Brand Portfolio Management: It’s “Decision Time” for Managing Growth Professor Richard Ettenson richard.ettenson@asu.edu Thunderbird School of Global Management Copyright Richard Ettenson 2015 Alternative session titles Growing Your Business Through Strategic Innovation Managing. Organizing, and Leveraging Your Branding Efforts Why Branding (and Marketing) Matter to Your Business Smart Brand Portfolio Management Can Deliver Profitable Growth -Tell Your CEO and CFO! Opening Remarks Great pleasure to be back with the IHA Who has attended before? I am familiar with and understand the scale, scope, and resources of IHA members and conference attendees My role today is to demonstrate how smart brand management can help you grow your business Take you out of your “comfort zone” We will analyze and discuss: • Large high-profile companies • Leading high profile brands • Industries different from yours Lessons learned will translate to your company/industry’ My Professional Experience Academic Background Professor & Keickhefer Fellow in Brand Strategy and Global Marketing, Thunderbird School of Global Management Visiting Professor – ESADE (Spain); Bond University (Australia) Visiting Scholar – Russia, Poland, Hungary; Senior Technical Advisor in China for the United Nations Development Program (UNDP) Consulted with and/or taught executives on 5 continents; clients include: Intel, McDonalds, ExxonMobil, LG Electronics, Amway, Acer, China Telecom, Honeywell, Briggs & Stratton, Dow Chemical, BP, Volvo, Fluor, Delta Airlines, SABIC, Best Western, among others Dual citizen – United States & Australia My Professional Experience Practitioner/Managerial Background Senior Partner -- Type 2 Consulting (brand and business strategy consultancy based in New York City) (www.type2consulting.com) Founder -- market research firm and 3 other start-ups Have served as: • CEO • CMO • CSO Applied thought leadership articles have appeared in: Let me ask a few volunteers – Describe your current job So, What is Your Job “Really Like”? Take You Out of Your “Comfort Zone” What is Your “Mission” at Your Company? Regardless of Position, Rank, Country or Function Contribute to Your Company’s Business Strategy and Success! How to Make it Happen? Create value in a dynamic and fiercely competitive domestic/global business environment The organization has to grow in a reliable and sustainable way Our Objectives(s) Today: Understand how strong well-managed brand portfolios deliver profitable growth Learn how to analyze, manage, evolve and grow your brand portfolios to deliver on your business strategy Let’s Look at the Big Picture Value Creation & Value Capture WHAT IMPACT DO WE HAVE? CUSTOMER & STAKEHOLDER EXPERIENCE PRODUCTS, SERVICES, & ACTIVITIES HOW SHOULD WE DO IT? Your Organization Marketplace Perceptions, Brand & Reputation BUSINESS STRATEGY WHAT SHOULD WE DO? Business Model, Competitive Advantage & Value Creation The world of management and “customer-facing” execution CUSTOMER & BRAND STAKEHOLDER STRATEGY EXPERIENCE PRODUCTS, MARKETING SERVICES, & STRATEGY ACTIVITIES BUSINESS STRATEGY The world of the senior business leader and strategist Key Objective: Get You Thinking in a “Strategic Brand Mindset” What is a Brand? A Multitude of Ways to Think About Brands Speaking Formally…. “A brand is a name, term, sign, symbol, or design or combination of them, intended to identify the goods/services of one seller or group of sellers and to differentiate them from the competition” “A brand is the sum of all the characteristics, tangible and intangible, that make the product offering unique” Managing Brands as a Strategic Asset The 3 P’s of Brands Presence Personality Performance Strong Brands Are an Asset -- Generates a Stream of Incremental Revenue Brand equity Can be a platform for growth Still Other (External/Customer) Ways to Think About Brands A brand is the relationship between a company and its customers that secures preference and loyalty An emotional shortcut between a company and its customers This will be critical with brand portfolios A brand creates expectations about what a customer will experience -- in any and all interactions