Inherited complex portfolios

The question of how many brands should be kept in each market has become a primary concern of all senior marketing managers. The fact is that, due to historical reasons, most firms have to manage a large portfolio of brands. The natural tendency during the growth of firms has been to add new brands each time they wanted to penetrate new market segments or new distribution channels.

This was done so as not to create conflicts with former segments and channels which could have endangered their old brands. The vogue of company mergers and acquisitions brought additional brands that managers were reluctant to dispose of or merge with other brands. The size of brand portfolios, therefore, just grew and grew, with increased complexity and waste.

Times have changed though, and now the trend is to reduce the size of portfolios as quickly as possible. There are several reasons for this reverse in trends:

  • Although it is easy to maintain several brands simultaneously in industrial markets where different brands are sometimes used for the same product to ease relations with distributors, in the retail market it is nearly impossible. The direct consequence is that only a few brands in a portfolio will be promoted, to gain a significant market share. The others will be abandoned.
  • The concentration of the distribution trade has reduced the number of retailers and has even almost suppressed certain retail channels and small businesses. Brands that were previously uniquely handled by specific distribution channels and sold only in certain stores may now be found in a single wholesaler or purchasing group. This tends to lead to the reduction in their numbers. The trade has also pursued a policy of creating distributors’ own brands. This, coupled with the fact that supermarket shelf space is limited, leads to the reduction of space allocated to the other brands, another factor causing a reduction in the number of references or brands themselves.
  • Industrial production has also become concentrated. International competition has put the emphasis on high productivity and low costs and has led to the regrouping of production units and research and development activities. There is less justification for large brand portfolios when the products, however varied, come from the same factories, and even the same production line.
  • Consumers, however, still have the last say and despite the fact that the objective of a brand is to clarify the market, their most frequent complaint is that they are confused by the growing number of brands. A company is fooling the consumer if it sells two identical products under two different brand names. Manufacturers respond by rationalising their brands.
  • The last point, but not the least, concerns brand internationalisation.

In many areas today, national barriers no longer make sense. In Europe, for example, class, lifestyle and consumer needs are no longer exclusive to a single country. The luxury goods industry has long been targeting the world market, as indeed have most industrial companies. Not all brands are suited to the international arena, however.

The investment required to establish a significant global presence means that firms can only maintain a small number of brands, or indeed just a single one for a mono-brand strategy such as that of Philips, Siemens, Alcatel, Mitsubishi or ABB.

How many brands, therefore, should be retained in a portfolio? It is obvious at this stage that there does not exist any magic formula or number. The question of the number of brands to retain is closely linked to the strategic role and status of the brands. In keeping only a single brand, we are assuming that an umbrella brand policy is possible and indeed pertinent in the market being considered.

For decades, the Philips brand included both brown and white products, yet they parted with the latter markets, selling them to the American company Whirlpool. The decision regarding the number of brands to be retained should therefore be closely linked to an analysis of the brand’s function in its respective market. Every market can be segmented, by product, customer expectation or type of clientele.

This does not mean, though, that a market divided into six segments, for example, should necessarily call for six brands. This depends on their function (do we need endorsing, umbrella, range or product brands?). It also depends upon the long-term corporate objectives, the degree of competition and the resources of the company. The appropriate number of brands results from a multi-stage, multi-criteria decision process whereby various scenarios are presented and evaluated. A good example of this approach is Michelin.

