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MARKETING LEADERSHIP COUNCIL FEBRUARY 2006 www.marketingleadershipcouncil.com ISSUE BRIEF The Sub-Branding Decision Catalog No.: MLC113O963 © 2003 Corporate Executive Board KEY QUESTIONS INTRODUCTION How do marketers define “sub-branding”? What are the benefits and drawbacks of launching a sub-brand? How can companies assess their brand portfolios for sub- branding potential? How do companies incorporate sub-brands into the overall brand architecture? What strategic marketing approaches do leading companies employ to cultivate successful sub-brands? TABLE OF CONTENTS Summary of Findings Page 1 Definition and Roles of Sub- Branding 3 5 7 9 11 Evaluating Sub-Branding Opportunities 14 Incorporating Sub-Brands into Brand Architecture 18 21 24 26 28 Bibliography 29 Although experts differ on the definition of what constitutes a sub- brand, they agree that sub-brands serve a variety of complex roles. For example, research suggests that sub-brands may describe, structure, and clarify offerings by serving as a driver, co-driver, endorser, or descriptor brand; protect the master brand by preventing brand dilution and modifying its meaning; and capitalize on new market opportunities. Due to the complex nature of sub-branding, Council research indicates that marketers utilize the following three step process to evaluate sub-branding opportunities: Determine Customer Needs States Analyze Market Opportunity in Needs States Consider Placement in Existing Brand Portfolio After assessing sub-branding potential, companies may employ the following strategies to incorporate sub-brands into existing brand architecture: Positioning Strategies Utilize the brand relationship spectrum Consider the principles of relevance and differentiation Employ “pooling” and “trading” techniques Sub-Branding Management Strategies Employ a brand architecture checklist Streamline brand architecture to control the proliferation of sub-brands Ensure that sub-brands consistently support the parent brand’s identity This issue brief examines sub-branding theory, including the definition and role of sub-branding and methods for evaluating sub- branding opportunities. In addition, the brief explores strategies for incorporating sub-brands into existing brand architecture. The brief also includes case profiles of Marriott, Levi’s, United Airlines, Timberland, General Motors, Dell, Walt Disney Company, and Nike.
29

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Page 1: The Sub-Branding Decision - tatasteelonline.com directories/Sales... · drawbacks of launching a ... preventing brand dilution and modifying its meaning; ... General Motors, Dell,

MARKETING LEADERSHIP COUNCIL FEBRUARY 2006 www.marketingleadershipcouncil.com ISSUE BRIEF

The Sub-Branding Decision

Catalog No.: MLC113O963 © 2003 Corporate Executive Board

KEY QUESTIONS INTRODUCTION

How do marketers define “sub-branding”?

What are the benefits and

drawbacks of launching a sub-brand?

How can companies assess their

brand portfolios for sub-branding potential?

How do companies incorporate sub-brands into the overall brand architecture?

What strategic marketing approaches do leading companies employ to cultivate successful sub-brands?

TABLE OF CONTENTS Summary of Findings

Page 1

Definition and Roles of Sub-Branding 3

5

7

9

11

Evaluating Sub-Branding Opportunities 14

Incorporating Sub-Brands into Brand Architecture 18

21

24

26

28

Bibliography 29

Although experts differ on the definition of what constitutes a sub-brand, they agree that sub-brands serve a variety of complex roles. For example, research suggests that sub-brands may describe, structure, and clarify offerings by serving as a driver, co-driver, endorser, or descriptor brand; protect the master brand by preventing brand dilution and modifying its meaning; and capitalize on new market opportunities.

Due to the complex nature of sub-branding, Council research indicates that marketers utilize the following three step process to evaluate sub-branding opportunities:

Determine Customer Needs States Analyze Market Opportunity in Needs States Consider Placement in Existing Brand Portfolio

After assessing sub-branding potential, companies may employ the following strategies to incorporate sub-brands into existing brand architecture:

Positioning Strategies ♦ Utilize the brand relationship spectrum ♦ Consider the principles of relevance and differentiation ♦ Employ “pooling” and “trading” techniques

Sub-Branding Management Strategies ♦ Employ a brand architecture checklist ♦ Streamline brand architecture to control the proliferation

of sub-brands ♦ Ensure that sub-brands consistently support the parent

brand’s identity This issue brief examines sub-branding theory, including the definition and role of sub-branding and methods for evaluating sub-branding opportunities. In addition, the brief explores strategies for incorporating sub-brands into existing brand architecture. The brief also includes case profiles of Marriott, Levi’s, United Airlines, Timberland, General Motors, Dell, Walt Disney Company, and Nike.

Page 2: The Sub-Branding Decision - tatasteelonline.com directories/Sales... · drawbacks of launching a ... preventing brand dilution and modifying its meaning; ... General Motors, Dell,

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p to

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ds in

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to

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e.

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nd A

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Page 3: The Sub-Branding Decision - tatasteelonline.com directories/Sales... · drawbacks of launching a ... preventing brand dilution and modifying its meaning; ... General Motors, Dell,

MARKETING LEADERSHIP COUNCIL PAGE 3 THE SUB-BRANDING DECISION: THEORY, PROCESS, AND BRAND ARCHITECTURE STRATEGIES

ISSUE BRIEF

© 2006 Corporate Executive Board

DEFINITION AND ROLE OF SUB-BRANDS Experts assert that while the term sub-branding enjoys widespread popularity in the marketing arena, marketers define it in a variety of ways. The definition below illustrates a general description of a sub-brand, followed by several more specific and slightly variant definitions derived from leading brand theorists. 456 7

ALTERNATE DEFINITIONS FROM LEADING BRAND THEORISTS:

“The practice of combining an existing brand with a new brand to brand a product is called sub-branding, as the subordinate brand is a means of modifying the super-ordinate brand.”

Kevin Lane Keller, Professor5

Dartmouth’s Tuck School of Business

“A sub-brand is a brand that distinguishes a part of the product line within the brand system. For example, Buick uses the sub-brand Roadmaster to distinguish a specific brand model (including its characteristics and personality) from another model, such as the Riviera. Both are Buicks and enjoy the umbrella of the Buick name, but each is a distinct product.”

David Aaker, Professor6

University of California, Berkeley’s Haas School of Business

“Sub-branding represents an effort to add an element below the level of the master brand. A sub-brand

combines with a master brand to create a ‘dual-mark,’ both of which are owned by the same firm.”

Paul Herr, Associate Professor of Marketing7

University of Colorado Experts note that sub-brands may fulfill the roles listed below and explained in more detail on the following pages.

8,9,10

4 Author Unknown, “Sub-Brand Definition,” www.acbrandguidelines.org (accessed January 2006). 5 David Aaker, Building Strong Brands, New York: Free Press (1996). 6 Paul Herr, “Higher Education Institutional Brand Value in Transition: Measurement and Management Issues,” www.educause.edu (6 July 2003). 7 Scott Bedbury, A New Brand World: New York: Viking (2002). 8 Chris Macrae, “Architectural Approaches to Brand Extension,” allaboutbranding.com (June 2003). 9 Sandra J. Milberg, C. Whan Park, and Michael S. McCarthy, “Managing Negative Feedback Effects Associated with Brand Extensions: The Impact of Alternative Branding Strategies,” Journal of Consumer Psychology (2001). 10 David Aaker, Building Strong Brands.

A product or service brand that possesses a differentiated name, persona, and visual identity from the parent brand (such that it can be uniquely trademarked), but remains endorsed by the parent brand and retains some of its perceptions.

DEFINITION OF A SUB-BRAND4

I. Describe, structure, or clarifying offerings in the current portfolio

II. Solidify the positioning of the master brand III. Leverage new market opportunities

SUB-BRANDING ROLES

Page 4: The Sub-Branding Decision - tatasteelonline.com directories/Sales... · drawbacks of launching a ... preventing brand dilution and modifying its meaning; ... General Motors, Dell,

MARKETING LEADERSHIP COUNCIL PAGE 4 THE SUB-BRANDING DECISION: THEORY, PROCESS, AND BRAND ARCHITECTURE STRATEGIES

ISSUE BRIEF

© 2006 Corporate Executive Board

DEFINITION AND ROLE OF SUB-BRANDS (CONTINUED)

I. Describe, Structure, and Clarify Offerings Companies often develop sub-brands to describe, structure, and clarify offerings in a brand portfolio to consumers. To this end, sub-brands serve one of the four roles examined in more detail below—driver, co-driver, descriptor, or endorser—determined by its relationship to the parent brand.

Driver—A driver brand encourages purchase decisions by representing the value proposition central to the user experience. The parent brand simply endorses the sub-brand in this case, while the sub-brand defines the user’s perceptions of the product or service experience and proves the primary driver motivating consumer purchase. As such, a driver sub-brand must generate real customer response to fulfill the key aspects of its role. 11

With the Gillette Sensor razor, customers primarily buy the technology and performance represented by the Sensor name. As a result, the Sensor serves as the driver brand and Gillette creates a strong identity and clear visibility for the Sensor name on the package, retail rack, and in consumers’ minds.

