Proprietary and Confidential ISBM ISBM Principles & Best Practices in Brand Portfolio Strategy & Architecture March 25, 2013
Jul 17, 2015
Proprietary and Confidential ISBM
ISBM Principles & Best Practices in Brand Portfolio Strategy & Architecture
March 25, 2013
Proprietary and Confidential ISBM
Common questions
Background & Context
Brand Definition/Requirements:
! What is the difference between a brand, a trademark and product name, and what are the implications for how they should be managed?
! What kind of financial investment is required to launch a brand and grow it over time?
Brand Portfolio Strategy:
! What is the optimal number of brands for my company?
! When does it make sense to create a new brand versus launch a new product under an existing brand?
! How “elastic” is my brand? What is its ability to stretch horizontally (across categories and markets), and vertically (across price ranges)?
Brand Architecture:
! Should brands within my portfolio be linked to one another?
! If yes, what is the optimal way to link brands (e.g., sub-branding, co-branding, endorsement)?
! When does it make sense for my corporate brand to endorse my product brands?
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Polling Question #1
Background & Context
Which of the previous groups of questions are most pressing and/or pose the greatest challenges in your organization?
A) Brand Definition/Requirements
B) Brand Portfolio Strategy
C) Brand Architecture
D) All of the Above
E) None of the Above
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Perspectives on Brand
Brand Portfolio Strategy
Brand Architecture
Process & Approach
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A brand is not just…
Perspectives on Brand
A Jingle
A Product A Spokesperson
A Symbol An Ad A Logo
A Slogan A Name
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A brand is…
Perspectives on Brand
! A promise
! A company’s most strategic asset
! The reflection of a customer’s entire experience with a company
! Built and protected by entire organization, not just the marketing department
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Powerful brands create significant economic value
Perspectives on Brand
Source: Interbrand, Brand Values 2011
• 1% increase in customer satisfaction leads to a 3% increase in market cap
• 2% increase in customer loyalty leads to a 10% cost reduction
• 5% increase in customer retention increases customer lifetime value by 25%
• 5% increase in customer loyalty can result in up to a 95% increase in profitability
• 50% of customers will pay 20–25% more for brands they are loyal to Sources: Brandkey, Bain and Mainspring, Marketing News
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Perspectives on Brand
Brand Portfolio Strategy
Brand Architecture
Process & Approach
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Brand Portfolio Strategy vs. Brand Architecture
Brand Portfolio Strategy
Portfolio Strategy
• An articulation of how a company should define its portfolio to drive profitability
• Specifies the optimal number, scope, and role for every brand in the portfolio
Architecture
• A depiction of the optimal relationship between any two brands within the portfolio
• Dictates both whether and how brands should be related to on another
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Five indicators you may have a portfolio problem…or opportunity
Brand Portfolio Strategy
Revenue growth is slowing 1
2
3
4
5 Brands’ funding/support misaligned with profitability/potential
Products increasingly seen as commoditized
Poor cross-sell or up-sell between brands
M&A activity has resulted in a bloated portfolio
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Portfolio organizing frameworks
Brand Portfolio Strategy
Customer Segment
Need/ Benefit
Price Tier
Industry/ Category
Channel/ Distribution
Loyal Enthusiasts Speed Good Financial
Services Direct
Bargain Hunters Convenience Better Consumer
Products Retail
Knowledge Seekers Simplicity Best Medical &
Healthcare Online
Thoughtful Planners Performance Luxury Federal
Government Wholesale
One-stop Shoppers Productivity Value Industrial &
Manufacturing Distributor
Attitudinal & Behavioral Demographic/Firmographic
(Most Powerful) (Most Common)
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Brand portfolio spectrum
Brand Portfolio Strategy
Branded House House of Brands
Customer Segments Few Many
Investment in Branding Low High
Business Make-up Homogenous Heterogeneous
Brand Mgmt. Capability Simplistic Sophisticated
Corporate Relevance High Low
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Brand Portfolio Strategy guiding principles
Brand Portfolio Strategy
1 Build & Leverage a Strong Corporate Brand
2 Define Strategic Objectives for Brands
5 Maximize the Extendibility of Brands
4 Build Relevance Across Value Tiers
3 Employ Simple & Clear Brand Architecture
• Strategic financial asset
• Primary point of reference
• Leveraged across portfolio
• Strategic roles
• Financial objectives
• Clear positioning
• Relatively flat hierarchy
• Easy navigation
• Consistent nomenclature
• Maximize customer reach
• Avoid premium dilution
• Avoid value cannibalization
• Across markets & regions
• Across categories & segments
• Across offer dimensions
Overarching Goal: Fewer, stronger global brands
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Components of a Brand Portfolio Strategy
Brand Portfolio Strategy
Strategic Role/Business Objectives
Price/Value Relationship
Brand Positioning/Identity
Brand Relationship to Master Brand Positioning
Brand Architecture/Linkage
Brand Extendibility/Elasticity
• What specifically is the brand charged with doing for the Company? What objectives should be set for the brand from a volume and financial perspective? What role does/should the brand serve from a channel perspective?
