Brand Strategy

Problem: How to build an international brand architecture?

After discussing the new trigger and defining the new problem our group came up with the following learning objectives:

1. Brand Portfolios

     a. What constitutes a brand portfolio?

     b. What are different brand portfolio strategies?

2. What are the main reasons for different portfolio strategies?

1. Brand Portfolios

Before starting with the fifth discussion which is about brand strategy, I would like to define some terms. 

Brand Portfolio: Number and nature of different brands marketed in the product class sold by a firm. A brand portfolio is used to group all different brands, services, companies etc. in which larger companies are operating together.

Brand architecture: According to Petromilli, Morrison & Million (2002) brand architecture describes "the way the pieces of the brand portfolio are structured, managed and perceived in terms of how they relate to each other and add value to the organization." It is defined by five dimensions which are: the brand portfolio, the roles of the portfolio brands, product-market context roles, the structure of the portfolio and portfolio grapics.

 a. What constitutes brand portfolio?

Large brand portfolios consists of different types of brands. Aaker (2004) seperates between the following roles:

- Master brand: primary indicator of the offering, the point of reference

- Endorser brand: represents an organization and its credibility (General Mills endorses Cheerios)

- Sub-brand: modifies master brand in a specific product-market context (Porsche includes Carrera), create a brand that is different from master brand 

- Descriptors

- Product brand: defines product offering consisting of masterbrand and subbrand or  master brand plus descriptor (Apple-Cinnamon Cheerios)

- Umbrella brand: defines a grouping of product offerings (Microsoft Office Word, Excel) under a common brand (Microsoft Office)

Furthermore, the composition of a portfolio is an essential aspect that needs attention. If there are too many brands, there may not be enough resources to support them all. The task here is to choose and pick: Which brands will add value and which won’t?   

Therefore, it is important to analyse the different brands and consider which role they have regarding the whole portfolio. 

1. Strategic Brand: a brand with strategic importance to the organization and that is projected to reap future sales and profits. It needs to succeed and therefore should receive whatever resources are needed. 

2.Linchpin Brand: A brand that holds the entire organisation together. It is a number one brand that indirectly influences a business area providing a strong base for customer loyalty (Cadbury’s Dairy Milk is a linchpin brand for Cadbury’s as it controls a critical segment in the confectionery industry)

3 Silver Bullet Brand: brand or sub-brand that positively influences the image of another brand. It can be a major factor in changing, creating or maintaining a brand image

4. Cash Cow Brands: brands with significant customer bases that require less attention than other brands. The total sales may be on a decline, yet there are a group of loyal customers who do not leave the brand. The role of a cash cow brand is to generate resources that can be invested in other brands for future growth (Nivea Crème provides resources for other brands by banking on its customer base)

Henderson (1970) came up with four similar roles while introducing the BCG Matrix: 

1. Cash Cow: Products with high market share and slow growth rate, don't need much investment but generate large amounts of cash which can be invested in other brand

2. Dogs: Products with low market share and slow growth, when they don't have a strategic importance those brands should be rejected

3. Question Marks: Low market share, high growth products, require far more cash than they can generate. If cash is not supplied, they fall behind and die. Even when the cash is supplied, if they only hold their share, they are still pets when the growth stops, requires very large cash inputs that it cannot generate itself

4. Star: The high share, high growth product, need investment in order to maintain leading position

However, the brands or products have a different role in different markets. In one market a brand can be a cash cow whereas it can be a dog in another market.

The balanced portfolio has:

- Stars whose high share and high growth assure the future, 

- Cash Cows that supply funds for that future growth, and 

- Question Marks to be converted into stars with the added funds. 

- Pets are not necessary

b. Different portfolio strategies

Brand portfolio strategies are an essential prerequisite for the long-term success of multi-brand companies because how a portfolio is managed has a direct impact on the growth and the future success of the organization. The ideal portfolio should always fit with the business vision of its future in the marketplace. According to Aaker, there are a few strategies that can be used:

1. The Branded House (Monolithic or Masterbrand): 

This model uses one ultimate brand (masterbrand) across all categories and beneath it are a number of products and services that use the same tagline, logo, colour etc. All offerings in the branded house carry only the coporate umbrella brand, often with a descriptor to clarify models or variations. A good example for this model is Virgin with its airlines, media and train companies etc.