Co-driver—The sub-brand serves as a co-driver when both the master brand and the sub-brand play major

driver roles. In co-driver roles, both the parent brand and the sub-brand’s associations influence the consumer’s decision to purchase the product, as illustrated in the snapshot of the Cadillac Escalade below.12,13

Cadillac’s Escalade sub-brand serves as a co-driver, as both the Cadillac and Escalade brand names influence consumers’ purchase decisions. While consumers associate the Cadillac name with top of the line performance, quality, and style, the Escalade brand compounds that image with the slightly rugged, more versatile associations of a sports utility vehicle. Cadillac marketers leveraged the associations of both driver brands to command market share in the luxury sports utility vehicle category, as well as generating significant demand for the car among Hollywood celebrities attracted to the brand’s image of luxury, spaciousness, and high performance versatility.

Descriptor—As implied by the name, descriptor brands communicate a brand’s class, feature, target segment,

or function. Experts assert that descriptor brands prove the riskiest category of sub-brands, as the sub-brand may cannibalize the parent brand if insufficient differentiation among varieties exists. The snapshot of Purina Dog Food below illustrates a successful descriptor brand strategy, with each variety targeting a different dog segment, such as high energy dogs, puppies, or overweight animals.14

Purina Dog Food maintains the following descriptive brands:

Dog Chow Beneful Hi-Pro Fit & Trim Puppy Chow Moist & Meaty

Purina Brand Dog Food features numerous descriptor sub-brands to more accurately meet the needs of numerous dog varieties and specialized owner demands. For example, while all dogs could potentially thrive off of the standard Puppy and Dog Chow offerings, Purina found that developing specialized offerings for overweight, high-energy, and performance dogs defined by a unique descriptor sub-brand enabled owners to better address their dog’s perceived needs. In addition, the descriptor brand strategy enabled Purina to quickly capitalize on emerging trends in the pet food market, such as introducing the Beneful high nutrient brand to address owner’s demands for nutritious or organic pet food.

11 David Aaker, Building Strong Brands. 12 David Aaker, “Should You Take Your Brand to Where the Action Is?” Harvard Business Review (October 1997). 13 Gary Witzenburg, “Cars Worth Noting: The Cadillac Escalade,” Automotive Industries (February 2005). 14 Author Unknown, “Purina Brands,” www.purina.com (accessed January 2006).

Page 5: The Sub-Branding Decision - tatasteelonline.com directories/Sales... · drawbacks of launching a ... preventing brand dilution and modifying its meaning; ... General Motors, Dell,

MARKETING LEADERSHIP COUNCIL PAGE 5 THE SUB-BRANDING DECISION: THEORY, PROCESS, AND BRAND ARCHITECTURE STRATEGIES

ISSUE BRIEF

© 2006 Corporate Executive Board

DEFINITION AND ROLE OF SUB-BRANDS (CONTINUED)

Endorser—In sub-branding relationships, the parent brand often plays an endorser role, providing support and credibility to the driver brand’s claims in a more explicit fashion than co-drivers (for example, Euphoria by Calvin Klein). Endorsed sub-brands provide consumers with assurance that the sub-brand will deliver on the same value propositions as the parent offering, enabling the master brand to expand into new markets while retaining its established brand position. The following case profile of Marriott illustrates how the hotelier utilized endorsed sub-brands to expand down market.

MARRIOTT INTERNATIONAL15,16,17

Industry: Hospitality Services

2004 Sales (US$): 10.1 billion

Employees: 128,000

Headquarters: Bethesda, MD

Web Site: www.marriott.com SITUATION Several decades ago, unknown regional brands populated the economy hotel category. Marriott recognized an opportunity to introduce a unique and appealing hotel format to entice travelers concerned with the quality of unknown local chains. At the upper end of the lodging spectrum, however, Marriott realized that its brand faced difficultly attracting clientele that differed from its affluent core customer. ACTION To leverage its strong brand name while simultaneously creating new brands to attract diverse market segments, Marriott implemented a new “Distribution Brand” strategy, striving to offer customers a hotel choice in as many locations and at as many price points as possible. As such, it added eight distinct lodging brands to its four core brands throughout the 1980s, five of which appear below in Table I. Despite initial concerns of cannibalization, Marriott attached its name to all the sub-brands in order to accelerate the hotels’ acceptance within the marketplace.

TABLE I. THE FAMILY OF MARRIOTT ENDORSED BRANDS Brand Distinctive Qualities

Full-service, premium-priced hotels

Mid-priced hotel without additional amenities, designed for business travelers

Economy lodging for families

Suite style, family hotels usually comprised of two rooms. This brand targets women while the other Marriott brands tend to be occupied by a 75 percent male clientele.

Extended stay hotels, spacious accommodations usually with kitchenette and maid service

Marriott profile continued on the following page.

15 David Aaker and Erich Joachimsthaler, Brand Leadership, New York: Free Press (2000). 16 Author Unknown, “Marriott International, Inc. SWOT Analysis,” Datamonitor Company Profiles (October 2005). 17 Laura Paugh, “Marriott International at Deutsche Bank Securities Inc. Hospitality & Gaming Conference,” Voxant Fair Disclosure Wire (November 2005).

Page 6: The Sub-Branding Decision - tatasteelonline.com directories/Sales... · drawbacks of launching a ... preventing brand dilution and modifying its meaning; ... General Motors, Dell,

MARKETING LEADERSHIP COUNCIL PAGE 6 THE SUB-BRANDING DECISION: THEORY, PROCESS, AND BRAND ARCHITECTURE STRATEGIES

ISSUE BRIEF

© 2006 Corporate Executive Board

DEFINITION AND ROLE OF SUB-BRANDS: MARRIOTT CASE PROFILE (CONTINUED) Marriott used its strong understanding of each brand’s equity when deciding whether or not to link the sub-brand to the Marriott name. For example, the company recognized that as it moves down-market, the Marriott brand enjoys greater significance because it promises customers that a lower price will still deliver a reliable, secure night’s sleep. As such, the company created “Courtyard by Marriott” properties to attract budget-conscious regional travelers. Conversely, as the super-premium hotel market involves prestige and self-expressive benefits, Marriott recognized the difficulty in moving the brand into this space. Therefore, when the company acquired The Ritz-Carlton in 1995 to appeal to high-end business travelers, it refrained from attaching its name to this super-luxury brand. Experts assert that Marriott successfully expanded the scope of its business by endorsing lower-end sub-brands without damaging the Marriott brand through adhering to the following guidelines, outlined in Figure I.

FIGURE I. MARRIOTT’S STRATEGIES FOR RETAINING BRAND EQUITY DURING EXPANSION RESULT Executives from Marriott report that employing an endorser brand strategy enabled successful expansion into new markets without damaging parent brand equity. In addition, multiple brands provided the opportunity to leverage marketing spend, increase cross-sell opportunities between hotels in the same market, and allowed for a more powerful frequent traveler program. After introducing the “Distribution Brand” strategy in the 1990s, Marriott’s growth rate exceeded 10% annually, while the lodging industry as a whole grew at less than 6 percent. Similarly, the company’s profitability enjoyed an 18.4 percent growth rate, 3 points higher than the industry average. As such, Marriott continues to expand into new markets with its endorsed sub-brands, opening 135 new hotels in 2005 and experiencing a 72% occupancy rate.

Please register!

Maintenance of two Marriott brands—The presence of the Marriott organization and the namesake hotel allows sufficient separation between each brand image. The Marriott organization acts as endorser of its entire line of hotels with its core brand attributes of consistency and friendliness applying to each market and providing a bridge between the brands.

Endorser role allows for the creation of distinct identities separate from the

flagship Marriott hotels—Although the overarching Marriott name ensures reliability and a certain standard, each sub-branded hotel chain maintains a separate proposition based upon location, amenities, and “look and feel.”

Down-market brand expansion—Research suggests that Marriott’s success may

stem from its downward market shift and its decision to refrain from monopolizing the premium market.

Avoidance of co-driver sub-brands—Marriott recognized that unless its sub-

brands stand for comparable quality, a co-driver may tarnish the more prestigious brand. When Marriott, a premium hotel name, endorses Courtyard, it reduces the risk to Marriott’s status and perceived quality standards. If Marriott had served as a co-driver instead, consumers may have perceived the Marriott brand to have been stretched downward, jeopardizing its quality.

Page 7: The Sub-Branding Decision - tatasteelonline.com directories/Sales... · drawbacks of launching a ... preventing brand dilution and modifying its meaning; ... General Motors, Dell,

MARKETING LEADERSHIP COUNCIL PAGE 7 THE SUB-BRANDING DECISION: THEORY, PROCESS, AND BRAND ARCHITECTURE STRATEGIES

ISSUE BRIEF

© 2006 Corporate Executive Board

DEFINITION AND ROLE OF SUB-BRANDS (CONTINUED) Occasionally, a parent brand serves as an endorser only temporarily until the sub-brand becomes well-established in its own right. The following case example of Levi’s illustrates how the brand served as an endorser for Docker’s before disappearing from view after its initial support of the sub-brand proved unnecessary.