with the company Seems straightforward … yes? The “ICEBERG VIEW” of Branding Your brand portfolio is a key marcomm element (a very visible part of the marketing effort) What your customers know about you and experience Your organization’s business strategy and strategic intent must be supported by a focused brand strategy and portfolio managed to provide distinctiveness, clarity, and consistency Customer and stakeholder experience Brand propositions What customers know and experience… Brand personality & communications Brand positioning …must be supported and managed in order to build a clear brand positioning and message Strategy & Vision Values and capabilities Strategic Brand Management Bringing the brand alive -Actions & behaviours For Our Purposes, Brands Can Be Summed Up This Way “What your current (and prospective) customers know, think and feel about your company and its products and services --prior to, during, and after purchase and engagement” Your Role as an Effective Manager with Brand-Related Responsibilities Provide meaning, expectation, distinction, and attraction to your company and its portfolio of brands. You must create and manage the associations and synergies about your brands. In doing so, you will be communicating to customers and other stakeholders how entire range of brands is different and relevant. From a Business Perspective – What Keeps You Awake At Night? 1. What Will Drive Organizational Growth? 2. What Will Be My Source of Business (S.O.B)? Your Company’s Brand Strategy, Brand Portfolio (and Brand Architecture) Decisions Should Deliver on Your Business Strategy Key Concepts 3 Core Principles Superior customer value Sustainable competitive advantage (SCA) Strategic focus Environment • / Market Analysis the “3 C’s” • Part 1 • Part 2 What do you do well? What makes you special? What are the boundaries beyond which YOUR COMPANY will not venture? It’s “Decision Time”: Key Drivers of Company Growth Focus and Build Current Product/Brand(s) Develop New Offering – Innovation (NPD) Develop New Offering/NPD and Brand Portfolio Strategy (It’s “Decision Time”) Develop New Brand— -- Line or Category Extension Brand Leverage-Brand Extension --Line or Category Extension Brand Strategy Decisions – A Complex Set of Tradeoffs (lots of choices!) Business Needs and Capabilities Employee Needs Brand Portfolio & Architecture Decisions Brand Needs Customer Needs New Product Development (NPD) & Brand Strategy-- 2 Main Choices Choice #1 Develop a “New” Brand (Empty Vessel) Three flavors are available at launch, including MIXXTAIL Firewalker, MIXXTAIL Hurricane, and MIXXTAIL Long Island. “With Bud Light MIXXTAIL, consumers spoke and we listened. We created a cocktail-inspired beverage to quench consumers’ demand for more variety, mixology and easy, convenient cocktail solutions. MIXXTAIL’S bold cocktail taste makes it the perfect pregame in a bottle,” said Alexander Lambrecht, vice president, Bud Light. Bud Light MIXXTAIL is meant to be served over ice. Available in 8packs of 11.5 oz. recloseable aluminum bottles and single-serve 16 oz. and 25 oz. cans beginning Feb. 16. Mixxtail Website Anheuser-Busch has announced they will launch new tequila-flavored beer Oculto in spring, 2015. Oculto is brewed with blue agave, then blended with beer aged in tequila barrels. The launch is designed to attract younger drinker demographic (those who have just turned 21) that aren’t drinking hard liquor yet, along with capturing some of the Mexican beer sales. Oculto has no tequila in it. The label feature a skull with the Oculto name etched into it. The eyes will glow when the bottle is cold. Oculto will be 6% ABV, and will be competing with Heineken USA’s recently launched Desperados, another tequila flavored offering. New Product Development (NPD) & Brand Strategy-- 2 Main Choices Choice #2 -- Brand Leverage Using existing brand platform (current owned equities) to move into other opportunities Brand Focus Strategy • Line Extensions / Brand Stretching • Parent brand is used to develop a new product that targets a new market segment • Category is currently served by parent brand Brand Diversification