Brand Architecture & Portfolio Mgmt Rahul Verma Project

BRAND ARCHITECTURE AND PORTFOLIO MANAGEMENT

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ANSAL INSTITUTE OF TECHNOLOGY A PROJECT REPORT ON

BRAND ARCHITECTURE AND PORTFOLIO MANAGEMENT Prepared by: Rahul Verma Roll no – 0651061705

In Partial fulfillment Of BBA Course At (GGS Indraprastha University)

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Evaluation of Project

This is to certify that the project titled “Project Finance and Financial Products for PFC “, submitted by “Rahul Verma, Roll no – 0651061705, Student of BBA V semester, Ansal Institute of Technology Affiliated to GGSIP University, Delhi”, has been examined by the following examiners

INTERNAL EXAMINER

EXTERNAL EXAMINER

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Acknowledgement

I wish to express my sincere gratitude to Mr. Sudhir for their constant support. I could not even start and complete my research work without their unbridled support and encouragement. Their inspiring guidance had always boosted my morale.

The immense learning from this project will be indelible forever.

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Chapter 1Introduction Brand Architecture is the vehicle by which the brand team functions as a unit to create synergy, clarity and leverage. So if you think of each brand of a company as a football player, Brand architecture assumes a coach’s role by placing each player at the right position and making them function as a team rather than a collection of players. The brand portfolio includes all the brands and sub-brands attached to product-market offerings, including co-brands with other brands. The architecture should define the different leagues of branding within the organization; how the corporate brand and sub-brands relate to and support each other; and how the sub-brands reflect or reinforce the core purpose of the corporate brand to which they belong. One of the most important elements of brand architecture is brand portfolio and its management. Brand portfolio management is not just a marketing issue, in which a sub-optimal portfolio dilutes marketing messages and confuses customers. It also directly affects corporate profitability. Ill-defined and overlapping brands in a portfolio lead to erosion in price premiums, weaker manufacturing economies, and sub-scale distribution. In a slower economy, the problems of an underperforming portfolio are even more acute: While adding brands is easy, it becomes difficult to harvest the value in a brand or to divest it.

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o The following model proposed by David Aaker, maps out the different elements of brand architecture.

Brand Portfolio Includes all the brands Brand-Market Context Roles

•Endorser/Sub brands •Benefit brands •Co-brands •Driver roles Brand Portfolio Structure Brand Groupings Brand hierarchy trees Brand range

• • •

& sub brands attached to the product-market offerings, including cobrands with other

Brand Architecture

Portfolio Roles

•Strategic brands •Linchpin brands •Silver bullets •Cash cow brands Portfolio Graphics

•Logo •Visual presentation

Optimal Synergy in Clarity of Leveraged Powerful allocation creating: offering brand brands of brand visibility, assets building efficiency resources

Platforms for future growth options

Source: Aaker, D. and Joachimsthaler, E. (2001) Brand Leadership, pp.134-153. London, the Free Press.

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Chapter 2Brand relationships within a portfolio o Single brand across organization Examples include Virgin, Red Cross or Oxford University. These brands use a single name across all their activities and this name is how they are known to all their stakeholders – consumers, employees, shareholders, partners, suppliers and other parties.

o Endorsed brands Like Nestle’s KitKat, Sony Playstation or Polo by Ralph Lauren. The endorsement of apparent brand should add credibility to the endorsed brand in the eyes of consumers. This strategy also allows companies who operate in many categories to differentiate their different product groups’ positioning. A case in point would be the Japanese giants who follow a strategy of corporate branding

 Case Study - Japanese Brands The concept, practice and techniques of branding in the Japanese market are traditionally very different to their Western counterparts. The large, successful brand is king in the Japanese market and, as a result, individual products and lines have often played second fiddle to, or been endorsed by, the more powerful corporate brand. Corporate logos often feature prominently in advertisements and the endorsement of a successful corporate brand has traditionally been very important to new products in particular. One reason for this is that frequent purchasing and ever shifting trends in Japanese society have shortened the average life cycle of a product as new fads and ever increasing bench marks have resulted in businesses having a necessity for quick model change and new products simply to maintain momentum. This quick turnover means that, often, a line will not be in existence long enough to develop a brand identity of its own and so by attaching a well known corporate brand, instant kudos is added. Examples of this include Sony whose brand name is attached to many of their products such as the ‘Sony Minidisc’ and ‘Sony Walkman’ and Yamaha who attach their own brand name to their lines of motorcycles, musical instruments and sports equipment. As