LEVI STRAUSS & COMPANY18,19,20

Industry: Consumer Products

2005 Sales (US$): 4.1 billion

Employees: 9600

Headquarters: San Francisco, CA

Web Site: www.levistrauss.com SITUATION In the midst of enjoying the company’s highly successful 1985 “501 Blues” jeans ad campaign, Levi Strauss & Co. learned that its bread-and-butter customer for the last 30 years—the American male—was now 25 to 49 years old and rapidly moving out of the jeans market. Challenged to retain aging baby boomers who increasingly purchased fewer traditional Levi’s products, the company launched a new product category, “new casuals,” with its Levi’s Dockers sub-brand in 1986. ACTION To brand its new line of casual pants, Levi’s named the brand Dockers, hoping that a neutral name would allow the company to use imagery relevant to its broad target audience. Incorporating the Levi’s moniker into the Docker’s winged logo, the company marketed the pants to retailers as an alternative to jeans and significant part of the new casuals category, which Levi’s projected would grow from 28 percent of the pants market to 34 percent by 1989. In an effort to establish the Dockers sub-brand, Levi’s concentrated distribution in department stores and chains—where the majority of 25- to 49-years olds shopped and where one-third of all slacks were sold—working closely with retailers to generate excitement and support for its new pants. Specifically, Levi’s courted retailers nationwide with extensive presentations, sell-in brochures, swatch books, and other sales support.

Moreover, as retailers demonstrated greater interest in innovative merchandise techniques, Levi’s established Dockers shops within main floor men’s areas of major department stores. Within these in-store concept shops, Levi’s installed fixtures and tables that displayed the pants folded, similar to the experience of buying jeans and distinctly different from competing rows of hanging slacks. Testing of this concept proved successful, generating twice the sales of pants hung on racks. As Levi’s earned retailers’ support, it focused on a high-impact consumer marketing campaign to accelerate the Dockers brand and generate consumer support to effectively influence trade awareness and interest. The company intended to position Dockers as an unpretentious alternative to traditional dressing for almost every occasion. Thus, advertising aimed to achieve the following two goals:

Educate the audience about the new product and create brand awareness Create an image for the new product that leveraged the positive Levi’s brand associations but also

established enough autonomy from the parent brand to signal the inherent product differences

Levi’s profile continued on the following page

18 Kevin Lane Keller, Strategic Brand Management, Prentice-Hall: New Jersey (1998). 19 David Aaker, Building Strong Brands. 20 Author Unknown, “Dockers Brand Takes Casual Pant Expertise to Younger Guys with New Sub-Brand of Khakis,” Business Wire (12 May 2003).

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DEFINITION AND ROLE OF SUB-BRANDS: LEVI’S CASE PROFILE (CONTINUED) Based on the results of focus groups and Dockers’ marketing objectives, Levi’s created a brand image focused on emotional appeal. The company’s contemporary advertising positioned the pants as timeless and classic, appropriate for a variety of occasions, and comfortable and casual in any setting. The ads also conveyed the high quality of the Dockers line while maintaining the link to the Levi’s brand name and heritage. Furthermore, similar to its “501 Blues” campaign, Levi’s utilized “reality-based advertising” to encourage male consumers to identify with the models featured in its advertising. Based on this strategy, Levi’s launched 30-second ads of men in their 20s, 30s, and 40s having informal conversations about life. The ads focused on the models from the waist down and included no faces. The tagline ran: “Levi’s 100 percent Cotton Dockers. If You’re Not Wearing Dockers, You’re Just Wearing Pants.” Levi’s included the “100 percent cotton” reference to provide a tangible bridge to its jeans heritage. The company ran these advertisements in 11 major regional markets, selected on the basis of Dockers’ retail placement, potential for volume growth, and geographical dispersion. By acting as an endorser, Levi’s lended credibility to the Dockers brand with both retailers and customers. However, because Dockers targeted middle-aged men requiring a different fit and style than Levi’s younger denim customers, the company worried that the Dockers brand could dilute the Levi’s user imagery or vice versa. Consequently, as the Dockers brand grew stronger, Levi’s removed its endorsement. RESULT Levi’s product positioning and marketing strategy enabled the company to overcome retailers’ initial product reluctance, ultimately generating an exceptionally high level of pre-promotion excitement. Retailers viewed Levi’s Dockers as the leader in the new casuals category, enabling the line to surpass competitors. Dockers continues to lead the new casuals category, expanding brand offerings to provide both men and women with comfortable, stylish clothes that offer versatility. In 2003, Dockers launched its D-Series sub-brand, targeted towards 20- to 24-year old males. The company intends for this sub-brand to deepen its relationship with this segment, which it already targets with its Go Khaki line, Stain Defender products, and Mobile Pant, which Time magazine recognized as one of its “Best Inventions of 2001.”

II. Protect the Master Brand Sub-brands protect the master brand through transcending its prevailing image while leveraging parent brand equity, leading to a clearer service offering. In addition, sub-brands may modify the image of a parent brand by directing attention to its intended new meaning in a way that helps customers link the master brand with a target category extension designed to solidify the brand. The case snapshot of Ted Airlines on the following page illustrates how introducing a co-driver sub-brand helped protect the United Airlines brand through reviving declining sales and acquiring market share from new low-cost market entrants.

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DEFINITION AND ROLE OF SUB-BRANDS: PROTECT THE MASTER BRAND (CONTINUED)

UNITED AIRLINES21, 22

Industry: Airlines

2004 Sales (US$): 16.4 billion

Employees: 61,000

Headquarters: Elk Grove Township, IL

Web Site: www.united.com SITUATION Struggling from aftereffects of September 11, higher fuel prices, tightened security regulations, and the invasion of the airlines industry by new low-cost carriers (LCCs) such as Southwest, JetBlue, and Frontier, United Airlines filed for bankruptcy in 2002. To exit bankruptcy, the company recognized that the key to its restructuring plan required a response to the low-cost carriers’ competitive threat, which not only featured more efficient operating models enabling discounted prices, but also offered customers luxurious in-flight amenities and a relaxed, fun atmosphere in stark contrast to traditional straight-laced mainline airlines. ACTION United launched the sub-brand Ted in February 2004, a low-cost carrier designed to steal market share from top competitor Frontier as well as expand beyond United’s traditional business traveler customer base into the leisure traveler segment. To effectively enter the market on an extremely limited budget, short launch time, and under extreme scrutiny by industry analysts and bankruptcy courts after filing for Chapter 11, marketers for Ted positioned the brand according to the following criteria outlined in Table II.

TABLE II. POSITIONING STRATEGIES FOR TED AIRLINES Objective Strategy Execution

Differentiate from the Parent Brand—Ted sought to establish a brand presence unique from United to successfully expand into new markets and avoid cannibalizing customers from the parent brand, while at the same time leveraging United’s brand equity to establish itself as a reliable, safe airline.

As United targeted frequent business travelers and thus featured a sophisticated, serious brand image, Ted targeted leisure travelers and aimed to create a more laid-back, approachable image.

To develop a laid-back image, Ted marketers opted for alternative marketing strategies in non-traditional media outlets to generate excitement for the brand prior to launch.

Find a Market Niche—Ted needed to find a unique space in the market to differentiate itself from other LCCs appealing to the leisure travel market and rapidly gain the market share it needed to improve United’s negative profits.

While other LCCs opted for “wacky and hyper-entertaining” positioning, executives at Ted preferred not to stray too far from the core brand image, and thus gave Ted a more personal appeal, hoping to make customers feel welcome and comfortable rather than entertained.

Marketers used numerous guerilla marketing tactics to give Ted a human-like brand persona, such as purchasing people’s dinners or drinks at restaurants with a sticker that read “this one’s on Ted,” delivering flowers from Ted to local businesses, and displaying “have you seen Ted” signs with a tear-away Web address.

Find a Customer Niche—As most LCCs targeted the leisure travel market, marketers wanted Ted to appeal to a smaller segment within the market that made the most trips per year and spent the most per trip.

Marketers positioned Ted to target a group of 22 million leisure travelers who averaged six trips a year (three more than the national average), typically flew to warm weather destinations, and preferred to make online travel arrangements.

To save money and access target customers, all pre-launch marketing efforts for Ted directed customers to the Web site, where they could “Meet Ted,” receive free giveaways and promotions, and book flights.

21 Author Unknown, “Meet Ted, a Part of United” www.flyted.com (accessed January 2006). 22 Author Unknown, “Effie Awards Brief of Effectiveness: Ted Launch,” New York American Marketing Association (2005).

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DEFINITION AND ROLE OF SUB-BRANDS (CONTINUED) RESULT Ted’s entrance into the low cost carrier market proved highly successful, acquiring 27% of its top competitor Frontier’s market share in the first year and forcing two low cost competitors to retract from three routes serviced by Ted after the airline’s launch. In addition to generating increased sales for United to help revive them from bankruptcy, Ted also increased market share for United in its primary hub of Denver, as well as bolstering its online booking ratings by 10%. Finally, the introduction of the sub-brand helped modify United’s straight-laced image through expanding reach in the leisure travel market and identifying with target customers on a personal level through guerilla marketing tactics. This strategy allowed the parent brand to successfully respond to competitive threats and new operating structures without requiring wide-scale overhaul of its mainline operations or image.