• What are the optimal pricing structures and price points for the brand? What sort of price differential should exist between it and its most direct competitors? What sort of promotional support should the brand receive?
• How should the brand be positioned to the consumer, taking into consideration its strategic role within the portfolio, consumer wants/needs, and its current equities? What is (or should be) its unique point of difference?
• What is the brand’s contribution to the Master Brand proposition? To what extent does it help the Company deliver on its brand promises? Does the brand help the Company reinforce desirable equities?
• What is the optimal relationship between the brand and the Company brand? Should there be an explicit relationship between it and other brands within the brand portfolio? If yes, what is the best way to establish this linkage?
• What is the brand’s “bounds of extendibility?” From a category perspective, where can the brand credibly go today, or in the near or intermediate future? What should be considered off-limits for the brand?
Brand 2 Brand 3 Brand 4 Brand 5 Brand 6 Brand 1
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Perspectives on Brand
Brand Portfolio Strategy
Brand Architecture
Process & Approach
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Five indicators you may have an architecture problem…or opportunity
Brand Architecture
Brands are cluttered and confusing to both customers and employees 1
2
3
4
5
There is no internal system for managing how new brands are developed
Not getting enough leverage from key brands such as the corporate brand
Brand architecture is not aligned with business strategy
No plan for integrating recently acquired brands into existing architecture
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A common B2B brand architecture hierarchy
Brand Architecture
Business Unit Level
Corporate Level
Group/Solution Level
Product/Offering Level
The name of the company; often but not always the legal entity
The name of a BU/subsidiary. May or may not be a derivative of corporate brand
The name of a group of product lines that share a common benefit or solution
The lowest level in the hierarchy – may not warrant “branding” (i.e., name only)
(Johnson & Johnson)
WorkCentre™ 6505 (Xerox)
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Polling Question #3
Brand Architecture
At which level of the hierarchy would you say the majority of brand equity resides within your company’s portfolio?
A) Corporate Level
B) Business Unit Level
C) Group/Solution Level
D) Product/Offering Level
E) None of the Above
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Brand equity flow considerations
Brand Architecture
Direction
Corporate Brand
?
Division/Product Brands
Deskjet
Intensity
Division/Product Brands
Corporate Brand
Polarity
Corporate Brand
Division/Product Brands
(-/+)
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Brand linkage options
Brand Architecture
Brand Type Definition Illustrative Examples
Master A brand that serves as the primary frame of reference, often carrying the corporate name
Co- An equity overtly linked to the master brand, receiving equal emphasis vis-à-vis the master (i.e. logo lock)
Endorsed An equity that is endorsed by the master brand, deriving benefit from it by virtue of the association
Descriptive An equity that is purely functional/descriptive in nature, with a logo lock to the master brand.
Stand-alone A brand that stands independent from the master brand with no overt or implicit link to the master
Un-branded A brand that stands independent from the master brand with no overt or implicit link to the master Strategic Outsourcing
IBM Software
Master Brand
Co-brand Endorsed Brand Descriptive
Brand Un-branded Equity
Stand-alone Brand
Netezza by IBM
IBM SmarterRetail
Emphasis on Master Brand
Emphasis on ‘Other’ Brand
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Brand Architecture decision tree
Brand Architecture
1. Revenue
Does the equity have direct revenue-generating responsibility?
2. Market Need
Does the equity offer a differentiated POV in the marketplace?
