This week I want to share some ideas with you that were prompted by a client’s question. I was recently asked about brand portfolio management and what to do to ensure that a company is correctly differentiating its offers. This question was in reference to the service industry, which is arguably more challenging since there are no physical products, but the basic requirements remain the same.

Brand portfolio strategies are an essential prerequisite for the long-term success of multi-brand companies. It is vital for these organisations to consider not only external but also internal competitors.

According to marketing theory, there are two types of brand portfolio models, the house of brands and branded property. The House of Brands model refers to a portfolio where brands have different names across categories. Most of the major consumer goods companies use this model. The advantage of this model is that since the brands are independent, the failure of any single one of them has little impact on the others.

The Branded Property model uses one brand across all categories. Virgin is a good example of this, with its airline, media and train companies all being similarly identified. The advantage of this model is that positive images of one benefit all categories; however a negative publicity or event will also have a direct impact on all brands within the family.

Interestingly, both Unilever and P&G have been placing more emphasis on the company brand associated with their brands in recent years. This move followed a ruthless culling of both their portfolios of brands, from thousands down to mere hundreds. The addition of the corporate name has come at a time of decreasing consumer trust in brands, which is certainly not helped by the growing adoption of private label, including those from discounters such as Lidl and Aldi.

Even though these two portfolio models exist, in reality firms tend to use components of both models together in their brand portfolio strategy.

For any company which has more than one or two brands, it is important to regularly review their portfolio strategy; here are some thoughts to help:

Two rules of portfolio creation

There are two basic principles for the design of a successful brand portfolio. The first is to maximise market coverage, so that no potential customers are being ignored. And second, to minimise the overlap between the company’s brands, so they aren’t directly competing with each other and trying to attract the same customers. If you can achieve both of these then your brand portfolio will have a solid foundation.

Identify the category

Surprisingly many don’t do this first essential step and end up with a sub-optimal strategy; let me explain why. Suppose you sell a carbonated soft drink and think you are in competition with other carbonated soft drinks. Consumers on the other hand see your brand as being in a larger category of soft drinks which also includes fresh fruit juices, because your product contains juice as well as being carbonated. If you didn’t know this, you would not only miss out on identifying your true market potential, but may even alienate current users through inappropriate communications. It is essential to ask consumers about the category in which you are competing; a simple brand or pack sort is a great exercise for this.

Identify the category “need states”

Need states are the intersection between what customers want and how they satisfy this need. Although many marketers think about need states from time to time, most define their brands by consumer demographics or product attributes. This can lead to brand overlap and cannibalization. Although the exercise of identifying needs states can be a challenge, the results can often identify new ways for existing brands to compete. It can identify “white spots” in the market as well as significant overlaps, even between brands from the same company, which is clearly undesirable. Once found, both situations can be addressed, offering the potential for significant growth, often without the need for new brand launches.

Identify the brand roles

Not all brands in your portfolio will be of equal value to the organisation. The Boston Consulting Group’s growth /share matrix is still one of the best and simplest tools for identifying those worth investing in, despite having been introduced as long ago as 1968. Since it is well-known and hopefully understood I won’t go into more detail here, but those interested in knowing more can read more about it in a recent article by its creator Bruce Hendersen here.

BCG Demand Matrix

Differentiate your brands

Once the category and need states have been identified, and the current brand role is plotted, it is important to differentiate and communicate these differences to customers. Articulating each brand’s target market and value proposition will also support a review of future challenges and responses in advance of them happening.

Hopefully this short post has given you some food for thought on your own brand portfolio strategy. What would you add?

C³Centricity used images from Dreamstime and BCG in this post.