III. Expand Into New Markets Companies often launch sub-brands in an effort to leverage previously untapped market opportunities. This strategy may entail targeting a new customer segment, as illustrated by the case profile of Timberland Boot Company below, or launching a sub-brand up- or down-market from the parent brand, as described further on the following page.

THE TIMBERLAND COMPANY23

Industry: Footwear

2004 Sales (US$): 1.5 billion

Employees: 5600

Headquarters: Stratham, NH

Web Site: www.timberland.com SITUATION While the Timberland brand traditionally appealed to what the company defines as the “gentle engager” consumer—typically male, married, well-established in his career, and aware of world issues yet not actively engaged in changing them—the company sought to expand its presence and popularity among a rising sub-segment of affluent yet demanding baby boomers. Defined as “edgy, involved in world issues, demanding in terms of product quality and craftsmanship, skeptical of marketing ploys, and exerting preference for environmentally friendly, socially conscious products,” Timberland sought to appeal to this group without alienating its core customers or marginalizing its brand image. ACTION To effectively expand into a new market without tarnishing the brand’s core image, Timberland launched the vintage sub-brand Timberland Boot Company (TBC) in January 2006 in an effort to appeal to this demanding sub-sector of baby boomers. Unlike traditional offerings mass produced in factories, Timberland Boot Company shoes feature hand-finished touches such as leather reinforcements at stress points. In addition, the company employs cobblers at select retail stores to repair and customize the boots as well as educate demanding customers about product benefits and features. To better reflect elements of the local communities surrounding its stores, TBC stores stock unique products exclusive to the needs of the community, and dedicate resources to neighborhood service programs to demonstrate the company’s commitment to improving local communities. RESULT While in its infancy, Timberland executives report a positive response to the Timberland Boot Company products, citing that the target baby boomer segment responded favorably to the company’s creation of a product specifically designed to meet their demands for high quality, authenticity, and sensitivity to local community needs. In addition, while the company refers to the sub-brand as TBC to establish distinction from the parent brand and better appeal to target consumers who might not purchase mainstream Timberland products, executives recognize the importance of leveraging the Timberland name and heritage to facilitate acceptance in the marketplace.

23 Ase Anderson, “Putting the Boot in Timberland,” Drapers Record (January 2006).

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DEFINITION AND ROLE OF SUB-BRANDS: EXPAND INTO NEW MARKETS (CONTINUED) When marketing a sub-brand to appeal to a new market, companies often launch the offering up or down-market from the core brand to leverage their established brand name in the category while making the brand relevant to new groups of consumers. While using a sub-brand creates distance from the parent brand to avoid damaging brand equity or confusing customers, the strategy still poses risks to the core brand. To avoid damaging the core brand when launching up or down-market sub-brands, experts suggest considering the following strategies outlined below and on the following page. Strategies for Minimizing Risk When Launching a Sub-Brand Down-Market: 24,25

Offer the highest quality product in the value category—As illustrated in the case snapshot of Gillette’s Venus Disposable Razors below, companies entering the value category may scale down the parent brand’s product features to offer a more affordable alternative to the parent brand while still striving to offer the highest quality product in the category to avoid tarnishing the parent brand’s equity.26

Despite offering several top of the line permanent razors for women, including the Venus Divine, Venus Vibrance, and Sensor for Women, research indicated that 54% of women remained committed to using less expensive disposable razors. As such, Gillette launched the Venus Disposable sub-brand in 2004 to appeal to this value segment. While offering a slightly less intricate design than the parent brand, the value brand featured the same flashy colors and pivoting, three blade head as the Venus Divine. Peter Hoffman, Gillette’s president for blades and razors, reports that the Venus Disposable serves as “a nice premium niche for those women who command higher performance within the value-oriented disposable category.”

Price Competitively—As value customers remain price-sensitive regardless of brand name, experts advise that

companies avoid assuming brand equity will translate into down-market sub-brands, as discovered by Armani Exchange in the snapshot below.27

Seeking to offer designer label apparel at mass market prices, Armani launched the Armani Exchange sub-brand to compete with casual clothing lines such as Guess and Benetton. While Armani Exchange clothing carried the high fashion name of its founder, Georgio Armani, the down-market brand failed to resonate with mass market consumers, as the line initially charged prices up to two and a half times more expensive than competitors. After several years of disappointing sales, Armani Exchange reconsidered its strategy and reduced prices to better compete with brands in its down-market category.

24 David A. Aaker, “Should You Take Your Brand to Where the Action Is?” Harvard Business Review (1 October 1997). 25 David Aaker, Building Strong Brands. 26 Theresa Howard, “Gillette Hopes to Power Shaver Sales to Women,” USAToday (December 2004). 27 Rusty Williamson, “Armani Exchange Pursues Lifestyle Marketing Gains,” Women’s Wear Daily (September 2005).

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DEFINITION AND ROLE OF SUB-BRANDS: EXPAND INTO NEW MARKETS (CONTINUED) Strategies for Minimizing Risk When Launching a Sub-Brand Up-Market:28,29

Make the vertical leap reasonable—Sub-brands accessing premium markets often achieve greater success when already positioned at the low end of the premium segment, as illustrated in the snapshot of Uncle Ben’s and Rice-A-Roni below.

Strongly associated with everyday meals, Rice-A-Roni’s upscale sub-brand Rice-A-Roni Savory Classics failed to capture sales. However, Uncle Ben’s, positioned as a basic product with a simple elegance, maintains a more flexible core brand. Thus, a higher-priced sub-brand such as Uncle Ben’s Country Inn Rice achieved success as an upscale entry. Learning from previous mistakes and Uncle Ben’s success, Rice-A-Roni recently introduced Pasta-Roni Homestyle Deluxe, also an upscale brand but positioned within the everyday meals category for consumers who “like the taste of homemade but don’t like the hassle of cooking from scratch.” Executives report that positioning the sub-brand as home-style yet featuring added benefits such as breadcrumbs and a richer sauce not available on the original offering appeals to working moms who want to provide their family with premium home-cooked meals yet lack the preparation time necessary to cook from scratch.

Differentiate the upscale entry with distinct characteristics from the parent brand—To avoid brand dilution,

experts advise creating differentiated coloring and design, as well as offering additional, value-added features to the upscale offering to clearly distinguish it from the core brand, as illustrated in the snapshot of Black & Decker below.

Black & Decker developed its upscale Quantum line of equipment to service the approximately 20 million serious do-it-yourself consumers in the United States. To clearly differentiate the line from both its core brand and from DeWalt, the company’s sub-brand for construction professionals, Black & Decker offers several products in the Quantum line distinct from its primary offerings, including a “dustless” drill that uses a specially designed vacuum system. In addition, Quantum-specific services such as the Shop Talk newsletter and the PowerSource telephone advice program offer the upscale line credibility and help position it well above the core brand’s line of tools. Quantum tools also differ in appearance from Black & Decker’s core line, with a black base accented with yellow print, a contrast to the orange coloring of the core Black & Decker brand.

Position the sub-brand in the premium market to revitalize the core brand

Ernest and Julio Gallo Winery earned the majority of its sales from its trademark jug wine, which endured increasingly fierce competition from slightly more upscale brands such as Glenn Ellen. To regain market share, Gallo aimed to improve the quality of its offering, and launched an upscale sub-brand, Ernest and Julio Gallo Varietals—a new line of wines offered at prices more than double those of its jug wine, with labels, bottle types, and advertising designed to convey an upscale entry. The company targeted the core Gallo customer rather than high-end consumers, even though it recognized that many current Gallo customers would never purchase an Ernest and Julio Gallo Varietal. Rather, the company intended for the high-end product’s associations of quality to elevate perceptions of the entire Gallo brand.

28 David A. Aaker, “Should You Take Your Brand to Where the Action Is?” 29 David Aaker, Building Strong Brands.

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EVALUATING SUB-BRANDING OPPORTUNITIES

Experts disagree over the success of sub-brands, with some lauding their efficacy when used correctly and others declaring that sub-brands destroy brand equity. Figure II below outlines the potential benefits and drawbacks of sub-branding, which companies consider as they begin a sub-branding process.

FIGURE II. BENEFITS AND DRAWBACKS TO SUB-BRANDING30,31,32 Experts agree that the drawbacks to sub-branding outlined above primarily result when brand managers seeking to achieve ambitious annual growth goals rapidly introduce a variety of new sub-brands without systematically analyzing the potential effects of this brand proliferation on the parent brand’s image. To ensure that a sub-brand provides the benefits listed above while avoiding the potential drawbacks, brand strategist David Aaker urges companies to ensure that each extension plays a predetermined and specific role in the overall brand strategy, rather than simply serving as a new product development for the sake of it. To judge the value of the proposed sub-brand within an existing portfolio, experts advise defining clear rules regarding who in the organization may introduce new brands, and sending each potential new sub-brand through a rigorous, standardized, evaluation process that analyzes customer needs states and maps the sub-brand’s potential placement and value within the existing portfolio. The following pages outline these criteria and the evaluation process in greater detail.33 30 Al Ries and Laura Ries, The 22 Immutable Laws of Branding, HarperBusiness: New York (1998). 31 Sam Hill and Chris Lederer, The Infinite Asset, Harvard Business School Press: Boston (2001). 32 Kevin Lane Keller, Strategic Brand Management. 33 Stephen Carlotti, Mary Ellen Coe, and Jesko Perrey, “Making Brand Portfolios Work,” The McKinsey Quarterly (2004).