3. Competitive
Does the equity hold competitive precedence that establishes independence?
4. Equity Flow
Is the equity charged with infusing unique equity into the Master Brand?
5. Risk
Does association with the equity place potential risk on the Master Brand?
Determination
Stand-alone Brand
Co-brand Brand
Un-branded Equity
YES START
NO
YES
NO
YES
NO
YES
NO
YES
NO
Endorsed Brand
Descriptive Brand
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Perspectives on Brand
Brand Portfolio Strategy
Brand Architecture
Process & Approach
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High-level approach
Process & Approach
Step 1: Current State Assessment
Step 3: Portfolio Scenarios & Business Case Step 4: Portfolio Migration Road Map
Step 2: Customer Insights & Brand Profiling
Need State 2 Segment 2
Segment 6 Segment 3
Segment 1
Need State 5
Need State 3
Segment 4 Segment 5
Need State 1
Need State 4
Brand 11
Brand 2
Brand 10
Brand 6
Brand 7 Brand 12 MGM Grand
Brand 8 Brand 9 Brand 13
Brand 15) Brand 3 Brand 14) Trump (All) Brand 17) Brand 1
Brand 5) Brand 4 Non - Gaming Amenities ( - )
Gaming/ Comps ( - )
Non - Gaming Amenities (+)
Gaming/ Comps (+)
Need State 2 Segment 2
Segment 6 Segment 3
Segment 1
Need State 5
Need State 3
Segment 4 Segment 5
Need State 1
Need State 4
MGM Grand
Trump (All) Non - Gaming Amenities ( - )
Gaming/ Comps ( - )
Non - Gaming Amenities (+)
Gaming/ Comps (+)
5% 10%
Location • Most properties benefit from excellent locations…
Physical Features • Highly variable - décor tends to be generic…
Ambiance • Disconnected experience • Lowest common denominator approach
Observed Customer • The typical customer is older (>45), working class…
Offer • Focuses primarily on gaming, particularly slots…
Service/Staff • Staff appears to be friendly and enthusiastic…
Property anomalies within properties
• New Orleans décor has unique layout and design featuring branded slot courts
• Tahoe offers a more sophisticated
• The customer experience needs to better match brand positioning by prioritizing key touchpoints that will… • St. Louis and Atlantic City may be best practice examples for property standards to handle variability in quality
Atlantic City New Orleans
Lake Tahoe St. Louis
Joliet
Las Vegas
L
V
C
P
HP
1 2 3
4
5 6
7
8
9
10
11
12
13
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Research techniques
Process & Approach
Segment 1 Segment 2 Segment 3 Segment 4
Brand C
Brand E
Brand F
Brand B Brand D
Brand A
Portfolio A
Portfolio B
Brand G
Portfolio C
Discrete Choice Modeling Portfolio Concept Testing
Determines the impact of different brand portfolio and architecture options
on customer purchase intent
Helps determine the extent to which various brand portfolio options help
create clarity and preference
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Business case assessment
Process & Approach
0
13
28.834 34.7
2005 2006 2007 2008 2009
14.820.3 22.2
-37.8
-2.52005 2006 2007 2008 20090.0
24.8
57.5
71.4 72.3
2005 2006 2007 2008 2009
Revenue Impact$Millions
EBITDA Impact$Millions
Cash flow Impact$Millions
Incremental IRR 18%
What is it: Financial analysis of value creation opportunities which allows the team to test brand portfolio moves and inform final recommendations (feasibility), value creation estimates, and high-level implementation plan
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Brand portfolio migration
Process & Approach
Strengthen, manage (BAM), & promote
2011 2012 2013
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
First Test Second Test
(per test results) Strengthen & Manage (BAM)
Promote & begin endorsing division brands as Brand J brand strength / equity is increased
(per test results) No immediate brand action Rationalize brand Endorse w/ Brand J
(per test results) No immediate brand action Rationalize brand Endorse w/ Brand J
(per test results) No immediate brand action Rationalize Brand Endorse Brand C w/ Brand J
Strengthen, manage (BAM) Brand C Br B
Br A
Br C
Br D
Br E
Br F
Current State
1 2 3
4
Future State
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Contact Information
Mitch Duckler Senior Partner (312) 451-2414 [email protected]