Strategy • Category Extensions • Parent brand is used to extend to product category different from the one currently served by the parent Has Become the Master of Brand Extensions Mountain Dew MTN DEW KICKSTART MTN DEW AD 2015 Brand portfolio strategy – what is it? The effective creation, deployment and management of brand assets in support of the organization’s business strategy and marketing strategy Brand Portfolio Strategy Brand portfolio strategy Specifies the structure of the company’s offerings/brands and the scope, roles, and interrelationships of those offerings/brands Effective managers must create and ensure: Synergy, leverage, and clarity within the portfolio Relevant, differentiated, and energized brands Profitable growth that is reliable and sustainable Two Major Brand Types Affect Portfolio Decisions Division / Product Brand (Autonomy) Individual divisions and/or products are given their own identity and promise No corporate brand is used in marketing or promotion programs • Competes on own merits and reputation Masterbrand (Consistency) Divisions, biz lines, products are promoted by leveraging brand strength of the parent Presents a single, clear, and positive identity for all businesses, products or services • Brand “promise” applies to all sub-brands Brand Portfolio Strategy – No Single Best Answer Consistency GE Aircraft Engines GE Commercial Finance GE Appliances GE Healthcare GE Capital GE GE Industrial Lighting GE GE Infrastructure Medical Systems GE GE Money Plastics NBC GE Electrical Distribution and Control Universal GE Power Systems GE Information Services GE Motors and Industrial Systems GE Transportation Systems NBC Autonomy Bounce Bounty Charmin Braun Cheer Folgers Tide Crest Prell Pantene Pringles Zest Pampers Mr. Clean Nyquil Noxema Always Ariel Cover Girl Max Factor Old Spice Pert Ivory Crisco Tampax Febreeze Pepto Bismal Vicks http://www.virgin.com/ Grow the Business! The Search for “S.O.B.” Through Innovation, NPD, Mergers, Acquisitions, Alliances… …is Both a Blessing and a Curse “Managers’ ability to develop new products and new brands, and also to build their portfolios through acquisitions, far outstrips their ability to coherently manage these strategic assets” This has consequences both internal and external to the organization Let’s look at some industries out of your “comfort zone” Unilever's 'Power Brands' strategy, was launched in 1999. As part of this strategy, the huge arsenal of 1600 brands (6000+ SKUs) was pared to comparatively more manageable number of 400 – our “power brands” - more profitable and greater familiarity among consumers. This strategy was vital to increase operational efficiency, to concentrate on the promotional activities on the profitable brands only and to encourage consumers to migrate from smaller brands to the power brands (Unilever spokesperson 2013). Vaseline Spray n' Go Ads (5) Marriott’s Market Coverage Marriott Hotel Brands Price Point Target Customer Positioning Ritz Highest High-end travelers Ritz: Luxury (brand is synonymous worldwide with the finest in hotels) Marriott/Renaissance High High-end prestigious business travelers Marriott: Full-service (flagship brand) Renaissance: Quality (ambiance of a boutique) Courtyard/SpringHill Moderate Business travelers and sales reps looking for good value and local convenience Courtyard: Business travelers/salespeople SpringHill: All suites Residence Medium moderate Extended-stay business traveler (made to feel more like home) Residence: Extended stay TownePlace Lower moderate Business travelers looking for good value TownePlace Suites: Affordable extended stay Fairfield Inn Low Inexpensive, extended family travel Fairfield: Lower moderate-price http://hhonors1.hilton.com/en_US/hh/about/brands.do It is important to keep in mind: Your brand portfolio and architecture is NOT determined by your organizational design or legal structure Brand portfolio and architecture is ALL about seeing the company through the eyes of your customers There are 3 levels of utility a strong well-organized brand portfolio provides your customers: NAVIGATION -- Make the customer’s life simpler REASSURANCE -- Make the customer feel confident about his/her purchase decision ENJOYMENT IN USE -- Enhance the customer’s experience of using your product or service Characteristics of a Well-Managed (Ideal?) Brand Portfolio Fits the company’s future vision and objectives Prioritizes markets and key segments Efficiently covers priority segments Prunes/retires those brands that do not fit or perform Fills gaps through new or extended brands and acquisitions Less Than Optimal Portfolio Management Too many brands in too many segments 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 supply chain Diffused, inefficient and ineffective resource allocation Questions You Often Hear from Management Why do we have two brands serving the same purpose in our portfolio? How well do our customers understand what we have to offer? How should we allocate our budget to drive brand growth? We need to consolidate brands. What is your recommendation? Can you help us “make sense” of our brand portfolio? The right question? Not quite the right question Can you help us develop a brand portfolio “that makes sense” 4 Brand Portfolio Pitfalls Brand bloat / proliferation – letting internal biases and NPD drive brand portfolio decisions Missed opportunities – under-leveraging brands in a portfolio and missing marketing efficiencies failing to create clarity, synergy and leverage across the portfolio Disconnect to business – not linking brand portfolio strategy to business goals and objectives Logo and naming guidelines are “endgame” – assume brand portfolio strategy is complete when logo treatments and naming conventions are set Making sense of brand bloat The Old Intel CORPORATE LEVEL PRODUCT LEVEL SERVICE LEVEL Intel Brand Architecture – Market Initiatives Master Brand Branded Platforms Processor Brands Unbranded Product Bundles G915 Express Chipset Classic Series Desktop Board Chipsets & Motherboards Products Intel®PXA250 Application Processor Intel® Communications Infrastructure Processors Low Power IA Intel® XScale™ processor Intel’s New Brand Strategy Delivers Clarity & Consistency Establish clear, distinctively positioned master brand Focused brand position and personality definition to govern all customer touch points Implement brand architecture for consistency and clarity in branding and communication Build stronger emotional connection with all audiences Intel Masterbrand Strategic rationale Aligns with how people buy technology look to source brands 1st when purchasing complex products Customers Elevates focus to – “Intel vs. competition” Instead of product vs. product vs. products…. Leverages a strong master brand Establishing value of a solutions platform • Requires a strong master brand in the lead Shared culture for employees Ford Motor Company will make history the night of Nov. 1 with a television commercial to be shown in virtually every country around the world. The global commercial, to be carried on every major global and pan-regional network, showcases Ford Motor Company's seven product brands – Ford, Lincoln, Mercury, Mazda, Jaguar, Aston Martin and Volvo. It is the first time all seven Ford Motor Company brands have been shown together on a broadcast commercial, and the first time any corporation has run a simultaneous advertising campaign around the world. The two-minute ad highlights the cultural diversity of Ford Motor Company customers around the world. In the United States, the ad will be carried at 9 p.m. EST on 38 different television networks. A New Entrant into the U.S. SUV Market (2014) First Launched Frankfurt Auto Show 2011 Maserati Kubang Introducing the Maserati Kubang Value Creation & Value Capture WHAT IMPACT DO WE HAVE? HOW SHOULD WE DO IT? CUSTOMER & STAKEHOLDER EXPERIENCE PRODUCTS, SERVICES, & ACTIVITIES Your Organization Marketplace Perceptions – What Customers Think & Feel BUSINESS STRATEGY WHAT SHOULD WE DO? Business Model, Competitive Advantage & Value Creation July 2014 Consider This Extension From….? Website An Interesting Source of Business? Wesbite A New Source of Business? What does Michelin do well? What makes them special? What are the boundaries beyond which P&G will not