Nick Cooper with Anastasia Kourovskala
Millward Brown Optimor
An optimal brand architecture can be created through the evaluation of six critical brand characteristics
Most companies own multiple brands, and while this has undoubted advantages, there are also pitfalls that come with the territory. The use of metrics to help measure, manage and model brand architecture outcomes can be a valuable tool in optimising the use of brand portfolios.
It is increasingly common for companies to own portfolios of brands, even in the same category. This approach has the obvious advantages of increasing market share, maximising appeal to consumers, enhancing bargaining power with retailers and blocking potential positioning to competitors. However, there are also a number of problems that come with portfolios – in particular, cannibalisation of your own sales, complexities in production, ensuring discrete positionings and allocating marketing investment.
The key issue out of all this, whatever the starting point, is to identify the future brand architecture scenario that delivers the most value to the client’s business. It is very rare that the number of brands owned by a company remains static -either it increases (brand divergence) or it decreases (brand convergence).
The most common question asked by marketers is: “Do I introduce a new brand?” While launching a new brand is exciting from a marketing perspective, it may not be the right answer for the business.
Brand divergence is most often seen in higher-growth, less mature categories, where new brands hold the promise of capturing growth and attracting specific consumer segments. Typical examples abound in restaurants and food-based pubs,
hotels and airlines. A highly successful British regional brewer, Greene King, has a portfolio of retail businesses including Loch Fyne restaurants, Old English Inns, Hungry Horse pubs and Hardy’s House pubs, which are intended to suit different going out occasions, different consumer segments, and different price points.
An increasingly common question is: how do I move from many to fewer brands? This is particularly the case for consumer packaged goods (CPG) companies that have found, for many years, that the cost of marketing investment is too great to support the whole portfolio. Unilever, under the leadership of Niall FitzGerald, is the classic case of making a radical reduction in the number of brands, from around 4,500 to 1,500.
But it remains a problem for those companies in areas such as confectionery, where novelty and variety are key to retaining consumer loyalty, and it is virtually impossible to build a market-leading share without a large portfolio of brands.
Equally, there are the famous cases of ‘less is more’. Tesco has built a strong market position in entertainment on the back of a limited range of best-selling DVDs, CDs and books, while WH Smith cut its DVD range by 40%, resulting in a 25% increase in sales.
To answer these complex, yet perennial questions, there are a number of approaches that can be invoked to help, which involve hard and fast metrics. I have focused them into six critical questions.
The first and most basic question to ask is: how strong is my brand, or sub-brand? There is no point in retaining a brand equity if it has no traction with consumers, or has no likelihood of doing so.
The next question is: how do I measure brand strength? There are a number of ways of doing this, but the Millward Brown approach is Brand Dynamics, which has been in use since 1998 and has been fully validated.
The Brand Dynamics tool creates a metric called Brand Contribution, which provides a score of the degree to which the brand influences purchase decision-making. It rests primarily on the concept of Bonding, which measures how many consumers choose a particular brand in a given category in preference to all others. The higher the Bonding, the stronger the brand.
This can take account of both standalone brands (eg Snickers) and endorsed brands that also carry the weight of a masterbrand or umbrella brand (eg Nestle Kit Kat).What-ever the situation, the foundation stone of any brand architecture is Brand Strength.
The second question to pose is: how well does my brand fit the category? Brand fit looks at the degree to which a brand measures up to the Key Buying Factors (KBFs) in its market. This can be used equally well within a B2B as a B2C context. We recently used this approach for a global industrials client that was looking to reduce the number of brands in its portfolio. It simply involves the identification of the KBFs in the category, and then scoring each brand against them. This produces a score for both individual buying factors and KBFs overall, and is a rational way of measuring many brands against a common set of factors.
The beauty of this approach is that it is both static and dynamic. In other words, Brand Fit can be used to understand which of the current portfolio of brands works best in each category – but it can also be used to understand the likelihood of success of extending a brand into a new category. If a brand scores highly on innovation, and the buyers in category X believe innovation is the key to their purchase decision, then the brand can be seriously considered.
A case in point might be BT, with both its BT Vision home video-on-demand product (designed to compete with Sky), and BT Mobile, its mobile phone offering. Technically, both stand up to close scrutiny. In addition, the general principle of using ‘BT’ as the sole brand has been very successful, delivering market presence alongside great economies of scale and efficiencies. However, it can be argued that this approach was tested to the point of destruction, and that the use of the BT brand in both of these instances has not fulfilled the criteria of Brand Fit.