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Sub-branding Benefits

Facilitates new product acceptance by reducing customers’ and distributors’ perceived risks, decreasing distribution and trial costs, and increasing efficiency of promotional expenditures

Avoids cost and risk of developing new brand names, allowing for packaging and label efficiencies, and fulfilling consumer need for variety

Increases shelf presence and consequently, retailer dependence in the store

Deepens the connection between the consumer and the company or family brand

Creates more targeted brand attributes, allowing customers to select the appropriate products for their needs

Potential Sub-branding Drawbacks

Represents an inside-out branding strategy that attempts to push the core brand in new directions which may not deliver on promised returns

Potentially serves as a short-term market response rather than an effort to strategically build the brand

May lack significant meaning to consumers, as some experts believe that sub-branding, master branding, and mega branding do not represent customer-driven concepts

Transfers brand equity from an existing franchise to a new one, which may result in a net dilution of equity to the portfolio if the new sub-brand fails

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EVALUATING SUB-BRANDING OPPORTUNITIES: EVALUATION PROCESS

I. Identify Customer Needs States

Experts recommend that when evaluating whether or not to launch a sub-brand, marketers begin by scrutinizing consumer “needs states” in order to illustrate whether existing products meet consumer needs and identify opportunities for launching a sub-brand to address holes in the portfolio. Needs states map the intersection of what consumers want and how they want it, enabling companies to identify ways to serve customers with products that span several different target segments. As sub-brands possess specialized brand attributes to appeal to sub-segments that the parent brand may not effectively reach, customer needs state mapping proves especially effective when determining whether to launch a sub-brand. Table III below outlines an example of a customer needs state map that a processed foods manufacturer utilized to determine customer needs currently unmet by the company’s existing family of brands. As illustrated in the table, the chart surfaces needs states by mapping the intersection between what customer segments want and how each segment prefers to receive their processed food options:34

TABLE III. CUSTOMER NEEDS STATE MAP: PROCESSED FOODS EXAMPLE35 Customer Segment

Cooking Enthusiast

Variety Seeker

Simplicity Seeker

Convenience Seeker

Price-Sensitive

Cook

Devoted Nutritionist

How Consumers Want It

What Consumers Want

Individualized

Needs StateA:

Food that is a Challenge to Prepare

Individualized and Available “On the Go”

Needs State D: Inexpensive

Food

Easy to Serve to a Large Group

Appropriate to Feed Their

Family A

Needs State E: Healthy

Food

34 Michael Petromilli, Dan Morrison, and Michael Million, “Brand Architecture: Building Brand Portfolio Value,” Strategy and Leadership (2002). 35 Stephen Carlotti et al, “Making Brand Portfolios Work.”

Identify Customer Needs States Calculate Market

Opportunity in Needs States

Consider Placement in Brand Portfolio

Needs State C: Quick and

Easy Food Options

Needs State B: Food

that Satisfies Cravings

Needs State F: Food that Everyone Enjoys

Mapping the “what and how” of customers’ needs enabled the processed foods manufacturing company to quickly identify which existing brands addressed particular needs states, as well as surfacing several areas currently unmet by existing products. Identifying these “holes” prompted the launch of a value-priced sub-brand for Kappa to more accurately serve the price sensitive cook’s need for “ready to serve” food.

“Our Kappa Brand addresses the convenience seeker’s need for quick and easy food options, but it doesn’t really cater to the price sensitive cook.”

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EVALUATING SUB-BRANDING OPPORTUNITIES: EVALUATION PROCESS (CONTINUED)

II. Calculate Market Opportunity in Needs States After identifying unmet needs through a customer needs analysis, experts recommend assessing the size of the market opportunity to evaluate the profitability of each needs state and allocate resources towards launching a sub-brand accordingly. As need states rarely coincide with conventional market definitions, research suggests that marketers piece together known segment-share and channel-mix figures creatively to project future size and profitability of need states. Specifically, category, consumer, product, and packaging trends may help indicate a need state’s future size, while potential shifts in the intensity of competition may provide an accurate assessment of a need state’s future profitability. Table IV below outlines the share of total profits for the processed foods company’s needs states illustrated in Table III on the previous page.

TABLE IV. ECONOMIC OPPORTUNITY MAP: PROCESSED FOODS EXAMPLE36 Customer Segment

Cooking Enthusiast

Variety Seeker

Simplicity Seeker

Convenience Seeker

Price-Sensitive

Cook

Devoted Nutritionist

How Consumers Want It

What Consumers Want

Individualized

Needs State A

Share of Total

Profits: 0–9%

Individualized and Available “On the Go”

Needs State D Share of Total

Profits: 10–14%

Easy to Serve to a Large Group

Appropriate to Feed Their

Family

Needs StateA

Share of Total

Profits: 0–9%

Needs State E Share of

Total Profits: 15–24%

36 Stephen Carlotti et al, “Making Brand Portfolios Work.”

Needs State C Share of

Total Profits: >25%

Needs State B Share of

Total Profits: 10–14%

Needs State F: Share of Total Profits: >25%

The high profitability potential of Needs State C further supported the processed food manufacturer’s decision to launch a sub-brand for Kappa, as well as suggesting future opportunities to launch sub-brands for Needs State F.

Identify Customer Needs States Calculate Market

Opportunity in Needs States

Consider Placement in Brand Portfolio

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I. Brand Relationship Mapping

II. Brand Assessment Methodology

EVALUATING SUB-BRANDING OPPORTUNITIES: EVALUATION PROCESS (CONTINUED)

III. Consider Placement in Brand Portfolio In addition to mapping customer need states and ensuring that opportunities present significant profitability potential, when evaluating whether to launch a sub-brand experts also advise sending each opportunity through a rigorous, standardized relationship mapping process. The decision trees outlined below and on the following page present a standardized process for analyzing how the sub-brand will relate to existing brands in the portfolio. Brand strategists indicate that considering these relationship factors during the evaluation phase may help with positioning for the sub-brand to ensure sufficient distinction from the parent brand without over-extending the brand’s central image. In addition, this process effectively rules out the possibility that an existing brand could serve the same purpose as the new sub-brand without incurring the costs of launching an entirely new brand and product.

I. Brand Relationship Mapping Within the context of existing brand architecture, the questions in Figure IV, below, may help companies make effective and consistent brand decisions for capitalizing on sub-branding opportunities.37

FIGURE III. BRAND RELATIONSHIP MAPPING PROCESS

37 Andrew Pierce, “Portfolio Power: Harnessing a Group of Brands to Drive Profitable Growth.”

PROCESSES FOR ASSESSING SUB-BRANDING POTENTIAL

Identify Customer Needs States Calculate Market

Opportunity in Needs States

Consider Placement in Brand Portfolio

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EVALUATING SUB-BRANDING OPPORTUNITIES: CONSIDER PLACEMENT IN BRAND PORTFOLIO (CONTINUED)

II. Brand Assessment Methodology

Companies may use the brand assessment flowchart described below in Figure IV to evaluate a sub-brand’s role within the context of the existing brand portfolio. Specifically, companies often consider how well the sub-brand complements and is supported by other brands, where opportunities exist to create synergies between sub- and other brands, and how sub-brands will enhance the overall portfolio’s value.38

FIGURE IV. BRAND ASSESSMENT METHODOLOGY PROCESS

EVALUATING SUB-BRANDING OPPORTUNITIES: EVALUATION CHECKLIST

Figure V below combines insight from the evaluation process outlined on the previous pages with recommendations from branding executives at Marriott International to present a general overview of questions that leading companies consider when evaluating whether to launch a sub-brand. If the answers align with those provided below, sub-branding may prove a solid strategy.

FIGURE V. CHECKLIST OF SUB-BRANDING EVALUATION CONSIDERATIONS39

38 Michael Petromilli, Dan Morrison, and Michael Million, “Brand Architecture: Building Brand Portfolio Value.” 39 David Aaker and Erich Joachimsthaler, Brand Leadership.

Do consumers possess strong recognition of our company’s family of brands?

Can consumers distinguish between distinct attributes of existing brands in the portfolio?

Do our existing brands possess a moderate degree of value transferability from one brand or product to the next?

Will the introduction of a sub-brand damage the equity of the master brand?

Have we identified a sufficient market to merit segmentation of brands?

Is there feasibility for us to be best-in-class in all segments?

Can we formulate a potential new segment niche and identify an open segment or needs state where no company excels?

