Brand architecture often comes down to an evaluation of
tradeoffs. In my experience, there’s rarely a cost-free benefit or
a no-foul cost. That’s why I have found the concept of brand value
so helpful. It focuses on the net effect of an initiative—are the
benefits worth more than the costs of getting those benefits or are
cost-saving initiatives doing more harm than good?
Brand value has been defined by C.W. Park, professor of
marketing at USC Marshall School of Businessas: “The difference
between customers’ willingness to bear the costs to obtain the
brand’s benefits and the firm’s costs expended to create these
benefits.”
A house of brands strategy—as exemplified by P&G and its
huge range of brands, from Tide to Crest to Gillette—benefits from
the fact that each brand has a focused positioning, but it costs a
lot to market all these different brands. So P&G (and other
packaged goods manufacturers) have been aggressively reducing their
brand portfolios. This strategy has a cost—there are lost sales and
share from the discontinued or sold-off brands, and the remaining
brands can become overextended. But so far the benefits seem to be
worthwhile, and brand value has been increased.
On the other side of the spectrum, the single brand strategy of
Accenture is very efficient, and pours all the equity into a single
brand. But the downside is that it’s more difficult to highlight
specific areas of competitive advantage. Single branded companies
typically allow brand architecture “exceptions” when they decide
that, for example, folding an acquired brand into the existing
business will cost too much in terms of lost brand equity—or that
one business does not fit well with the remainder of the portfolio
and must be kept at a distance.
Some common drivers of the benefits and costs of brand
architecture initiatives are:
Increasing benefits
1. Targeting the drivers of specific product categories
2. Targeting the needs of specific consumer groups
3. Focusing attention on product innovation or other areas of
competitive advantage
Reducing costs
1. Reducing marketing costs necessary to support multiple
brands
2. Reducing the management costs of running a complex brand
portfolio
3. Reducing buying costs by giving customers fewer options so
that they can find what they’re looking for more quickly
One common brand architecture issue is brand proliferation. Over
time, either through organic growth or acquisition, companies
increase their portfolio of brands and eventually find that the
cost of supporting and managing all these brands is impacting
business performance.
This issue is particularly well-served by brand value
thinking—anything that dies not add value should be eliminated.
Brand value puts the burden of proof on keeping brands that add
complexity and cost for little benefit. For growth-minded companies
that are prone to brand proliferation, it provides a useful check
and a source of control.
Brand value also puts a premium on simplicity. The simplest
brand architecture will be the least expensive solution, so it
should be the default choice, all things being equal. All other
things may, of course, not be equal—there can be strong arguments
for more brands. But since brands are a source of cost and
complexity, they should only be added or kept if the benefit
outweighs the costs incurred.
In terms of an overarching principle, brand value thinking says
that businesses should cover the market and target consumer groups
with the least number of brands necessary. Fewer
brands are easier to manage, less expensive to operate, and create
stronger pools of brand equity. Less, in brand architecture terms,
is often more.
From
Marketing Daily