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:
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.
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