Yes No X ____ X ____ X ____ ____ X _ X ____ X ____ X ____

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INCORPORATING SUB-BRANDS INTO BRAND ARCHITECTURE 40

As indicated above, brand experts assert that the key to creating effective brand architecture lies in understanding how to relate a new offering to the existing brand. While the process for melding sets of brands and their relationships into a composite brand architecture may differ across companies, experts recommend utilizing a combination of the strategies outlined below and described in further detail on the following pages to successfully integrate a sub-brand into an existing brand architecture and manage it over time.

40 David Aaker and Erich Joachimsthaler, Brand Leadership.

STRATEGIES FOR INCORPORATING SUB-BRANDS INTO EXISTING BRAND ARCHITECTURE

“Brand architecture involves identifying the brand and sub-brands that are to be supported, their respective roles, and critically, their relationship to each other. An effective, well-conceived brand architecture will lead to clarity in customer offerings. It will create real synergies in the brands and their communication programs, and an ability to leverage brand assets.”

David Aaker, Professor40

UC Berkeley’s Haas School of Business

SUB-BRANDING POSITIONING STRATEGIES (pages 19–22)

Experts advise that marketers carefully consider sub-branding positioning to ensure the brand combines relevant associations with the master brand to build equity while avoiding overlap with other sub-brands in the portfolio.

Tool: Brand Relationship Spectrum—Developed by David Aaker, the spectrum serves as an architecture tool to help marketers position new sub-brands effectively within their existing brand portfolio.

Strategy: Balance Master Brand Relevance with Sub-Brand Differentiation —Experts advise that marketers position sub-brands to relate to the master brand while retaining differentiation from other sub-brands.

Strategy: Consider Benefits of Employing Pooling or Trading Techniques—Depending on the brand portfolio’s placement on the relationship spectrum, pooling or trading techniques may help marketers maximize overall portfolio equity through leveraging elements of multiple sub-brands to address the needs of a variety of consumer segments.

SUB-BRANDING MANAGEMENT STRATEGIES (pages 23–28)

After positioning the sub-brand within the existing portfolio, brand strategists recommend developing a formal brand management process as a final step towards incorporating the sub-brand into the company’s brand architecture.

Tool: Brand Architecture Checklist—Adapted from David Aaker, the checklist provides a general overview of considerations for brand managers to ensure sub-brands continue to add long-term value to the parent brands.

Strategy: Streamline Brand Architecture to Control Sub-Brand Proliferation—Progressive companies maintaining a branded house strategy may streamline sub-brands to clarify the offering to consumers and avoid overextension of their core offerings.

Strategy: Ensure Sub-Brands Consistently Support the Parent Brand’s Identity—Successful sub-brands maintain consistent positioning within the overall brand portfolio to ensure they provide long-term support to the parent brand.

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INCORPORATING SUB-BRANDS INTO BRAND ARCHITECTURE: SUB-BRANDING POSITIONING STRATEGIES

I. Utilize the Brand Relationship Spectrum The brand relationship spectrum, described in Figure VI below, serves as a tool for marketers to determine the type of brand architecture strategy their firm employs and effectively position sub-brands with the appropriate driver role to complement the existing portfolio. Brand strategists recommend that marketers use this spectrum as the first step in incorporating a sub-brand into existing brand architecture to ensure that they employ sub-brands and endorsed brands with insight and subtlety. As outlined below, a company’s position on the spectrum reflects the degree to which a brand drives the purchase decision and customer use experience. On the left side of the spectrum in the house of brands, each brand plays a driver role, while on the right side of the spectrum in the branded house, the master brand generally plays the driver role and descriptive sub-brands hold little or no driver responsibility. Endorser and co-driver sub-brands fall in the middle of the spectrum, with endorser brands typically playing a relatively minor driver role while in co-driver relationships, the master brand shares the driver role.

FIGURE VI. THE BRAND RELATIONSHIP SPECTRUM41

As indicated by the shading above, sub-brands apply to every brand architecture strategy except the house of brands approach, characterized by an independent set of stand-alone brands. To optimize positioning of a new sub-brand and determine specifically where a particular company’s brands fall along this spectrum , marketers may use the questions presented in Figure VII on the following page. Positive answers to the questions in the left-hand box suggest a movement toward a “branded house” approach, where the corporate brand serves as the overarching umbrella under which the firm markets multiple product or service offerings, while positive answers to the questions on the right imply a movement towards a house of brands approach.

41 David Aaker and Erich Joachimsthaler, “The Brand Relationship Spectrum—The Key to the Brand Architecture Challenge,” California Management Review (Summer 2000).

House of Brands Branded House Endorsed Sub-Brands Co-Driver Sub-Brands

Not Connected

Shadow Endorser

Token Endorser

Strong Endorser

Linked Name

Master Brand as

Driver

Equal Co-driver

Descriptor Sub-brand

Low Degree of Master Brand Driver Role High

Saturn (GM); RCA (GE); Nutrasweet (G.D. Searle)

Tide (P&G); Lexus (Toyota); Touchstone (Disney)

Docker’s, LS & Co.; Universal Pictures, a Sony Company

Courtyard by Marriott; Obsession by Calvin Klein

DKNY; McMuffin

Chevrolet Silverado; HP Deskjet

DuPont Stainmaster; Gillette Mach 5

BMW 3 Series; Purina Puppy Chow

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INCORPORATING SUB-BRANDS: POSITIONING STRATEGIES (CONTINUED)

FIGURE VIII. SELECTING THE OPTIMAL POSITION IN THE BRAND RELATIONSHIP SPECTRUM42

Toward a Branded House Toward a House of Brands Yes No Criteria Yes No Criteria

Does the master brand enhance the value proposition?

Does each brand represent a distinct and separate offering?

Does the master brand provide increased credibility for sub-brands?

It is important to avoid association between the brands?

Does the master brand add increased visibility to the organization during the sales cycle?

Does each brand serve a distinct category or market segment?

Does the masterbrand provide communications efficiencies?

Will separate brands prevent channel conflicts?

Will the masterbrand be strengthened through association with the sub-brand?

Will the business financially support separate brand names?

II. Balance Master Brand Relevance with Sub-Brand Differentiation

As described in Figure IX below by Kevin Lane Keller, marketing professor at Dartmouth’s Tuck School of Business, marketers should position a sub-brand so that it maintains a clear relationship and shared associations with the master brand, while ensuring that consumers can easily distinguish it from other sub-brands in the portfolio.

FIGURE IX. BALANCING RELEVANCE WITH DIFFERENTIATION: FORTE HOTELS EXAMPLE43,44

42 David Aaker and Erich Joachimsthaler, “The Brand Relationship Spectrum.” 43 Kevin Lane Keller, Strategic Brand Management. 44 David Aaker, Building Strong Brands.

Principle of Relevance The principle of relevance dictates that marketers create associations to as many brands nested at the level below the corporate or family brand level as possible. To that end, marketers who utilize associations that maintain product marketing value typically find it more efficient and economical to consolidate these associations into one brand that becomes linked to all the company’s products. Typically, the more abstract the association, the more likely it will retain relevancy in different product settings.

Principle of Differentiation According to the principle of differentiation, successful marketers aim to distinguish brands at the same level as much as possible. If consumers cannot easily distinguish between two sub-brands, then retailers or channel members may not justify supporting both brands.

R D

Highlight Similarities in Vertically Aligned Brands:

All hotels guarantee the Forte Hotel brand’s excellent customer service, comfortable surroundings, and stylish décor.

Differentiate Horizontally Aligned Brands Forte Travelodge: Roadside budget hotels that offer simple

modern rooms conveniently located along major highways

Forte Crest: High-quality, modern business hotels that specialize in personal service

Forte Heritage: Traditional British inns offering comfort, personal hospitality, and character

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INCORPORATING SUB-BRANDS: POSITIONING STRATEGIES (CONTINUED) As illustrated in the case example below, experts suggest that General Motors failed to adequately distinguish its family brands of automobiles, leading to consumer confusion and loss of brand equity.

GENERAL MOTORS CORPORATION45 Industry: Automotive and Transport

FY2004 Sales (US$): 194.5 billion

Employees: 324,000

Headquarters: Detroit, MI Web Site: www.gm.com

SITUATION In the early 1920s, Alfred P. Sloan of General Motors decreed that his company would not produce a single, universal automobile, but would instead offer a line of automobiles: “A car for every purse and purpose.” This philosophy led to the creation of the Cadillac, Oldsmobile, Buick, Pontiac, and Chevrolet divisions, with a branding strategy to create different divisions and automobiles to appeal to distinctly unique market segments on the basis of price, product design, user imagery, and other factors. ACTION Over the years, the marketing overlap between the five main GM divisions slowly increased and their distinctiveness diminished as each division attempted to offer cars for all market segments. By the mid-1980s, GM offered many of its basic body types under multiple brand names. For example, under pressure to reduce costs, GM sold one body type (the J-body), under five different brand names with only minor physical differentiation. Adding to the brand convergence, in some cases the same dealership sold more than one GM brand. In 1990, recognizing that consumer confusion over product design, brand image, and the marketing of the different brands hampered sales, GM sought to distinguish its brands more effectively. At the same time, the company launched a corporate image campaign to dispel customer concerns of reduced GM quality and motivate its employees though ads touting “Putting Quality on the Road.” The different divisions attempted to distinguish their images by adopting new brand promises, described below in Table V.

