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Best Practices in Brand Portfolio Strategy

A tutorial workshop on the best practices in brand portfolio strategy prepared for and facilitated on behalf of The Institute for the Study of Business Markets (ISBM).

Best Practices in Brand Portfolio Strategy

  1. 1. Proprietary & Confiden0al brand growth strategy Best Practices in Brand Portfolio Strategy Tutorial workshop prepared for and facilitated on behalf of: The Institute for the Study of Business Markets (ISBM) Mitch Duckler mduckler@fullsurge.com
  2. 2. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 2 Common Questions Background & Context Brand Defini4on/Requirements: §  What is the difference between a brand, a trademark and product name, and what are the implicaEons for how they should be managed? §  What kind of financial investment is required to launch a brand and grow it over Eme? Brand Por;olio Strategy: §  What is the opEmal number of brands for my company? §  When does it make sense to create a new brand versus launch a new product under an exisEng brand? §  How “elasEc” is my brand? What is its ability to stretch horizontally (across categories and markets), and verEcally (across price ranges)? Brand Architecture: §  Should brands within my porRolio be linked to one another? §  If yes, what is the opEmal way to link brands (e.g., sub-branding, co-branding, endorsement)? §  When does it make sense for my corporate brand to endorse my product brands?
  3. 3. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 3 Polling Question #1 Background & Context Which of the previous groups of quesEons are most pressing and/or pose the greatest challenges in your organizaEon? A)  Brand DefiniEon/Requirements B)  Brand PorRolio Strategy C)  Brand Architecture D)  All of the Above E)  None of the Above
  4. 4. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 4 §  Perspec4ves on Brand §  Brand PorRolio Strategy §  Brand Architecture §  Process & Approach Agenda
  5. 5. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 5 A brand is not just… Perspec4ves on Brand A Jingle A Product A Spokesperson A Symbol An Ad A Logo A Slogan A Name
  6. 6. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 6 A brand is… Perspec4ves on Brand §  A promise §  A company’s most strategic asset §  The reflecEon of a customer’s enEre experience with a company §  Built and protected by enEre organizaEon, not just the markeEng department
  7. 7. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 7 Powerful brands create significant economic value Perspec4ves on Brand Source: Forbes §  1% increase in customer saEsfacEon leads to a 3% increase in market cap §  2% increase in customer loyalty leads to a 10% cost reduc4on §  5% increase in customer retenEon increases customer life4me value by 25% §  5% increase in customer loyalty can result in up to a 95% increase in profitability §  50% of customers will pay 20– 25% more for brands they are loyal to Sources: Brandkey, Bain and Mainspring, Marke5ng News
  8. 8. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 8 §  PerspecEves on Brand §  Brand Por;olio Strategy §  Brand Architecture §  Process & Approach Agenda
  9. 9. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 9 Brand Portfolio Strategy vs. Brand Architecture Brand Por;olio Strategy Por;olio Strategy §  An ar0cula0on of how a company should define its por;olio to drive profitability §  Specifies the op0mal number, scope, and role for every brand in the por;olio Architecture §  A depic0on of the op0mal rela0onship between any two brands within the por;olio §  Dictates both whether and how brands should be related to on another
  10. 10. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 10 Five indicators you may have a portfolio problem… or opportunity Brand Por;olio Strategy 1. Revenue growth is slowing 2. Products increasingly seen as commodiEzed 3. Poor cross-sell or up-sell between brands 4. M&A acEvity has resulted in a bloated porRolio 5. Brands’ funding/support misaligned with profitability/potenEal
  11. 11. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 11 Portfolio Organizing Frameworks Brand Por;olio Strategy Customer Segment Need/ Benefit Price Tier Industry/ Category Channel/ Distribu4on Loyal Enthusiasts Speed Good Financial Services Direct Bargain Hunters Convenience Beler Consumer Products Retail Knowledge Seekers Simplicity Best Medical & Healthcare Online ThoughRul Planners Performance Luxury Federal Government Wholesale One-stop Shoppers ProducEvity Value Industrial & Manufacturing Distributor Aotudinal & Behavioral Demographic/Firmographic (Most Powerful) (Most Common)
  12. 12. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 12 Brand Portfolio Spectrum Brand Por;olio Strategy Branded House House of Brands Customer Segments Few Many Investment in Branding Low High Business Make-up Homogenous Heterogeneous Brand Mgmt. Capability SimplisEc SophisEcated Corporate Relevance High Low
