Many marketers seek to obtain financial benefits from their brands by using the awareness, attitudes, affection, and loyalty associated with these brands by “extending” the brand to new and different products and product categories. Procter and Gamble used its Tide brand, which was associated for many years with a single powdered detergent, to expand into an array of more than 60 related cleaning products, including specialty powdered products, liquid detergents, antibacterial fabric spray, and instant stain remover, among others.
It followed a similar path with its Crest brand, which evolved from the name of a single toothpaste product to a collection of dental health products. Apple has expanded a brand name for a single computer product to a highly varied portfolio of digital hardware, software, and information content products. The benefits of such successful brand extensions are obvious. Yet, for any example of successful brand extension, it is easy to find one or more failures: Cadbury instant mashed potatoes, Colgate dinner entrees, KFC scented candles, BIC disposal underwear, and Ben-Gay aspirin are among notable market flops.
The successes and failures of brand extensions are just one example of the challenges of managing a portfolio of products. Most firms grow by increasing the number of customers for any one product and, more importantly, by offering multiple products. However, managing portfolios of multiple product offerings adds to the complexity of business decision-making. Management must not only identify profitable strategies for individual products but also seek the optimal allocation of resources among products that may differ with respect to the size of the served market, profitability, stage in the product lifecycle, and competitive intensity, among many things.
Key Considerations For Brand Portfolio Decisions
When managers of a business make decisions involving multiple products, there are a variety of supply-side and demand-side factors. On the supply side there is a need to consider synergies (or dyssynergies) in financing, production, marketing, and distribution. On the demand side, there are synergies (or dyssynergies) in customers’ awareness and loyalty to brands, shopping patterns, and how the market as a whole is organized. One very important demand side decision is illustrated by the examples that began this piece: whether to use the same name for products or use different names. At a strategic level, this decision is frequently referred to as the choice between managing a corporate brand that identifies all products in the portfolio or a “house of brands” that uses different brand names for different product offerings or similar set of offerings.
Corporate branding tends to be easier and more efficient in business-to-business markets, where the firm offers related products and services and controls its own distribution channels, often through a dedicated salesforce. Thus, IBM is the name for a portfolio of products and services associated with information technologies and information management. In contrast, Procter and Gamble, which is a house of brands, has a broad array of rather different products that carry different brand names. Such a strategy makes sense in a highly segmented market where complete market coverage may require multiple products that are differentiated in a variety of ways, including the brand names under which they are sold. Of course, even in a house of brands, synergies among products may merit the use of the same brand name for different but related products like those found with the Tide and Crest portfolios.
The Role Of Brand Names
Regardless of whether a corporate brand or house of brands strategy is employed, an important consideration is whether the brand name makes sense to the customer as an identifier. Brand names can be used to identify many related products if the set of products makes sense to customers. If the grouping of products does not make sense, the common brand name is likely to be confusing to customers, and its meaning is diluted in the marketplace. Thus, the extension of the Harley-Davidson brand to clothing and hotels made sense to consumers because travel and group identification are a significant part of the Harley-Davidson consumer culture. In contrast, the effort to extend the Harley-Davidson brand name to fragrance products, perfumes, and colognes failed because fragrance products are not really associated with the typical Harley owner.
There have been numerous suggestions regarding best practices for making decisions about the range of products that can be successfully marketed under a common brand name. Some of these suggestions focus on product or service similarities in terms of features and attributes. However, focus on features and attributes ignores the way(s) in which customers think about products. For the customer, a product is a means to an end, a way to obtain a goal. Goals serve as a way for customers to organize products and also give specific meaning and value to features and attributes. For example, bleach is perceived as a great toilet bowl cleaner not so great as an ingredient in a dishwashing product.
The Role Of Customer Perceptions
When thinking about how a brand name should be used and the array of products and services to which the name might be applied, it is useful to start with the purposeful intent of customers and their goals as they relate to products. Products that consumers perceive to fit together are most often managed best under a common brand name, whether that name be IBM, with its array of products and services for solving information technology needs, or Crest, with its portfolio of dental hygiene products. This goal-driven approach works when the brand and associated business are new, as well as when considering potential extensions of an existing brand name to new products.
Contributed to Branding Strategy Insider by Dr. David Stewart, Emeritus Professor of Marketing and Business Law, Loyola Marymount University, Author, Financial Dimensions Of Marketing Decisions.
Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Growth and Brand Education