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products have changed quickly, so the discerning Japanese consumer has come to rely on big names of strong reputation when making purchasing decisions. The basic driver of a brand in the Japanese market is success and a large and successful corporate name has often become a badge that instantly authenticates a new product on the market, reducing the need for individual brands to be built and promoted. Following the difficulties in the Japanese domestic economy in the 1990’s, however, practices are beginning to change in Japan. As the economy slowed, so businesses found themselves able to spend less on product innovation and instead concentrated on sustaining and promoting established products. Japanese corporations are increasingly taking on a more Western attitude of creating brands for individual lines as the product and the corporate brand are separated. The Playstation 2 is an excellent example; the Sony name is much less prevalent in the promotion of the product than the previous Playstation as Sony attempts to build a distinct ‘PS2’ brand, separate from the Sony brand itself. Many of the large corporate brands are long standing and they have built strong reputations of reliability, quality and cutting edge technology or have come to define a niche market. Whilst the corporate brand has often been less important in the marketing of Japanese products for export, they have been vital in the domestic market and as they are distanced from products it remains to be seen how Japanese consumers will react to a new generation of product rather than corporate brands

o House of brands Like Procter & Gamble’s Pampers or Unilever’s Persil. The individual sub-brands are offered to consumers, and the parent brand gets little or no prominence. Other stakeholders, like shareholders or partners, know the company by its parent brand.

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

The above three concepts can also be explained figuratively as follows:



Brand relationships spectrum, and there are additional examples of brand relationships

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Chapter 3Portfolio roles For building effective brand architecture it is necessary to identify the portfolio roles of each brand. It provides a tool to take more system view of the brand portfolio and includes a strategic brand, a linchpin brand, a silver bullet brands and a cash cow brand.

o Strategic brands A strategic brand or a mega brand is a currently dominating brand that represents a meaningful future level of sales and profit. For ex: Slate is a strategic brand for Levi’s, TATA consultancy services (TCS) is a strategic brand of TATA group of cos. because the vision of the firm is to move beyond traditional steel and automobile business.

o Linchpin brands A linchpin brand unlike strategic brand not necessarily represents a meaningful future level of sales and profit but it is a leverage point of a major business area. It indirectly influences a business by providing a basis for customer loyalty. For ex. ‘Park Avenue’, a brand extension of Raymond’s launched in mid-eighties. It is a linchpin brand for Raymond’s because it has extended the Raymonds’s credibility in different businesses from ready –to- wear trousers to men’s toiletries.

o Silver bullet A silver bullet is a brand or sub brand that positively influence the image of another brand. It can be a powerful force in creating, changing and maintaining a brand image. for ex. When IBM ThinkPad was launched it has provided a significant boast in public perception of the IBM brand. Another ex. is the Positioning of Forhans’s Flouride as having branded feature of ‘being foamy’ rather than just ‘protect gums and teeth’. It has served to make credible claim that Forhans had achieved another breakthrough in oral care industry.

o Cash cow brand

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Strategic, Linchpin and Silver bullet brands involves investments and active management for fulfilling their strategic mission. The cash cow brands in contrast do not require any investment because it has a significant loyal customer base. The role of a cash cow brand is to generate marginal resources that can be invested in other brands, which will help for future growth and vitality of brand portfolio. For ex; Nivea cream the core product of Nivea, a brand that has been extended to variety of skin care and related products.

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Chapter 4Brand market context roles For deciding effective brand architecture, the product market context roles of the group of brands must be well defined and coordinated. There are four steps of product market context roles that work together to define a specific offering and these are:

o Endorser and sub brands roles An endorser brand is an established brand that provides credibility and substance to the offering. Endorser brands usually represent organizations rather than products because organizational associations such as innovation, leadership and trust are particularly relevant in endorsement context. For example Nestea and Nescafe create associations with its mother brand Nestle and Mcchicken, Mcburgers, Mctikki, etc. from Mcdonald’s. Tata has 80 different companies operating in seven business sectors, which are endorsed under the megabrand TATA. The subbrands on the other hand stretches endorser brands that add associations, a brand personality or any other quality which creates brand identity of it for ex. Nestle’s Cerelac, Gillette’s Sensor and Cadbury’s Bournvita. The understanding and use of endorser brand and subbrands is a key in achieving clarity, synergy and leverage in the brand portfolio.

