scope of Each Brand (i.e., How is it Deployed in the Market)?
The scope (or range) of a brand pertains to how the brand is deployed in the market. There are four common ways to think about a brand’s scope: across customer segments, product categories, price or value tier, and geographies.
Consumer-oriented brands often define their range by customer segments. Companies can segment customers across several dimensions: demographics, attitudes, needs, behaviors, or some combination of those factors. The key is that the branding revolves around the customer, not the company and its products.
Conversely, many B2B companies define their brands’ scope by industry verticals or product categories. Categories and industries are easily defined and universally understood, which makes it tempting to structure a portfolio in this manner. However, this organizing principle tends to be less sophisticated and effective than customer segmentation. When too many competing brands strive to position around a set of attitudes, motivations, and behaviors that are common to an entire category or industry, differentiation between them becomes a tall order.
Many businesses, both B2B and B2C, define that scope at least in part by their price or value tier. Global companies sometimes go to market with different brands (sometimes with nearly identical products) in different regions of the world.
Regardless of the approach (or approaches), the critical point is that the brand portfolio strategy explicitly and purposefully dictates how brands should be deployed in the market.
4. What Type of Relationships Should Brands within the Portfolio Have with One Another?
This question covers brand architecture, which defines the explicit relationships among brands in a portfolio. Very often, this involves the relationship between a product brand and a corporate brand. When an explicit relationship exists, it tends to be most evident in the company’s visual identity system, specifically through logo locks and other overt linkages.
These questions cannot provide all the answers for every brand, but they do provide a solid foundation to build upon. Of the four organizing principles, the first option—customer segments—remains the obvious choice for companies seeking brand differentiation. While the other principles serve their uses, they typically are not sufficient to drive meaningful differentiation for the brands within any given company’s portfolio.
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