  13. 13. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 13 Brand Portfolio Strategy Guiding Principles Brand Por;olio Strategy 1 Build & Leverage a Strong Corporate Brand 2 Define Strategic Objec4ves for Brands 5 Maximize the Extendibility of Brands 4 Build Relevance Across Value Tiers 3 Employ Simple & Clear Brand Architecture §  Strategic financial asset §  Primary point of reference §  Leveraged across porRolio §  Strategic roles §  Financial objecEves §  Clear posiEoning §  RelaEvely flat hierarchy §  Easy navigaEon §  Consistent nomenclature §  Maximize customer reach §  Avoid premium diluEon §  Avoid value cannibalizaEon §  Across markets & regions §  Across categories & segments §  Across offer dimensions Overarching Goal: Fewer, stronger global brands
  14. 14. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 14 Components of a Brand Portfolio Strategy Brand Por;olio Strategy Strategic Role/Business Objec4ves Price/Value Rela4onship Brand Posi4oning/Iden4ty Brand Rela4onship to Master Brand Posi4oning Brand Architecture/Linkage Brand Extendibility/Elas4city What specifically is the brand charged with doing for the Company? What objecEves should be set for the brand from a volume and financial perspecEve? What role does/should the brand serve from a channel perspecEve? What are the opEmal pricing structures and price points for the brand? What sort of price differenEal should exist between it and its most direct compeEtors? What sort of promoEonal support should the brand receive? How should the brand be posiEoned to the consumer, taking into consideraEon its strategic role within the porRolio, consumer wants/needs, and its current equiEes? What is (or should be) its unique point of difference? What is the brand’s contribuEon to the Master Brand proposiEon? To what extent does it help the Company deliver on its brand promises? Does the brand help the Company reinforce desirable equiEes? What is the opEmal relaEonship between the brand and the Company brand? Should there be an explicit relaEonship between it and other brands within the brand porRolio? If yes, what is the best way to establish this linkage? What is the brand’s “bounds of extendibility?” From a category perspecEve, where can the brand credibly go today, or in the near or intermediate future? What should be considered off-limits for the brand? Brand 2 Brand 3 Brand 4 Brand 5 Brand 6 Brand 1
  15. 15. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 15 §  PerspecEves on Brand §  Brand PorRolio Strategy §  Brand Architecture §  Process & Approach Agenda
  16. 16. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 16 Five indicators you may have an architecture problem… or opportunity Brand Architecture 1. Brands are clulered and confusing to both customers and employees 2. There is no internal system for managing how new brands are developed 3. Not geong enough leverage from key brands such as the corporate brand 4. Brand architecture is not aligned with business strategy 5. No plan for integraEng recently acquired brands into exisEng architecture
  17. 17. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 17 A common B2B brand architecture hierarchy Brand Architecture Business Unit Level Corporate Level Group/Solu4on Level Product/ Offering Level The name of the company; oqen but not always the legal enEty The name of a BU/subsidiary. May or may not be a derivaEve of corporate brand The name of a group of product lines that share a common benefit or soluEon The lowest level in the hierarchy – may not warrant “branding” (i.e., name only) (Johnson & Johnson) WorkCentre™
  18. 18. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 18 Polling Question #3 Brand Architecture At which level of the hierarchy would you say the majority of brand equity resides within your company’s porRolio? A)  Corporate Level B)  Business Unit Level C)  Group/SoluEon Level D)  Product/Offering Level E)  None of the Above
  19. 19. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 19 Brand Equity Flow Considerations Brand Architecture Direc4on Corporate Brand ? Division/Product Brands Deskjet Intensity Division/Product Brands Corporate Brand Polarity Corporate Brand Division/Product Brands (-/+)
  20. 20. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 20 Brand Linkage Options Brand Architecture Brand Type Defini4on Illustra4ve Examples Master A brand that serves as the primary frame of reference, oqen carrying the corporate name Co- An equity overtly linked to the master brand, receiving equal emphasis vis-à-vis the master (i.e. logo lock) Endorsed An equity that is endorsed by the master brand, deriving benefit from it by virtue of the associaEon Descrip4ve An equity that is purely funcEonal/descripEve in nature, with a logo lock to the master brand. Stand-alone A brand that stands independent from the master brand with no overt or implicit link to the master Un-branded A brand that stands independent from the master brand with no overt or implicit link to the master Strategic Outsourcing IBM Soqware Master Brand Co-brand Endorsed Brand DescripEve Brand Un-branded Equity Stand-alone Brand Netezza by IBM IBM SmarterRetail Emphasis on Master Brand Emphasis on ‘Other’ Brand