venture? Michelin Lifestyle What does P&G do well? What makes them special? What are the boundaries beyond which P&G will not venture? Mr Clean Retro 1950s Ad Mr. Clean 1958 Mr Clean 1986 – Is it Wet? http://www.youtube.com/watch?v=j6lRCJPb3-0&NR=1 Mr Clean Magic Eraser http://www.youtube.com/watch?v=cNLsLBI5yug http://www.youtube.com/watch?v=wbiofcuTZBo http://www.youtube.com/watch?v=j6lRCJPb3-0&NR=1 “We need to look for new opportunities to allow us to grow. That isn’t limited to things within our current business model.” • Bruce Brown, Chief Technology Officer, P&G 2009 We need to find things we’re really good at and find partners for the things we’re not good at” • Bruce Brown, Chief Technology Officer P&G 2009 December 2008 acquired assets of Carnett’s Car Wash in Atlanta Car wash industry -- attractive opportunity Fragmented market 100,000 car washes -- no dominant national player Aging baby boomers reluctant to wash their own cars Water-strapped communities pushing for conservation Franchise model • Mitigates capital requirements Leveraging the “Magic Triad” Franchise model Customer experience Branding muscle Prefers to build new facilities vs. convert existing facility Generates consistency Fit with business model Optimized by location and site design We are truly focusing on the consumer experience. We’re making sure that not only our footprint, but our procedures and operation are all designed around the consumer experience, probably to a level that has not been seen before in the industry. It’s something we’re taking into account and making sure it is a part of every single detail” • Bruce Arnett Jr. (2009) About Us Mr Clean Club Shine Services Promotions Mr Clean Cares Gift Cards Locations Franchising AutoSPA •Every 10th wash free! A free Signature Shine Wash - our best full service wash when you purchase any nine Mr. Clean car washes •On your birthday, a complimentary Gold Shine exterior wash within +/- 7 days of your birthday •Exclusive email offers and discounts available Membership is free! A convenient and rewarding way to get the shine you seek. We track your visits for you as a Mr. & D&G Fragrance http://www.youtube.com/watch?v=X1nfgcTUg7s D&G Fall 2008 Ready-to-Wear Milan Women's Fashion Week http://www.youtube.com/watch?v=q2ScOYUV1Rc D&G – The One http://www.youtube.com/watch?v=HMWofLZ6gH8&NR=1 What does McDonalds do well? What makes them special? What are the boundaries beyond which McDonalds will not venture? Product Breakthrough Substantial Incremental Process Strategy Product Incremental Strategy Big Mac Franchisee regulations of quality, consistency ? Value meals Hamburger University Serve Breakfast Green milkshakes St. Patrick’s Day New french fry cooker Boston Market acquisition Breakthrough Substantial Process Beds & Burgers Beds & Burgers 4 star hotel – Golden Arch 2 sites in Switzerland Zurich & Lully Relied on McDonald’s core competencies Franchising Real estate management Controlled (quiet) failure (3 year venture) Real estate investment not a significant loss The 2 properties are now managed by Rezidor SAS Hospitality under the Park Inn brand Rules of Thumb For Brand Cateogry Diversification (The McKinsey Way) Understand Your Brand’s “Parameters of Relevance” Brand’s Basic Value Proposition -- Personality and promise (2 Ps) – brand essence The McKinsey Approach -- Understand Customer Reaction to Extension Opportunities (several steps here): Have managers evaluate/list all expansion opportunities (even wacky ones!) Ask respondents/customers to answer to 2 key questions “Would it be appropriate for this brand to offer a product/service in this other area” • degree of appropriateness “Would you expect the brand to perform better, same as, or worse than currently available brands” • relative performance Exploiting the Potential for Brand Leverage at Ralph Lauren: Category Diversification: % of Respondents Category Clothing Home Furnishings Hotels Electronics Restaurants Print Media Travel Services TV Channels PCs Movie Theaters Financial Services Real Estate Cars and Trucks Car Rentals Insurance Telephone Airlines Electric Service Appropriateness Competitive Position 99 