TABLE V. GM’S REVISED BRAND POSITIONING Division Brand Positioning

Chevrolet Value-priced entry level Saturn One-price, customer-oriented service Pontiac Sporty, performance-oriented for young people Oldsmobile Medium-priced larger cars Buick Premium and “near luxury” Cadillac Top-of-the-line luxury

RESULT AND SUBSEQUENT SUB-BRANDING STRATEGY GM’s new brand structure proved challenging. Despite improved performances from Pontiac and the newly introduced Saturn division, both Chevrolet and Cadillac struggled. Consequently, in 1995, GM placed a renewed emphasis on model branding, choosing to market GM’s 65 car and truck models more as individual brands to specific market segments with less emphasis on their divisions. Accordingly, the company tasked 29 brand managers with creating clear and distinct model brand images and initiated plans to replace 25 percent of its auto lineup.

45 Kevin Lane Keller, Strategic Brand Management.

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INCORPORATING SUB-BRANDS: POSITIONING STRATEGIES (CONTINUED)

III. Consider Benefits of Employing Pooling or Trading Techniques While experts recommend differentiating the positioning of horizontally aligned sub-brands, some companies take this strategy one step further, employing an inter-relationship driven brand building approach through “pooling” or “trading” techniques to optimize the collective brand portfolio. As defined below, these techniques enable marketers to position sub-brands to target various consumer segments or needs within the same category, ultimately increasing market share and bolstering competitive advantage.46

Pooling—Brand pooling occurs when multiple, distinct sub-brands work in a concerted way to address a spectrum of consumer segments and needs. Because each brand in the portfolio possesses unique equities and provides its own set of customer values, pooling the attributes of the collective brands provides the following benefits:

Greater relevance to a broader market Cross-selling and loyalty-building opportunities across brands in the portfolio Opportunity to dominate category sales and increase market share, augmenting entry barriers for

potential competition

Procter & Gamble leverages its manufacturing capabilities to develop multiple laundry detergent brands—Tide, Cheer, and Gain. Each brand targets a different customer segment and offers distinct benefits, although all three products serve an identical purpose and compete for sales in the same category. However, by pooling the brands together and presenting them side-by-side, the company captures more shelf space and ultimately gains more market share.

Caveat—Experts advise companies considering the pooling technique to ensure that each sub-brand maintains clearly defined positioning that highlights the brand’s differentiating factors and clearly targets a unique customer group to avoid brand cannibalization.

Trading—While pooling targets unique customer segments, a brand trading strategy uses two or more sub-

brands or a master brand and a sub-brand to serve distinctive customer needs within a single segment. In this technique, the brands trade equities to extend each other’s reach and credibility. The benefits of trading prove similar to pooling, but as the trading technique relies more heavily on leveraging multiple brands’ values, this approach also helps close portfolio gaps and can create a combined offering with value that a single brand may not be able to match.47

Disney effectively utilizes trading to support its brand identity as a family entertainer. The company extends its master brand equity to create value in its sub-brands, including Disney World, Disneyland, and the Disney Stores. As such, while sub-brands such as Disney World and Disneyland maintain unique value as exhilarating theme parks, each also retains its image of a destination for wholesome, family entertainment through leveraging the benefits of the Disney master brand associations.

46 Michael Petromilli, Dan Morrison, and Michael Million, “Brand Architecture: Building Brand Portfolio Value.” 47 Michael Petromilli and Dan Morrison, “Creating Brand Harmony,” Marketing Management (August 2002).

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INCORPORATING SUB-BRANDS INTO BRAND ARCHITECTURE: SUB-BRANDING MANAGEMENT STRATEGIES

I. Employ a Brand Architecture Checklist

After positioning the sub-brand within the existing portfolio, brand strategists recommend developing a formal brand management process as a final step towards incorporating the sub-brand into the company’s brand architecture. The list of questions below provides marketers with a starting point for developing an annual strategic brand portfolio plan, highlighting questions that marketers should ask about their brands and sub-brands to analyze the sub-brand’s role within the larger portfolio, and help marketers effectively allocate resources to ensure each sub-brand supports the parent brand and strengthens the overall portfolio.

FIGURE X. THE BRAND ARCHITECTURE CHECKLIST, ADAPTED FROM DAVID AAKER48

48 David Aaker and Erich Joachimsthaler, “The Brand Relationship Spectrum—The Key to the Brand Architecture Challenge.”

I. Business Analysis

What current and potential sales, profits, and growth exist in the brand’s product portfolio? What strategic initiatives exist? What businesses and segments are important financially and strategically, now and in the future?

II. Brand Architecture

Portfolio Roles Which brands act as the strategic brands? (i.e. which brands represent substantial future profits?) Should any linchpin brands act as loyalty levers across important business arenas? What brands or sub-brands lead the market in reputation and sales? Are strategic brands, linchpin, and silver bullet brands actively managed? What brands should play cash cow roles? Do cash cow brands continue to require the resources they now receive?

Brand Portfolio Structure

Do current sub-brands add value to the parent brand or detract? Is their identity appropriate for the parent brand? According to the value sub-brands offer the parent brand, do they receive appropriate resources? Could additional sub-brands be developed from other components, features, and services currently offered? Do the sub-brands generate clarity, purpose, and direction or do they simply add another level of complexity, ad

hoc decisions, and strategic drift? Do existing brands require omission or greater or lesser influence in existing market contexts? Have

circumstances changed since the brand’s conception? What potential horizontal brand extensions exist? Does the potential exist to extend brands vertically (with or

without a sub-brand)?

Portfolio Graphics Looking across all brands’ visual presentations including logos and communication materials:

Does collateral present a clear, consistent, and logical message? Do the visuals reflect the relative importance of each brand? Does the brand’s visual presentation across the portfolio support the overall brand structure?

New Brand Building Is the brand sufficiently different to merit a new name? Will a new name truly add value? Will an existing brand be jeopardized if used on a new product? Will the business support a new brand name?

III. Managing the Brand Architecture

By what process and criteria can a brand or sub-brand be added to the portfolio? Is the brand architecture periodically reviewed? Who manages the brand’s visual presentation? What processes govern the brand’s visual presentation?

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INCORPORATING SUB-BRANDS: MANAGEMENT STRATEGIES (CONTINUED)

II. Streamline Brand Architecture to Control Sub-Brand Proliferation Many experts believe that a proliferation of brands contributes to marketplace clutter and consumer confusion. Consequently, they advocate rationalizing complex brand portfolios. The following case examples illustrate how BMW and Dell simplified their brand portfolios by streamlining their sub-brands.

BMW utilizes a simple number system (3-series, 5-series, and 7-series) to help consumers instinctively identify an entry-level car versus a top of the line model, placing higher numbers in front of more expensive models.49

DELL COMPUTER CORPORATION50 Industry: Computer Hardware

FY2005 Sales (US$): 49.2 billion

Employees: 55,200

Headquarters: Round Rock, TX

Web Site: www.dell.com

SITUATION: Upon reviewing its collection of individually supported sub-brands, Dell Computer concluded that buyers did not understand its varied collection of brand images and messages. ACTION: The company converted nearly all of its sub-brands to uniform members under the core Dell brand, depicted in Figure XI below.

FIGURE XI. DELL’S BRAND ARCHITECTURE SHIFT

RESULT: In addition to the economic benefits derived, Dell believes the “scrubbing” process created greater ease of recognition for customers and renewed emphasis on the core Dell brand.

49 George Anders, “Cleaning Up Brand Clutter,” fastcompany.com (December 2001). 50 Marketing Leadership Council, Stewarding the Brand for Profitable Growth, Corporate Executive Board (2001).

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INCORPORATING SUB-BRANDS: MANAGEMENT STRATEGIES (CONTINUED)

III. Ensure Sub-Brands Consistently Support the Parent Brand’s Identity Research indicates that successful sub-brands maintain consistent positioning within the overall brand portfolio and support the parent’s brand identity. Sub-brands that fail to do so often prompt consumers to disregard the connection to the brand portfolio and, at worst, taint the portfolio’s overall equity. The following case profiles of Disney and Nike illustrate how companies implement brand leverage controls and how sub-brands that ineffectively position themselves in relation to the overall portfolio can fail.

