A brand is only successful if the factors governing its production work together in a coordinated and motivated manner. The success of a group logic and a brand portfolio cannot be assessed without analysing the conditions of its development and, above all, the type of organisation. Since this is not widely publicised, or may even be deliberately played down, it tends to be overlooked as a key factor in the success of a brand portfolio policy.
The main risk of a brand portfolio is the gradual de-energising of the brands, reduced to the state of increasingly undifferentiated ‘outer casings’ that are little more than publicity devices. This is exacerbated by the fact that the economic press only talks in terms of groups and therefore publicises the fact that brands that were once different are now produced by the same group.
Its readers, often opinion leaders, are within their rights to ask certain questions, behind the bodywork, what remains of the brand identity? Do Jaguars still have a Jaguar engine or do they have a Ford engine? Will the specificity of Saab disappear with its integration within the GM group?
The essence of a brand is differentiation. Anything that detracts from this is a threat –within the context of a favourable economic equation, of course.
To a certain extent, over-centralisation is responsible for the loss of differentiation. At Fiat, the different brands are managed within the same department, with Alfa Romeo alongside Lancia and Fiat, a type of organization that leads one to wonder whether the company still believes in its brands.
Conversely, PSA – Europe’s second largest car manufacturer, almost on a par with Volkswagen – may use the same factories but Peugeot and Citroën remain separate organizations with their own product plan, marketing, design, publicity, sponsorship and, of course, distribution network (Folz, 2003).
Volkswagen has abolished the VAG (Volkswagen Audi) network and given each brand its own distribution network. It has to be said that the sales force in the VAG network had a strong tendency to push the Volkswagen models rather than the very similar Audi models, which were 10 per cent more expensive.
Part of Seagram’s problems can be explained by the over-centralised organisation of its international brands. The development of international campaigns at all price levels is a classic tendency among all centralised organisations. It is significant that the first thing the buyer of Seagram did was to decentralise the organisation of the brand portfolio. Thus the management of Martell, the flagship of cognac worldwide, was relocated in Cognac where famous brandy is produced, while Chivas was returned to London.
LVMH, world leader in the luxury market with such famous brands as Christian Dior, Christian Lacroix, Vuitton, Moet, Hennessy and Tag Heuer, has an interesting business model. The group manages 45 international luxury brands. When asked about the upper limit on the number of brands in such a portfolio, the group’s CEO, B Arnault, replied that there wasn’t one.
In fact, success in the luxury sector depends on there being three types of people able to work together – in design, management and marketing – but this is impossible to achieve at a centralized level. At LVMH, however, each brand is a ‘house’, a mini-company, and this makes it possible to create the optimum conditions under which extremely talented people from these three areas of competence are able to work together. As heads of their ‘brandcompany’, they are more motivated and their remuneration is directly proportional to their financial results and the international reputation of the brand.
Although it not as widely known, l’Oréal functions in the same way. It is significant that within the l’Oréal group, reference is made to the Garnier ‘house’, the Lancôme ‘house’ and so on. These ‘houses’ are autonomous operational units that manage their business with an international approach.
In the field of distributor brands, changing from the single brand – usually a store brand – to private labels also affects the organisation. The recent transformation of Decathlon (the world’s fifth largest retailer of sports clothing and equipment), from the Decathlon brand to the so-called ‘passion brands’ portfolio, had far-reaching repercussions for the organization – is it in fact possible to develop ‘passion brands’ within a centralizing structure? The first people who have to be inspired by this passion are those within the organisation, the managers and the teams, then the co-designers, the fans and the opinion leaders. There is a need to recreate a formal autonomy.