60 51 43 38 37 36 34 29 25 25 24 23 23 22 21 20 20 57 22 9 10 16 12 12 5 5 7 4 5 6 6 5 4 5 3 10 Paths To Successful Brand Extensions Shift the form: Starbucks Frappuccino, Snickers Ice Cream Bars, Black & Decker Role Play Tool Toys, Clorox Bleach Pen, Dial Hand Wash. Transfer a component: Crayola soap paints (creative color), Entenmann’s “Fresh Baked” Candles, Dr. Scholl’s shoes, Ghirardelli Brownie Mix. Transfer a benefit: Arm & Hammer Car Litter Deodorizer, Mr. Clean Magic Eraser, Ziplock Food Containers, Weight Watchers Ice Cream Bars. Leverage an expertise: Food Network cookware, Honda lawnmowers, Gold’s Gym 7-in-1 Body Building system, Mayo Clinic Diet, Reebok Sports Club. Companion products: Coleman Sleeping bags, Coppertone Sunglasses, Harley Davidson Apparel, Mr. Coffee Premium Coffee, Steinway Furniture Polish, Weber Seasonings. Leverage the customer base: Trix Yogurt, Smith & Wesson Tactical Police Mountain Bikes, Sesame Street Toys, Barbie Scooter, Adidas Watches, Fisher-Price Diapers. 10 Paths To Successful Brand Extensions Leverage a lifestyle: Biggest Loser Kitchen Scale, Coach Fragrance, Cover Girl Sunglasses, Discovery Kids Telescope, ESPN Restaurants, Esquire Furniture, Porsche Kitchen Appliances, Rolling Stone Restaurant. Leverage a celebrity expertise: Jack LaLanne’s Power Juicer, Jack Welch Management Institute, Jan Fonda Workout DVD, Martha Stewart Bedding, Ralph Lauren Paints, Wolfgang Puck Frozen Pizza. Leverage a celebrity lifestyle: Cindy Crawford Jewelry, Donald Trump Signature Collection Apparel, Eddie Bauer Baby Stroller, Jessica Simpson Luggage, Kelly Ripa Shoes, Lakers Bottled Water, George Foreman Grill. Change the game by changing a brand image: Old Spice High Endurance Deodorant, V8 V-Fusion Vegetable and Fruit Juice, Zagat Health Survey Doctor’s Ratings, “Marketplace” Advantages of Brand Leverage Facilitates New Product Acceptance Reduce consumer risk Increase probability of distribution and trial Increase marketing communications efficiencies Reduce costs of introductory and follow-up marketing programs Avoid cost of developing new brand Packaging and labeling efficiencies Permits consumer variety seeking Sony Viao “Strategic” Advantages of Brand Leverage Feedback/Benefits to Brand and Company Clarify brand meaning (avoid marketing myopia) Enhance parent brand name Spillover effect to brand name Revitalize the brand Permits subsequent extensions …. Enhancing Brand Identity Through Successful Extensions Extension Products New Brand Meaning Brand Original Product Weight Watchers Fitness centers Low-calorie foods Weight loss and maintenance Sunkist Oranges Vitamins, juices Crayola Crayons Markers, paints, Colorful crafts pens, pencils, clay for kids Aunt Jemima Pancake mixes Syrups, frozen waffles Xerox Copiers Office Equipment Digital Document Digital Documents Company Nike Running Shoes Apparel Sports Equipment Good health Breakfast foods Fitness & Performance Disadvantages of Brand Extensions Confuse/frustrate consumers Retailer resistance Failure can hurt parent brand Can succeed but diminish identification with any one category Can succeed but hurt image of parent brand Forgo opportunity to develop new brand Ford Global Brand Portfolio and Architecture: 2 Key Decisions 1. What should “be in” the portfolio? What to keep? Invest more? What to discard? What transition to retire? What to combine? What to reposition? What to add? Achieving the Ideal Brand Portfolio Brand Portfolio Assessment and Renewal Tool • 2. How should the firm “organize” the portfolio Brand architecture Brand hierarchy Brand leverage Brand Extension Checklist Does the parent brand have strong/appropriate equity to transfer to the extension? Is extension consistent with brand vision and essence? (internal) Is extension a logical fit that makes sense to target market? The “permission” issue (external) Will it create strong competitive positioning in new category? Can it avoid creating negative associations in new category? What implications will extension have on parent brand equity? Will it offer additional extension opportunities? Dove Beauty -- Women Dove Beauty -- Men Axe Spray Axe Billions