Advantages:

- it enhances clarity and synergy among the brands in the group

- the brand equity for the single brand in a branded house can be transferred to support additional business units or product lines (positive image transfer)

- all products carry the brand budget

- easy to launch new products

- no need to find new brands that are capable of being protected

 

Disadvantages: 

- rather unspecific positioning

- a product or service failure that does not deliver on the brand promise will reduce the brand equity of the whole group  (negative image transfer to the brand and all products)

- each new introduction under a parent brand umbrella forces the consumer to redefine what the brand stands for (Buday, 1989)

2. House of Brands: 

This model refers to a portfolio of different brands (sub-brands) each with a unique positioning and a different name across different categories. Most of the major consumer goods companies use this model such as Procter&Gamble

 

Advantages:

- brands are independent and master brand can remein seperate 

- the failure of any single one of the brands has little impact on the others

- concentration on specific target group

- negative publicity or failure of one brand does not directly affect other products (no negative image transfer)

Disadvantages:

- significant resources are needed to build up the equity of each individual brand and to promote synergy 

- every product needs to carry the whole brand budget on its own

- hard to find suitable brands that are capable of being protected

3. Hybrid: In reality firms tend to use components of both models such as Johnson & Johnson. This model often uses a primary brand to endorse sub-brands (Microsoft is endorsing Windows)

 

Advantages:

- enjoys the advantages of both of the above mentioned models such as the transfer of the brand equity of the master brand but also the independence

Disadvantages:

- requires higher brand management

- requires more resource inputs

The following illustration summarized the main models quite well and shows them in comparism.

4. Sub-Branding: Sub-brands stretch and modify the corporate master brand by adding attribute and benefit associations. The corporate brand remains highly visible and is clearly linked to the sub-brand. Example: Apple - Apple iPod

5. Endorsed Branding: Second brand besides the master brand is super-ordinate, more prominent and more visible, and plays the critical driver role. Endorsement role can be explicit or implicit.

Example: General Mills - Cheerios, Beiersdorf - Nivea

2. What are the main reasons for different portfolio strategies?

 

According to Douglas, Craig & Nijssen (1999), there are a few drivers underlying brand architecture:

1. Firm-based characteristics

a. Administrative heritage and its organizational structure

- decentralized structure where country managers have control over strategy as well as day-to-day operations is likely to have a substantial number of local brands

- centralized structure and global product divisions, such as Sony or Siemens, are more likely to have global brands

b. International expansion strategy + mode of expansion affect how brand structure evolves over time

- organic or greenfield growth or through acquisitions and strategic alliances

- acquiring local companies, even where the primary goal is to gain access to distribution channels, will typically also acquire local brands

c. Importance of corporate identity

- IBM and Apple, place considerable emphasis on corporate identity

- logo to project and convey the image

d. Product diversity

- Firms that are involved in closely related product lines or businesses that share a common technology or rely on similar core competencies, often emphasize corporate brands

- range of diverse product businesses that target different customer segments, and have different associations, they sometimes opt to develop separate identities 

2. Product market structure

a. Nature and scope of the target market

- Global branding is frequently an effective means of reaching target markets with relatively homogeneous needs and interests worldwide

b. Degree of market integration

- where markets are fully integrated and the same competitors compete in these markets worldwide, use of global brands help to provide competitive differentiation.

- same competitors compete in all or most markets, but local competitors are also present, use of a multi-tier branding structure, including global brands as well as local brands is desirable

- Coca-Cola not only has its global brand of colas, but also numerous local and regional brands catering to specific market tastes.

c. Cultural embeddedness of the product

- deeply culturally embedded products (food) are more likely to thrive as local brands due to specific local tastes. Particularly, where these are traditional products and market tastes have evolved little over time, a well-established local brand name may have substantial value

 

3. Underlying market dynamics

a. Political and economic integration

- key factor stimulating the growth of international branding

- remove of tariff and non-tariff barriers to business transactions marketing of international brands becomes more favorable because firms no longer need to modify products to meet local requirements but can market standardized products with the same brand name in multiple country market

b. Infrastructure

- global market infrastructure

- Global and regional media provide opportunity for advertising international brands

c. Consumer mobility

- increasing international travel and movement of customers across national boundaries provides active exposure to brands in different countries 

Branded house:

- relatively narrow or coherent product line

- objective is to establish a strong global brand identity rather than to respond to local market conditions

House of brands:

- wide product range due to acquisitions, megers, etc.

- international expansion by leveraging power brands

- global and regional product brands

- disadvantage: cannibalization within the own product portfolio, but it is even better than replacement through competitor

- Procter&Gamble introduced the brand Meister Proper besides the existing cleaning agent brand Ariel

Sources:

Aaker D. A. (2004). Brand portfolio strategy. New York: Free Press.

Buday T. (1989). Capitalizing on Brand Extensions. Journal of Consumer Marketing. 6 (4). 27-30

Chartered Institute of Marketing. (2003). Brand Portfolio and Architecture. URL: http://www.marketingritson.com/wp-content/uploads/2014/11/week4brandarchitecturebycim.pdf. Accessed: 27.02.16

Douglas S. P., Craig C.S. &  Nijssen E.J. (1999). International brand architecture: Development, drivers and design. New York University. URL: http://people.stern.nyu.edu/sdouglas/rpubs/intbrand.html. Accessed: 28.02.16

Henderson B. (1970). The Product Portfolio. in: bcg.perspective. URL: https://www.bcgperspectives.com/content/Classics/strategy_the_product_portfolio/. Accessed: 27.02.16

Petromilli M., Morrison, D., & Million, M. (2002). Brand architecture: building brand portfolio value. Strategy and Leadership, 30 (5), 22-28