  21. 21. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 21 Brand Architecture Decision Tree Brand Architecture 1. Revenue Does the equity have direct revenue- generaEng responsibility? 2. Market Need Does the equity offer a differenEated POV in the marketplace? 3. Compe44ve Does the equity hold compeEEve precedence that establishes independence? 4. Equity Flow Is the equity charged with infusing unique equity into the Master Brand? 5. Risk Does associaEon with the equity place potenEal risk on the Master Brand? Determination Stand-alone Brand Co-brand Brand Un-branded Equity YES START NO YES NO YES NO YES NO YES NO Endorsed Brand DescripEve Brand
  22. 22. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 22 §  PerspecEves on Brand §  Brand PorRolio Strategy §  Brand Architecture §  Process & Approach Agenda
  23. 23. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 23 High-level Approach Process & Approach Step 1: Current State Assessment Step 3: Por;olio Scenarios & Business Case Step 4: Por;olio Migra4on Road Map Step 2: Customer Insights & Brand Profiling Need State 2 Segment 2 Segment 6 Segment 3 Segment 1 Need State 5 Need State 3 Segment 4 Segment 5 Need State 1 Need State 4 Brand 11 Brand 2 Brand 10 Brand 6 Brand 7 Brand 12 MGM Grand Brand 8 Brand 9 Brand 13 Brand 15) Brand 3 Brand 14) Trump (All) Brand 17) Brand 1 Brand 5) Brand 4 Non - Gaming Ameni4es ( - ) Gaming/ Comps ( - ) Non - Gaming Ameni4es (+) Gaming/ Comps (+) Need State 2 Segment 2 Segment 6 Segment 3 Segment 1 Need State 5 Need State 3 Segment 4 Segment 5 Need State 1 Need State 4 MGM Grand Trump (All) Non - Gaming Ameni4es ( - ) Gaming/ Comps ( - ) Non - Gaming Ameni4es (+) Gaming/ Comps (+) 5% 10% Loca4on •  Most properEes benefit from excellent locaEons… Physical Features •  Highly variable - décor tends to be generic… Ambiance •  Disconnected experience •  Lowest common denominator approach Observed Customer •  The typical customer is older (>45), working class… Offer •  Focuses primarily on gaming, parEcularly slots… Service/Staff •  Staff appears to be friendly and enthusiasEc… Property anomalies within proper4es •  New Orleans décor has unique layout and design featuring branded slot courts •  Tahoe offers a more sophisEcated •  The customer experience needs to beler match brand posiEoning by prioriEzing key touchpoints that will… •  St. Louis and AtlanEc City may be best pracEce examples for property standards to handle variability in quality AtlanEc City New Orleans Lake Tahoe St. Louis Joliet Las Vegas L V C P HP 1 2 3 4 5 6 7 8 9 10 11 12 13
  24. 24. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 24 Research Techniques Process & Approach Segment 1 Segment 2 Segment 3 Segment 4 Brand C Brand E Brand F Brand B Brand D Brand A Por;olio A Por;olio B Brand G Por;olio C Discrete Choice Modeling Por;olio Concept Tes4ng Determines the impact of different brand porRolio and architecture opEons on customer purchase intent Helps determine the extent to which various brand porRolio opEons help create clarity and preference
  25. 25. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 25 Business Case Assessment Process & Approach 0 13 28.8 34 34.7 2005 2006 2007 2008 2009 14.8 20.3 22.2 -37.8 -2.5 2005 2006 2007 2008 2009 0.0 24.8 57.5 71.4 72.3 2005 2006 2007 2008 2009 Revenue Impact $Millions EBITDA Impact $Millions Cash flow Impact $Millions Incremental IRR 18% What is it: Financial analysis of value creaEon opportuniEes which allows the team to test brand porRolio moves and inform final recommendaEons (feasibility), value creaEon esEmates, and high-level implementaEon plan
  26. 26. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 26 Brand Portfolio Migration Process & Approach Strengthen, manage (BAM), & promote 2011 2012 2013 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 First Test Second Test (per test results) Strengthen & Manage (BAM) Promote & begin endorsing division brands as Brand J brand strength / equity is increased (per test results) No immediate brand ac5on RaEonalize brand Endorse w/ Brand J (per test results) No immediate brand ac5on RaEonalize brand Endorse w/ Brand J (per test results) No immediate brand ac5on RaEonalize Brand Endorse Brand C w/ Brand J Strengthen, manage (BAM) Brand C Br B Br A Br C Br D Br E Br F Current State 1 2 3 4 Future State
  27. 27. PROPRIETARY AND CONFIDENTIAL SUBSECTION TITLE 27 Click to edit Master title style 1603 Orrington Evanston IL 60201 MDuckler@fullsurge.com fullsurge.com Thank you

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