6.2 Managing brand portfolios

Brand portfolio management is a crucial strategy for companies with multiple brands. It involves coordinating and positioning brands to maximize market coverage, allocate resources efficiently, and enhance overall brand equity. Companies like Procter & Gamble and Unilever use this approach to target different segments and minimize cannibalization.

Key factors in portfolio management include target audience considerations, market positioning, and resource allocation. Strategies for optimization include brand extension, pruning, and repositioning. These approaches drive business growth, enhance profitability, and ensure long-term success by adapting to evolving market conditions and customer needs.

Brand Portfolio Management

Concept of brand portfolio management

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• Involves overseeing and coordinating multiple brands owned by a company
• Aims to position brands strategically aligning them with the company's overall business objectives
• Maximizes market coverage by targeting different segments minimizes cannibalization between brands (Procter & Gamble, Unilever)
• Efficiently allocates resources such as marketing budgets and personnel among brands based on priority and potential
• Enhances the company's overall brand equity and reputation by creating a cohesive brand architecture
• Facilitates business growth by identifying opportunities for brand expansion and profitability by optimizing brand performance (Apple, Nike)

Key factors in portfolio management

• Target audience considerations
  • Demographic factors such as age, gender, income level (Luxury brands targeting high-income consumers)
  • Psychographic factors such as values, interests, lifestyle (Patagonia appealing to environmentally conscious consumers)
  • Behavioral factors such as purchase habits, brand loyalty (Amazon Prime members)
• Market positioning
  • Establishing a brand's perceived value and differentiation compared to competitors
  • Maintaining a clear and distinct brand identity within the portfolio (Coca-Cola vs. Sprite)
  • Assessing the brand's price point, quality, and unique selling proposition (Tiffany & Co. as a premium jewelry brand)
• Resource allocation
  • Determining financial budgets for marketing, R&D, and operations for each brand
  • Assigning human resources such as brand managers and marketing teams (P&G's brand management system)
  • Prioritizing investments based on a brand's growth potential and strategic importance (Nike's focus on innovation and athlete endorsements)

Strategies for portfolio optimization

1. Brand extension strategy
   • Leverages an existing brand's equity to enter new product categories or markets (Virgin Group extending into airlines, mobile phones, and fitness clubs)
   • Capitalizes on brand recognition and loyalty to drive growth in new areas
   • Evaluates brand fit and potential risks of diluting the core brand image (Harley-Davidson's unsuccessful perfume extension)
2. Brand pruning strategy
   • Eliminates underperforming or non-strategic brands from the portfolio (General Motors discontinuing Pontiac and Oldsmobile)
   • Frees up resources to allocate to more promising brands
   • Streamlines the portfolio and improves overall profitability by focusing on core brands
3. Brand repositioning strategy
   • Adjusts a brand's market position or target audience to revitalize declining brands or adapt to changing market conditions
   • Modifies brand elements such as logo, packaging, and messaging to signal the new positioning (Old Spice's successful rebranding to appeal to younger consumers)
   • Alters the brand's value proposition and marketing mix to align with the new positioning (McDonald's introducing healthier menu options)

Role of portfolios in business growth

• Drives business growth
  • Identifies opportunities for brand expansion into new markets or product categories (Starbucks expanding into packaged goods and ready-to-drink beverages)
  • Develops strategies to increase market share and customer loyalty within existing markets (Apple's ecosystem of interconnected products and services)
  • Fosters cross-selling and up-selling across brands in the portfolio (Amazon's recommendation engine promoting complementary products)
• Enhances profitability
  • Optimizes resource allocation to maximize return on investment for each brand (Procter & Gamble's portfolio strategy focusing on high-growth, high-margin brands)
  • Reduces costs through economies of scale and shared resources such as distribution networks and marketing campaigns
  • Increases brand equity and allows for premium pricing based on strong brand reputation (Mercedes-Benz's premium pricing strategy)
• Ensures long-term success
  • Continuously assesses and adapts the brand portfolio to remain relevant and competitive in evolving market conditions
  • Proactively addresses changing customer needs and preferences through brand innovation and repositioning (Netflix's transition from DVD rentals to streaming services)
  • Builds a strong and sustainable brand architecture that supports future growth and mitigates risks (Johnson & Johnson's brand architecture organized by consumer segments)