o Benefit brands The benefit brand is a brand which offers either features, component ingredients or services which becomes the unique selling proposition (USP) of offering. for ex. Gillette diversified’s oral B has a branded feature which shows the time to replace the toothbrush, Dietcoke, Dabur amla, and Neem & Margo soaps have branded component and gradient and American express, Life insurance corporation (LIC) and Taj group of hotels have the branded services associated with their names.

o Driver role Driver role is an extent to which a brand drives the purchase decision and defines the use experience. Brand with a driver role will have some level of loyalty. Brand architecture involves

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selecting the set of brands to be assigned a major driver role; those brands will have priority in brand building. A driver brand is usually a masterbrand or subbrands but endorser and second and third level sub brands can have some driver roles.for ex. Cadbury’s has two subbrands ‘Dairymilk’ and ‘Bournvita’, which have the major driver roles for selling. Another example is Nirma tikia and Nirma washing powder, which is operating in the market with value for money as its major driving role.

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Chapter 5Brand portfolio structure The brands in the portfolio have a relationship with each other. Brand architecture also involves designing a structure of all the brands, which will provide clarity to the customer rather than complexity and confusion. It must provide a sense of order, purpose and direction to the organization. Three approaches can be utilized to present the portfolio structure.

o Brand groupings A brand grouping is a logical grouping of brands that have meaningful characteristics in common. The groups provide logic to the brand portfolio and help its growth overtime. For ex. in case of Johnson and Johnson Ltd.,the brand grouping can be made using following characteristics. •

Segment( Infant Care and Intimate Feminine Care)

•

Product (Healthcare and Pharmaceuticles)

•

Design (Classic and Contemporary)

o Brand hierarchy trees Sometimes the brand portfolio structure can be captured by brand hierarchy trees. The brand hierarchy tree structure looks like an organization chart with both horizontal and vertical dimensions. The horizontal dimensions reflect the subbrands and endorsed brands that reside under a brand umbrella. The vertical dimension captures the number of brands and subbrands that are needed for different segments of the market. For ex. Colgate, the hierarchy tree for the Colgate oral care shows that Colgate name covers toothpaste, toothbrush, dental floss and other oral hygiene products. Again under toothbrush it has brands like plus, precision, classic, youth and colour change. Under Colgate plus toothbrush it has brands like diamond head and "the wild ones". The brand hierarchy tree presentation provides perspective to help evaluate the brand architecture. A successful brand architecture makes a range of offerings both to the customers and to those inside the organization, Having a logical hierarchy structure among sub brands helps generate the clarity.

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o Brand range Brand architecture also involves deciding the range of portfolio brands. It throws light on the some issues like how far a brand (Megabrand or subbrand) should be stretched horizontally in the brand hierarchy tree? How far should they be stretched vertically in to the different markets? The brand range can be described for each brand in the portfolio that spans product classes or has the potential to do so. The above issues must be analyzed by organizations by distinguishing between the brands in its role as an endorser and master brand and recognize that sub brands and co- brands can play a key role in leveraging brands.

o Portfolio Graphics The logo of the brand or the company as well as the visual representation also form an integral part of the architecture.The identifying logos, trademarks, packaging, symbols, product designs, taglines and even the touch and feel aspect of the product are all included in portfolio graphics. These are helpful towards building a strong brand, and drive the purchase toward the brand. The unique shape of Tupperware containers, the Swoosh of Nike, the colour blue which is synonymous

with

IBM,

are

all

signs

of

strong

pictorial

brand

associations.

When compared to Indian Airlines logo, the Jet Airways logo definitely stands out, because of its relative signage. Changes in brands and brand management systems are but obvious, especially with regard to the varied functions a brand performs. Hence the role of brand architecture is to maintain equilibrium between so many brands within and outside the organisation. In the new world of competition, survival essentially depends upon the effective management of brand architecture.

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Chapter 6Characteristics of the ideal brand portfolio There is a clear analogy between managing a brand portfolio and a football team. The football pitch is the market map. You have to decide in which areas you will dominate – whether, for example, the midfield or the flanks. The players, represented by brands, have to cover the priority areas. Each will have a specific role but will still contribute to the team. The manager will avoid players who duplicate – for example, two small fast strikers – or who detract from team effort. Some players are stars (super brands) while others have a more pedestrian role (support brands).

