Too many brands? Think about optimizing your brand architecture portfolio
It’s easy to have too many brands. There are at least five different ways this can happen:
- Tech and R&D teams
It’s a natural human tendency. When people invent something, they want to feel they own it and to give it a name.
Usually, it’s the tech guys or the R&D guys (not the most brand savvy professionals!). Typically, the tech guys call a team lunch, order in a pizza and discuss “what shall we call it?”. Apple is particularly guilty of this. The Macintosh was named by its developer, Jeff Raskin, after his favorite apple. The Lisa computer was a reference to Steve Job’s daughter. But it’s not just Apple. Other engineer coined names include Java, picked because the engineers were drinking Java coffee; Android was the nickname of Andy Rubin, one of the operating system engineers; Python (Monty Python not the snake), Slack, Wikipedia and Bluetooth.
Often it starts early, when the product is in the concept stage. The developers give their projects names. Then they become attached to them, and before you know it, they’ve spread across the company and out into the market. Apple’s operating system big cat names are a great example. The first two, Cheetah and Puma, were essentially secret internal names. But with OS X 10.2, the codename Jaguar escaped into the press, and Apple adopted it. Then, when they ran out of cats, they turned to California locations.
- Local management
But it can also be the regions who create their own brands. This is particularly true for food and beverage and health and beauty products. Product variations are developed to fit local tastes. This has happened a great deal in India. The Pepsico India team came up with Kurkure, a snack developed specifically around Indian tastes, textures and spices. Kurkure became a major Indian brand and subsequently expanded to other markets. The cosmetics brand Lakmé (after the Hindu goddess of beauty Lakshmi) was created by the Tata Group at the urging of the Indian government and is now owned by Unilever.
- Quarterly budget pressure
The stimulus for coining lots of new names, centrally and locally, is often the pressure for constant new product introductions. Both central and regional management are under pressure to launch something new every year, to drive the immediate bump in sales required for them to meet their quarterly revenue targets. This is too often for real innovation, so they fall back on the constant introduction of new tweaks each of which gets a name. I’ve been faced with this often when called in to tidy things up. Cadbury, at one point was launching a new flavor or variant in each region, multiple times a year. They ended up with 95 brands/sub brands and 250+ flavors.
- The need to signal product improvement
When products get better, marketing wants to tell people. The problem again, is the desire to bump up sales by signaling something new. This leads to spawning of new names, or versions of names indiscriminately. A classic example is Duracell. Battery technology evolves continually, though real innovation is much rarer. So, every year, the team came up with a new version of the name. There was Duracell, Duracell extra, Duracell ultra, Duracell ultra plus, and my favorite, Duracell Super Hyper.
- Acquisitions
And then, of course, there are acquisitions. Whatever the industry is, however, strong or weak the brand, the CEO and executives of the acquired company will say, “You can’t take our brand away or we’ll lose all our customers”. Sometimes this is true, sometimes it is partly true, and sometimes it is not true at all.
I’ve heard this from the CEO of an insurance company in Kansas City whose business was insuring the cars on dealers’ lots, which had been acquired by the global insurance company Zurich. The acquired brand had almost no equity and a small number of customers, to whom it would have been simple to communicate a change. But often the purchasers lack confidence, chose the least risky path and let the acquired brands stay.
Another example is UPS’s acquisition of Mail Boxes Etc. in the US. The owners of Mail Boxes Etc. were arrogant Californian entrepreneurs. UPS on the other hand, had a modest, humble culture. So UPS was about to defer to the owners’ claims about the strength of the brand. In fact, it wasn’t even a coherent brand. It wasn’t clear what the name was. Some stores called it Mailboxes Etc., others Mail Boxes Etcetera, and still others MBE. Brand valuation quickly solved both of these issues. The brand value of the UPS brand among consumers compared to the value of the Mail Boxes Etc. brand was like an elephant vs. a peanut. The US stores were quickly rebranded UPS, with no impact on sales.
Having too many brands is a very bad thing
The result of all these factors is that brand portfolios spiral out of control. Does it matter if your brand portfolio looks a complete mess? If you have 80 brands that all look different and whose names have no relationship to each other or to the corporate brand? It matters very much.
Having an incoherent brand architecture portfolio has major negative financial implications for the company. It puts you at a significant disadvantage versus more organized and disciplined competitors.
Having too many brands increases the cost and reduces the efficiency of both marketing and innovation.
Costs go up because spend must be allocated across the brands in the portfolio. Effectiveness goes down because you won’t be able to spend enough on any individual brand or innovation to create meaningful marketing impact. It’s a “death by a thousand cuts” problem. Spending a little on many brands has far less market impact than spending more on fewer brands.
Here are ten bad things that result from having too many brands.
- Weaker brand building: Brands won’t get the resources and investment they need to achieve the reach and frequency needed to build distinctive memories and associations.
- Less efficient media: Small budgets often cannot exploit scale, negotiate as effectively, or sustain campaigns long enough to work.
- Customer confusion: The target audiences, propositions and product lines of your different brands will inevitably overlap, wasting resources and making customers less likely to buy.
- Less innovation: Lack of resources will lead innovation teams to spend their time near-in short term tweaks to product and service lines, rather than testing and scaling the few ideas that could materially change the business.
- A lack of breakthrough innovation: Fragmentation makes it difficult to fund the risk taking and disproportionate investment required by the breakthroughs that essential for future growth and leadership.
- Organizational overhead: Every brand tends to develop its own strategy, agencies, research, packaging, digital assets and management processes.
- Reduced learning: Knowledge gets trapped within individual brands rather than being transferred across the portfolio. The same mistakes are repeated. Successes are not leveraged by other brands.
- Harder to build distinctive brands: Brands become less differentiated when there isn’t enough money to establish a distinctive positioning or distinctive assets.
- Poorer ROI measurement: Small programs have noisy results, making it difficult to tell what is actually working.
- Competitors take advantage: Even if your total budget is larger, competitors who concentrate all their marketing power behind one or two brands will have a greater share or voice and gain share from you.
You spend more. You get less. You open your market share for competitors to grab.
Yet there is risk attached to reducing the number of brands in your portfolio. You don’t want to kill off brands if that means you lose customers today, or if the brand may be small today, but fits with the trends and has the potential to drive major revenues in the future.
How do you decide on the best way to rationalize and optimize your brand portfolio architecture? Sign up to our emails and read the next installment in this series.