We recently completed an assignment for a financial services company, looking at the relative merits of keeping two brands, rather than one. The conclusion was that the second brand enjoys such an exceptional fit within its category that the downside of losing the brand was out of all proportion to any advantage to be gained from internal efficiencies. The ability to inform the debate with hard metrics was instrumental in helping the client understand the pros and cons of the argument.
The third question that needs to be addressed is: what is the ability of the brand to move into new markets? This issue can involve the replacement of an incumbent brand or the addition of an existing brand from a different category. The key here is to find metrics that compare the brands on a like-for-like basis, because surely comparing two different brands in two different categories is the closest thing to apples and pears that you can get.
Unsurprisingly, the answer to this third question lies primarily in answering the first two questions. Starting with Brand Strength, it is a relatively straightforward task to assess this for two different brands. Then we can use Brand Fit. Again, we can assess this through research. However, the trick is to predict the degree to which Brand Strength and Brand Fit would be retained if a brand were extended from one category to another.
Both Ariel and Daz laundry products promise whiteness, but they occupy different positionings and so complement each other’s market share. Ariel (top) employs a highly scientific approach in its ads, whereas Daz (above) is given a far more light-hearted tone of voice
The objective is to end up with three metrics to help predict the future: how strong is my brand?; how well does my brand fit with the category?; and how welcome would brand change be?
This is a question that has been faced many times, for example in the technology arena. When cable TV businesses in the UK were merged into a single company, the incumbent brands, such as NTL, were ditched in favour of Virgin. Perhaps this was a simple decision, perhaps not.
The fourth question to be considered is: where should I invest my marketing spend? As mentioned before, the inability to support all brands at an optimal level is a very real problem for many businesses, especially in FMCG/CPG, where extensive portfolios abound.
There are only three responses to this question: increase spend; reduce the number of brands; or become more scientific about allocating budgets. Not surprisingly, the most common response has been to do the latter, and to invest time and resources into conducting econometric studies that measure the return on investment from marketing spend, on a brand-by- brand and category-by-category basis. In short, econometrics demonstrates the amount of money generated from each $1 invested in marketing, and therefore the responsiveness and performance of different brands can be compared on a like-for- like basis. Those brands with the greater return are the best candidates for marketing support.
The fifth question to be conjured with is: do all my brands have a discrete positioning? The key to successfully managing a portfolio of brands is differentiation. This can be at a rational level (price and performance) or at an emotional level (inner and outer directed values). So, even when two brands are functionally similar, it is still possible to create two differentiated positionings.
For example, both Ariel and Daz promise whiteness, but because they occupy different positionings and price points, they generally complement each other’s market share. In the case of Ariel, a highly scientific approach is used to position the brand, whereas for Daz a far more light-hearted, everyday tone of voice is used.
Measuring this facet of brand architecture can be achieved through mapping brand personality or brand attributes, whereby consistent measurements can be identified across the portfolio, and correlations used against each brand.
BRAND FINANCIAL PERFORMANCE
Finally, the question that some marketers embrace, and others avoid: what is the financial impact of alternative brand architectures? The first counter question to put is whether the financial goal is short or long-term. Thankfully, most of the questions we’re asked conform to three-year timescales, which provides the opportunity to take longer-term decisions.
A recent assignment for a major soft drinks company asked us to look at the varying financial returns from alternative brand architectures. This debate revolved around critical mass, cooler presence and marketing investment. The result was a clear recommendation. It turned out that, in an effort to develop an exciting and relatively new market, the client had pursued brand divergence too far, and that its financial interests would have been better served by reducing the number of brands and sub- brands. We were able to demonstrate not only the savings that could be made in marketing investment from having a more focused portfolio, but also the likely gains in sales that would result from having critical mass from each product – and using
the masterbrand more consistently.
This project put into sharp relief the constant question around brand architectures which is about cannibalisation, and the varying margins that different brands offer. The most fundamental point of having a portfolio of brands is to make greater sales and profit. In the case of the industrials client mentioned earlier, we were able to demonstrate the optimal brand architecture construct on the basis of net sales through employing the tools of Brand Strength, Brand Fit and Brand Stretch.
The employment of some or all of the above metrics enables clients to determine predictive metrics around future-facing brand architectures, and thus identify the optimal solution.
The final choice rests on the strategic direction of the client – for instance, whether it is to defend a market or expand it, and the degree of risk that is acceptable in order to achieve a given opportunity. In addition, it depends partly on what competitor reactions are likely to be (Figure 1).
In any event, when it comes to the vexed question of creating an optimal brand architecture, there are plenty of predictive metrics that can be used to help with finding that elusive right answer.
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