This figure represents an ideal football team. The shaded areas in midfield, on the flanks and upfront are where they look to dominate to win. Companies, unlike football teams, are not restricted by any fixed boundaries, and may enter any market they wish. And they are not limited to 11 products or brands – though perhaps they should be.

So the ideal portfolio: •

Fits the company’s future vision and destination

•

Prioritizes markets and key segments

•

Efficiently covers those priority segments

•

Ruthlessly prunes out those that do not fit

•

Fills gaps through new or extended brands and acquisitions.

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 Case Study : Allied Domecq One case study which is often quoted to represent an ideal brand portfolio is Allied Domecq. Allied Domecq Spirits and Wine Ltd is one of the largest players in the alcoholic drinks market with colossal brands such as Beefeater Gin, Kahlua liquor, Sauza tequila, Tia Maria and Malibu in their portfolio. The company also own a chain of some 3,500 pubs in the UK and the American fast food giant Dunkin’ Donuts.Their website claims that ‘Allied is about brands and people’ and with some of the world’s leading alcoholic drink brands and an exclusive database of some three million consumers to assist in understanding their customers it would be difficult to argue with the statement. The Allied portfolio of brands is carefully managed for a large company with such a vast range. Allied have prioritised the area’s that they wish to compete in such as high quality spirits (Courvoisier cognac, Ballantines Finest Scotch) and ready to drink cocktails and positioned their brands accordingly. This has been supported by brand extensions and a policy of buying individual, cherry picked, brands to strengthen their portfolio; Allied have recently produced a new range of Kahlua cocktails and purchased brands such as Malibu, Mumm Champagne and the US distribution right s for Stolichnaya vodka. This policy has allowed Allied to manage their portfolio effectively. They have covered their priority areas, maintained a sustainable number of brands and have largely avoided overlapping and causing cannibalisation. The strategy seems to be working. In 2001, Allied reported pre tax profits of £236million over a six-month period, an increase of 16% on the previous year. Allied’s four core drinks brands, Kahlua, Sauza, Beefeater and Ballantines are all the second biggest of their kind globally and with a vast portfolio of second tier products, a commitment to market research and innovative products such as their ready to drink cocktails, Allied’s focus on portfolio management seems to be paying off. (Source: The Charted Institute of Marketing, U.K.)

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Chapter 7Major mistakes in portfolio management The biggest mistake is to allow each brand to be managed in isolation because what is right for an individual brand may be wrong for the portfolio in terms of: •

Too many brands in too many segments: there may be too many brands in relation to consumer needs, retailer space and company ability to promote

•

Duplication and overlap

•

Gaps in priority market segments

•

Inefficiencies in operations and the supply chain

•

Diffused and therefore ineffective resource allocation.

To return to the football analogy, this approach will result in bunching and poor coverage of the playing area like the following figure :

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Chapter 8Why managing a brand portfolio is Important “Lack of focus means that energy and resources are dissipated. Focus, in contrast, ensures that people and resources are concentrated where they can add greatest value.” (Source: Fitzgerald, 2001)

Portfolio management will influence the following areas: o Resource Resources such as R&D and marketing spend need to be allocated to areas of best return. Each brand requires brand-building resources. Without a clear picture of the portfolio, it will be harder to identify how best to support the brands that will bring the best returns. If each brand is funded solely according to its profit contribution, high-potential brands with modest current sales could be starved of resources.

o Efficiency Create synergy with your brand portfolio – strong associations can not only benefit all the brands but also be cost efficient by creating economies of scale in both manufacturing and communications. Looking at brands as standalone silos is a recipe for confusion and inefficiency. Are there too many or too few brands? Could some be consolidated, eliminated or sold?

Growth Davidson identifies six ways in which portfolio management enhances growth: •

Clear prioritization of future focus by major market

•

Prioritization by brand and product

•

Concentration of spend on priority market, brands and products

•

Operational cost savings through simplified business

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•

Disposal of brands which don’t fit

•

Gap filling by product development and acquisition

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Leverage Leverage your brand equity. Leveraging brands makes them work harder. A proper portfolio analysis can highlight which brands are best suited to extension, for instance. The more effective and powerful your brands are, the stronger your leverage and the bottom line.

Clarity Clarity of product offerings will underpin a consistent brand identity with all the stakeholders. A balanced portfolio would take advantage of the relative strength of each type of brand to support others.