How do you know when you have too many brands and variants? In my opinion the answer is that you have too many when you can’t answer that question!
A couple of months ago I wrote a very popular piece called “A Beginners Guide to Brand Portfolio Management”. This week I’d like to take it a little further and speak about some of the reasons why brand portfolio management is so important to a healthy business.
Brand management is clearly essential, but marketing has one of the quickest promotion ladders of almost any profession. That’s great news for marketers, less so for brands. Why? Well because marketers want to make an impression and get that promotion as quickly as possible. And one of the easiest ways to do that is by launching a new brand or variant.
I believe this is one of the main reasons why we poor consumers often end up NOT buying something, because we just can’t make our minds up between the vast choice of flavours, packs and sizes on display in some of the larger hypermarkets. More is most definitely not always better when it comes to retailing!
Does a brand really need tens of flavours / aromas and hundreds of variants? I decided to take a look at the leading global brands to help answer this. According to Interbrand, these are the top 10 most valuable global brands of 2014:
- General Electric
- Mercedes Benz
Interestingly, in comparing this top ten with that of 2013, only Mercedes was added at the expense of Intel; all the other nine remain in the top ten. Since there is still only one consumer packaged goods brand, namely Coca-Cola, I decided to look at the sub-category of consumer brands.
- Gillette (#18)
- Pampers (#30)
- Kellogg’s (#32)
- L’Oreal (#43)
- Colgate (#50)
- Danone (#51)
- Nestle (#54)
- Johnson & Johnson (#78)
- Duracell (#84)
- Kleenex (#89)
According to Fred Burt, Managing Director of Global Accounts at Interbrand, “While technology has been the great enabler for consumers, consumer packaged-goods brands have the most to gain from technology and the empowered consumer.” Clearly this in itself will force manufacturers to reevaluate their spending to support their brands, as each will need to build a more intimate relationship with its consumers, both inside and outside the retail environment. Burt ends his review of the CPG sector by saying “In the Age of You, the consumer will soon get smarter about how to wield the power that his or her data provides. Consumer goods brands that know how to respond will be the winners.” It will be very difficult to analyse all the data coming into companies from the consumer, so prioritisation is the new name of the game.
Two of the leaders in CPG (Unilever and P&G) both culled the number of their brands’ SKUs about 15 years ago from thousands down to “mere” hundreds and continue to do so on a regular basis. Taking Pareto’s Principle as a guide, it is relatively easy to cut the bottom 5%, 10% or even 20% of brand variants without losing any significant share. This is why both companies continue to do this on a frequent basis.
What is surprising however, is that other CPG giants don’t, or at least not to the same extent! It’s as if they know they should be making cuts and so make a few, but in the end they don’t go far enough because they seem to be scared of losing share. This new “Age of You” as Interbrand calls it, will force many to take a cold hard look at what all this data is telling them.
If you are struggling to make this difficult decision yourself, then perhaps I can provide a few reasons to convince you to make that much needed pruning:
- Those multiplications of flavours, aromas, packaging etc you are making are renovations, not innovations. Wake up marketers, you are not innovating!
- Retailers can’t stock every variant, so the more you offer the less chance you have of getting wide distribution. Think back to your pre-launch market assumptions; I bet they included a wildly exaggerated level of distribution in order to get that precious launch approval.
- Precise targeting and a deep understanding of your consumers are the most successful ways to limit SKU explosion. If you are suffering from too many variants, then perhaps you should go back and review what you know about your consumers and what they really need.
- Arguably some categories need constant renovation (food?), but even that’s no excuse for simply multiplying SKUs. Use the “one in, one out” rule, because if you don’t the retailer probably will and without regard for your own plans and preferences.
- Remember, that if you offer a vast choice of variants for each brand, consumers could get analysis paralysis and end up walking out of the store without buying anything
Coming back to the leading consumer brands from the Interbrands’ list, all top ten excel in brand portfolio strategies that are precisely differentiated, clearly targeted and well communicated. David Aaker wrote an article on L’Oreal a few months ago (Which firm has the best brand portfolio?) which explains the above theories quite well.
I believe most brands with hundreds of variants in a market, are being managed by a lazy marketer who also doesn’t have the courage to face up to the lack of success of some of his “babies”. Are you one of them? What’s your excuse? I’d love to hear your reasons for keeping all your SKUs.
C³Centricity used images from Microsoft and Dreamstime in this post.
This post is adapted from one that was first published on C³Centricity; you can read it here.