Too many brands spoil the strategy

If there are two hot topics that surmount all others when it comes to brand strategy in 2012, they are surely brand architecture and brand portfolio. At first sight these may appear to be relatively minor, rather superficial topics. The vast majority of organisations have never actually explicitly considered how many brands they need (their portfolio) or the manner in which those brands are combined or kept separate in the consumer’s mind (brand architecture).

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And yet, despite the relative lack of corporate attention placed on them, portfolio and architecture issues are the main source of brand pain and profit trauma within most of the companies I have worked with. The reason most marketers underestimate their importance is simple - neither presents itself explicitly as a problem. You don’t wake up one morning and realise you need to trim your portfolio.

Instead, you uncover a problem with internet landing pages or business cards or cannibalisation or sales force conflict, and eventually, after much sleuthing, you realise the issue is either down to too many brands or that they are organised in an inappropriate manner.

In more severe cases, you never work out that the wrong portfolio or architecture is killing your marketing effectiveness. I remember one tragic chief marketing officer at a very a large car brand that continued to extol the fact that “we don’t have too many brands, we just don’t market them well enough” until he was eventually fired. To this day, he does not realise that the second part of his observation was directly related to the first.

There are strong clues to the importance of trimming the portfolio. The best case studies are Procter & Gamble and Unilever. When I was a marketing undergraduate, these two beasts had more than 2,000 brands between them. Today they make most of their profits from a combination of 30 brands. I worked recently for an Australian organisation that had 42 brands. The easiest way to point out the madness of their approach was to point out that despite enjoying less than 0.2 per cent of the profits of Unilever, they were operating more than double the number of brands.

There are equally clear examples of the importance of brand architecture. I always cite McKinsey - a pure branded house that runs everything under a single brand. If the world’s greatest strategy firm has opted for a single branded house approach, perhaps there is something to be said for less being more.

The big problem for many British firms is they think more brands will make them more successful but they have neither the architecture nor the ability to manage a multiplicity of brands well. When God created branding, he intended it to be executed using a brand house and a single brand derived from the name of the founder.

Remember that, because although there is much to be said for sub-branding and big brand portfolios, most companies should stick with the more basic, original approach. As McKinsey has long appreciated, the single branded house approach presents clear strategic advantages related to economies of brand, strategic focus, a single employer brand and a clear and efficient internal operation.

In contrast, have a look at Accor Group. It’s like a jungle inside its operational chart. It has 14 brands, many formed from sub-brand structures and all of which are endorsed by the mother brand. So its current ad campaign features Ibis, Ibis Styles and Ibis Budget - all of which are endorsed by the Accor master brand. I call the technical name for this approach a “dog’s dinner” and it is usually achieved when you employ a naive brand manager fresh out of a textbook or have engaged a brand consulting firm that is being paid by the yard.

Whatever the reason, Accor will struggle because it has too many brands and its architecture is a big old mess and it will eventually feel the pain. Its marketing will appear dull and ineffective because it is spread too thinly. Profitability will suffer as too many brands suckle from the corporate teat. And the organisation will suffer as internal confusion and contradiction erupts around the muddled design. Architecture might look relatively simple, but like a blockage in the windpipe, it will soon cause much more serious complications to arise.

The crucial challenge for organisations facing the explicit questions of how many brands and which structure is to start with a single brand in a branded house structure and then ask: do you need more?

The answer might, and I underline might, be yes. But you’ll be surprised how few brands you actually really need to get the job done. If you like complexity, organisational charts and inflated sales figures, the more brands the merrier. But if, like me, you prefer impactful marketing, strategic focus and disgustingly impressive profits (despite potentially lower revenues) - less is invariably more.

Readers' comments (11)

  • You've conflated a great many points of view here.
    For me, it's not so much a question of the number of sub-brands in a portfolio and their relationship to their master - although the architecture you refer to is vital.
    Rather, I believe it's a sub-brands individual sense of purpose in relation to its competitors that governs ultimate success.
    Put simply, it's down to the clarity of the positioning.
    It's a no-brainer that the greater the product or service differentiation, the more chance of it's successful and sustainable future.
    In defence of the car manufacturer CMO you've cited in your piece, he may have been half right.
    After all, what car manufacturer does not have a stable of models that have confused, ill-defined or overlapping reasons for being. Trimming their number may solve part of the problem but creating clear differentiation - positioning - is the ultimate key.