Strategic Brand Management Related Practice Tests

Strategic Management Practice Tests
Brand Equity In Question What Is A Brand? Differentiating Between Brandassets, Strength And Value Tracking Brand Equity Goodwill: The Convergence Of Finance And Marketing How Brands Create Value For The Customer How Brands Create Value For The Company Corporate Reputation And The Corporate Brand Strategic Implications Of Branding What Does Branding Really Mean? Permanently Nurturing The Difference Brands Act As A Genetic Programme Respect The Brand ‘contract’ The Product And The Brand Each Brand Needs A Flagship Product Advertising Products Through The Brand Prism Brands And Other Signs Of Quality Obstacles To The Implications Of Branding Brand And Business Building Are Brands For All Companies? Building A Market Leader Without Advertising Brand Building: From Product To Values, And Vice Versa Are Leading Brands The Best Products Or The Best Value? Understanding The Value Curve Of The Target Breaking The Rule And Acting Fast Comparing Brand And Business Models: Cola Drinks From Private Labels To Store Brands Evolution Of The Distributor’s Brand Are They Brands Like The Others? Why Have Distributor's Brands? The Financial Equation Of The Distributor’s Brand The Three Stages Of The Distributor’s Brand The Case Of Decathlon Factors In The Success Of Distributor's Brands Optimising The Dob Marketing Mix The Real Brand Issue For Distributors Competing Against Distributor's Brands Facing The Low-cost Revolution Should Manufacturers Produce Goods For Dob's? Brand Diversity: The Types Of Brands Luxury, Brand And Griffe Service Brands Brand And Nature: Fresh Produce Pharmaceutical Brands The Business-to-business Brand The Internet Brand Country Brands Thinking Of Towns As Brands Universities And Business Schools Are Brands Thinking Of Celebrities As Brands The New Rules Of Brand Management The Limits Of A Certain Type Of Marketing About Brand Equity The New Brand Realities We Have Entered The B To B To C Phase Brand Or Business Model Power? Building The Brand In Reverse? The Power Of Passions Beginning With The Strong 360° Experience Beginning With The Shop The Company Must Be More Human, More Open Experimenting For More Efficiency The Enlarged Scope Of Brand Management Licensing: A Strategic Lever How Co-branding Grows The Business Brand Identity And Positioning Brand Identity: A Necessary Concept Identity And Positioning Why Brands Need Identity And Positioning The Six Facets Of Brand Identity Sources Of Identity: Brand Dna Brand Essence Launching The Brand Launching A Brand And Launching A Product Are Not The Same Defining The Brand’s Platform The Process Of Brand Positioning Determining The Flagship Product Brand Campaign Or Product Campaign? Brand Language And Territory Of Communication Choosing A Name For A Strong Brand Making Creative 360° Communications Work For The Brand Building Brand Foundations Through Opinion Leaders And Communities The Challenge Of Growth In Mature Markets Growth Through Existing Customers Line Extensions: Necessity And Limits Growth Through Innovation Disrupting Markets Through Value Innovation Managing Fragmented Markets Growth Through Cross-selling Between Brands Growth Through Internationalisation Sustaining A Brand Long Term Is There A Brand Life Cycle? Nurturing A Perceived Difference Investing In Communication No One Is Free From Price Comparisons Branding Is An Art At Retail Creating Entry Barriers Defending Against Brand Counterfeiting Brand Equity Versus Customer Equity: One Needs The Other Sustaining Proximity With Influencers Should All Brands Follow Their Customers? Reinventing The Brand: Salomon Adapting To The Market: Identity And Change Bigger Or Better Brands? From Reassurance To Stimulation Consistency Is Not Mere Repetition Brand And Products: Integration And Differentiation Specialist Brands And Generalist Brands Building The Brand Through Coherence Defining The Core Identity Of The Brand Confirming The Presence Of Brand Core Facets In Each Product Identifying The Role Of Each Product Line In The Construction Of The Brand Graphically Representing The Overall System Of The Brand Checking The Coherence Worldwide The Three Layers Of A Brand: Kernel, Codes And Promises Respecting The Brand Dna Managing Two Levels Of Branding Growth Through Brand Extensions What Is New About Brand Extensions? Brand Or Line Extensions? The Limits Of The Classical Conception Of A Brand Why Are Brand Extensions Necessary? Building The Brand Through Systematic Extensions: Nivea Extending The Brand To Internationalize It Identifying Potential Extensions The Economics Of Brand Extension What Research Tells Us About Brand Extensions Avoiding The Risk Of Dilution Balancing Identity And Adaptation To The Extension Market Segments Assessing What Should Not Change: The Brand Kernel Preparing The Brand For Remote Extensions Keys To Successful Brand Extensions Is The Market Really Attractive? An Extension-based Business Model: Virgin How Execution Kills A Good Idea: Easycar Brand Architecture The Key Questions Of Brand Architecture Type And Role Of Brands The Main Types Of Brand Architecture The Flexible Umbrella Brand The Aligning Umbrella Brand (masterbrand) Choosing The Appropriate Branding Strategy New Trends In Branding Strategies Internationalising The Architecture Of The Brand Some Classic Dysfunctions What Name For New Products? Group And Corporate Brands Corporate Brands And Product Brands Multi-brand Portfolios Inherited complex portfolios From Single To Multiple Brands: Michelin The Benefits Of Multiple Entries Linking The Portfolio To Segmentation Global Portfolio Strategy The Case Of Industrial Brand Portfolios Linking The Brand Portfolio To The Corporate Strategy Key Rules To Manage A Multibrand Portfolio The Growing Role Of Design In Portfolio Management Does The Corporate Organization Match The Brand Portfolio? Auditing The Portfolio Strategically A Local And Global Portfolio – Nestlé Handling Name Changes And Brand Transfers Brand Transfers Are More Than A Name Change Reasons For Brand Transfers The Challenge Of Brand Transfers When One Should Not Switch Analysing Best Practices Transferring A Service Brand How Soon After An Acquisition Should Transfer Take Place? Managing Resistance To Change Factors Of Successful Brand Transfers Brand Turnaround And Rejuvenation The Decay Of Brand Equity The Factors Of Decline Distribution Factors When The Brand Becomes Generic Preventing The Brand From Ageing Rejuvenating A Brand Growing Older But Not Ageing Managing Global Brands The Latest On Globalisation Patterns Of Brand Globalisation Why Globalise? The Benefits Of A Global Image Conditions Favouring Global Brands The Excess Of Globalisation Barriers To Globalisation Coping With Local Diversity Building The Brand In Emerging Countries Naming Problems Achieving The Delicate Local–global Balance Being Perceived As Local: The New Ideal Of Global Brands? Local Brands Can Strike Back The Process Of Brand Globalisation Globalising Communications: Processes And Problems Making Local Brands Converge Financial Valuation And Accounting For Brands Accounting For Brands: The Debate What Is Financial Brand Equity? Evaluating Brand Valuation Methods Brand Valuation In Practice The Evaluation Of Complex Cases What About The Brand Values Published Annually In The Press? Strategic Brand Management Interview Questions