WALT DISNEY COMPANY51

Industry: Media and Entertainment

2001 Sales (US$): 25.3 billion

2001 Employees: 114,000

Headquarters: Burbank, CA

Web Site: www.disney.go.com SITUATION With a long history of leveraging its core attributes, the Walt Disney Company continues to draw on the strength of its brand to drive growth, often looking outside its core businesses to identify new opportunities. In doing so, Disney increasingly involves a broader range of participants in the process of generating and executing leverage initiatives: a broad and growing employee base to generate new ideas and an expanding set of marketing partners to deliver the new brand extensions to market. As a result, Disney must undertake active measures to ensure that the high variability of both idea generation and concept delivery cause no harm to the core brand. ACTION In order to drive growth through leverage without allowing these challenges to damage the core brand, Disney implements the following brand leverage controls:

1. Clear articulation of the brand promise and attributes 2. Screening criteria to ensure consistency of leverage ideas and potential partners with the brand 3. Appointment of a single brand steward to review all leverage initiatives 4. Close brand health monitoring tied to swift corrective action to counter potential brand threats

In addition, the Disney brand promise of “Special Entertainment with Heart” corresponds to granular and important brand attributes to the consumer and defines Disney’s brand aspiration widely enough to allow for nearly limitless leverage opportunities. Disney also builds its partnership screening criteria, described on the following page at left, and its leverage and extension principles, described on the following page at right, around the brand promise.

Disney profile continued on the following page

51 Marketing Leadership Council, Stewarding the Brand for Profitable Growth.

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Using its brand leverage protocols and the criteria above, Disney determined that the brand partnerships described below at left proved consistent with the Disney brand. Using the same criteria, Disney also determined that the concept of “Mickey’s Kitchen,” described below at right, fell outside of Disney’s brand promise because it could not meet the high bar of the Disney brand, and its healthy menu items did not fit with the fun elements of the Disney brand.

RESULT As part of an ongoing stream of successful leverage ideas, Disney most recently expanded its presence in the consumer products category with a set of unique product and service concepts, including Disney Color Paint and Princess Bedding in each case ensuring that the products deliver on the Disney brand promise. For more information on Disney’s Brand Leverage Protocols, see the Council study, “Stewarding the Brand for Profitable Growth: Concentrating the Brand Portfolio—Practice #8: Brand Leverage Protocols.”

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NIKE, INC.52 Industry: Media and Entertainment

2001 Sales (US$): 9.9 billion

2001 Employees: 22,700

Headquarters: Beaverton, OR

Web Site: www.disney.go.com SITUATION In 1984, Nike launched its first true sub-brand, Air Jordan, a collection of footwear and apparel introduced when Michael Jordan joined Nike. According to Scott Bedbury, Nike’s former head of advertising, the sub-brand’s stunning success blinded Nike to the reality of how daunting, costly, and ultimately frustrating it could prove to create an entirely self-sufficient sub-brand from scratch. To date, despite several attempts, Nike has not succeeded in replicating Air Jordan’s success. Although Nike hoped to create sub-brands and businesses that might one day grow into entirely distinct brands in their own right, the company found this task nearly impossible. Consequently, Nike opted to achieve some of the benefits of brand segmentation by developing groups of products that represented “brand collections,” as opposed to sub-brands. By the late 1980s, retailers complained that they could not purchase additional Nike-branded merchandise as they feared a surfeit could unbalance the delicate retail mix in their stores. In response, Nike created several tightly focused collections of shoes, apparel, and accessories—each targeted to a unique consumer segment and attitude—to assuage retailer’s concerns. ACTION Nike created the following collections, characterized by the features described below in Table VI.

TABLE VI. NIKE’S BRAND COLLECTIONS Brand Distinctive Qualities

Force

Big, heavy basketball shoes for larger players, including Moses Malone, Charles Barkley, and David Robinson; basic apparel concepts; no frills; serious gear

Flight Lightweight, expressive shoes for outside shooters and point guards, including Reggie Miller, John Stockton, and Gary Payton; stronger fashion statements; speed, agility, and finesse

Jordan

For extremely talented players; where ultimate physical performance meets art

Air Raid Outdoor basketball shoe built for the inner-city blacktop player; less of a collection than the three above; initial shoe tied directly to an advertising campaign with Spike Lee: “Mo Colors, Mo Better;” primarily a response to Reebok’s Blacktop offering

Challenge Court Tennis collection that debuted with Andre Agassi wearing hot pink Lycra underneath denim shorts; ads featured the Red Hot Chili Peppers; irreverence justified

Supreme Court Tennis collection geared towards athletes such as Pete Sampras; more conservative attire; wider access point

Nike profile continued on the following page

52 Scott Bedbury, A Brand New World.

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INCORPORATING SUB-BRANDS INTO BRAND ARCHITECTURE (CONTINUED) ACTION (CONTINUED) Each new collection possessed its own design, pricing, promotion, and advertising strategy, yet all unequivocally connected to Nike and its brand values. For example, the company still tagged the commercials “Nike,” but the line logos featured the collection icons more prominently. RESULT Shortly after the product lines’ launch, retailers recognized they could not afford to pass on any of Nike’s collections. According to Bedbury, “Tom Clark, at that time Nike’s president, and Mark Parker, Nike’s head of product design and development, masterminded the collection concept as a means to provide the retail trade with ‘digestible chunks’ of Nike products while at the same time delivering to the consumer more differentiated and unique products.” 53

53 Scott Bedbury, A Brand New World.

As Nike launched its collections in the late 1980s, it faced another hurdle—rising footwear competitor L.A. Gear. Although unsure of L.A. Gear’s future strategy, Nike recognized that L.A. Gear’s footwear brand embodied a unique set of values and appealed to a significant segment of the population. In response, Nike developed two sub-brands of fashion-driven, value-priced products—Side One for teen girls and “i.e. for women.” Although both lines contained strong products, neither brand maintained consistency with Nike’s brand image. Because both sub-brands lacked cultural roots for Nike to leverage as it would with sport-related gear, both product lines eventually failed. As a result, Nike returned to its original strategy of creating products and advertising targeted at young women that resonated well within Nike’s overall brand, rather than creating another sub-brand. Consequently, the company gained the top position in the women’s fitness market, outselling rival L.A. Gear.

NIKE’S FAILED SUB-BRANDS: “SIDE ONE” FOR TEEN GIRLS AND “I.E. FOR WOMEN”36

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BIBLIOGRAPHY

Aaker, David and Erich Joachimsthaler, Brand Leadership, New York: Free Press (2000).

Aaker, David and Erich Joachimsthaler, “The Brand Relationship Spectrum—The Key to the Brand Architecture Challenge,” California Management Review (Summer 2000).

Aaker, David, “Should You Take Your Brand to Where the Action Is?” Harvard Business Review (1 October 1997).

Aaker, David, Building Strong Brands, New York: Free Press (1996).

Anders, George, “Cleaning Up Brand Clutter,” fastcompany.com (December 2001).

Author Unknown, “Dockers Brand Takes Casual Pant Expertise to Younger Guys with New Sub-Brand of Khakis,” Business Wire (12 May 2003).

Bedbury, Scott, A New Brand World, New York: Viking (2002).

Douglas, Susan P., “Executive Insights: Integrating Branding Strategy Across Markets,” Journal of International Marketing (1 January 2001).

Herr, Paul, “Higher Education Institutional Brand Value in Transition: Measurement and Management Issues,” www.educause.edu (6 July 2003).

Hill, Sam and Chris Lederer, The Infinite Asset, Harvard Business School Press: Boston (2001).

Kamal, Raj, “The Shift in Classic Brand Concept,” Institute of Rural Management (January 2003).

Keller, Kevin Lane, Strategic Brand Management, Prentice-Hall: New Jersey (1998).

Kirmani, Amna, “The Ownership Effect in Consumer Response to Brand Line,” Journal of Marketing (1999).

Macrae, Chris, “Architectural Approaches to Brand Extension,” allaboutbranding.com (25 June 2003).

Marketing Leadership Council, Stewarding the Brand for Profitable Growth, Corporate Executive Board (2001).

Milberg, Sandra J., C. Whan Park, and Michael S. McCarthy, “Managing Negative Feedback Effects Associated with Brand Extensions: The Impact of Alternative Branding Strategies,” Journal of Consumer Psychology (2001).

Petromilli, Michael, Dan Morrison, and Michael Million, “Brand Architecture: Building Brand Portfolio Value,” Strategy and Leadership (2002).

Pierce, Andrew, “Portfolio Power: Harnessing a Group of Brands to Drive Profitable Growth,” Strategy & Leadership (2002).

Ries, Al and Laura Ries, The 22 Immutable Laws of Branding, HarperBusiness: New York (1998).

NOTE TO MEMBERS This project was researched and written to fulfill the research request of several members of the Corporate Executive Board and as a result may not satisfy the information needs of all member companies. The Corporate Executive Board encourages members who have additional questions about this topic to contact their research manager for further discussion. The views expressed herein by third-party sources do not necessarily reflect the policies of the organizations they represent. PROFESSIONAL SERVICES NOTE The Marketing Leadership Council has worked to ensure the accuracy of the information it provides to its members. This project relies upon data obtained from many sources, however, and the Marketing Leadership Council cannot guarantee the accuracy of the information or its analysis in all cases. Further, the Marketing Leadership Council is not engaged in rendering legal, accounting or other professional services. Its projects should not be construed as professional advice on any particular set of facts or circumstances. Members requiring such services are advised to consult an appropriate professional. Neither the Corporate Executive Board nor its programs are responsible for any claims or losses that may arise from any errors or omissions in their reports, whether caused by the Corporate Executive Board or its sources.