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  • For the first time ever I'm edging towards disagreeing with you Mark. Brands should be organised depending on where the revenue is coming from, not what fits neatly into a diagram. That's especially relevant if you are an acquisitional company, where each brand has its own history, audience, position, values and reveue stream. If you try to merge those, you risk diluting all that, just for the sake of neatness. Also, hedging your future through a portfolio of brands will help if one of them becomes toxic, or just loses its way - think NOTW and News International. The latter quickly ditched the former with no significant consequences.

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  • Fair comments Dominic but I would point out:

    1) I have no problem with a house of brands approach because, as you say, it reduces risk of contagion and allows different brands to exist in their own perceptual space. BUT that is only if you can make for these brands to exist. Which sometimes you can.

    2) You mention "revenue" as the decisive factor. In my experience if you monitor revenues you will always end up with an oversized brand portfolio because more brands always mean more sales revenues. When you look at it from a profit and resources view the case for many brands becomes less secure....

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  • Much to agree with; but what to make of P&G's attempts to unify their portfolio of brands under one ueberbrand, viz. during the Olympic campaign?

    Personally, I found it confused and unimpactful... to develop Dominic Collard's point, cramming diverse historic brands into one brand identity doesn't just dilute their distinctive values, perhaps it risks rendering the unifying brand impotent and confused as well.

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  • If Accor is such a 'dogs dinner', why is it the largest and most successful Hotel company in the world?

    Also - their Brand Managers each have 20+ years of experience in the Marketing industry.

    In many parts of the world the company is 100% debt free. Seems to be a stretch if they're going to financially struggle anytime soon.

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  • Very much in agreement. I've worked with companies where they try to brand and productise stuff - and this often comes from departments outside of marketing.

    I have always had an instinctual desire, even when new to marketing, to strip out unnecessary brands within a portfolio.

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  • Brand overkill can indeed plague a corporation. After all, in the eyes of the consumer, the difference between an Ibis and an Ibis Styles might never be clear, no matter how much misguided marketing is used to convince a consumer to choose either over an InterContinental Group brand offering.

    However, a clear brand positioning over a diverse portfolio of products is not always what makes or breaks a company's growth or stability. HP, Sony and RIM are just some of the examples where, despite a very definite brand identity and architecture, we are still witnessing the spectacle of their slow and steady path to demise.

    So in a sense, I do agree with Sarah Bourke. There are some very successful companies out there that have a multitude of brands and they're all thriving in their respective line of business. Danone Group is the example I like to attach to this idea and you Mark rightly cite McKinsey.

    In an ever growing market of mixed messages and information overload, along with failure to adapt to changing consumer appetites and trends, what will separate the wheat from the chaff are 2 very key ingredients:

    1. Sound business strategy and operations.
    2. A good product or service.

    My view is that these two elements of the brand existence are the foundations on which all other parts of the business are built on. If you have a good product and effective and efficient business process leading it into the market, the rest will follow suit. This applies not only to a single brand company but also to a corporation managing dozens.

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  • I am not sure if I follow the McKinsey example. They are split by practice, purely b2b and offer complementary services.

    I don't see other professional services firms having multiple brands either.

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  • In general, I'd support Mark's call for simplification.
    The problem is that decisions about separate brands are often made for historical / legacy reasons rather than from a customer-driven logic.
    Is there a solid model for making those decisions? The most useful approach in my experience is to start from the idea of the brand as a marker of meaning and ask where that meaning is relevant in the market (same brand) and where the meaning should change (different brand). In practical terms, a combination of Aaker's Portfolio Roles, Tauber's extension models and archetypal brand logic is a good starting point.
    Where is our brand meaning now? Where can it stretch without breaking the brand? Which opportunities are better captured via a different brand meaning?

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  • Interesting article. How many brands should a company have ? 'Just enough' would be my answer - which, as a guideline, is a good few less than the marketing department would like. Which brings me to a rarely cited reason for brand proliferation : Marketing Managers and Brand Managers. They are often the worst culprits. The more you have the more brands they will create. It's essentially part of the hard-wired creative drive in this community - but it's also the way they get on. Though they are usually working elsewhere, often in a more senior role, by the time someone realises that the promised profits aren't there.

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