There are three fundamental ways to grow your business:
To accomplish these fundamental objectives, we deploy strategies ranging from more engaging advertising to drive awareness and purchase intent, to larger sizes and multi-pack packaging and pricing to increase transaction size, to discovering and communicating new usage occasions to increase purchase frequency.
The job of brand marketers is to satisfy, sustain, and grow existing users of their brand. That’s job one. But you also want to capture new users to grow the business. Can you do this by creating products with new benefits that stretch your brand, or do you grow by adding completely new brands to your portfolio? It’s a tough question and one that even the best companies and marketers get wrong while others excel.
In this attempt to capture new users or add consumption occasions there is a strong temptation to extend your brand to places it may not belong, you see the opportunity to add new products under an existing brand to reduce the high cost of launching a new stand-alone brand. That’s understandable. But you can do the opposite by stretching the brand into areas the customer doesn’t expect thus undermining existing brand equity. Remember that the customer ultimately determines brand positioning. In the 1990s, when Danone wanted to grow with a bottled water business, they initially attempted to launch a water brand under the powerful Danone brand name. One Danone executive I spoke to at the time tried to justify this Danone brand extension by stating that the Danone is all about health and water is healthy. True. But when you mention Danone to just about anybody as you walk down the street and ask them what comes into their head, they’re not initially going to respond healthy, they’re going to say yogurt. Danone is a yogurt brand that is healthy but that’s a very broad benefit area with lots of different product categories. Water is clearly not yogurt and Danone failed in trying to extend its brand into water. Instead, it created the brands Volvic and Aqua, which are quite successful, and it acquired the international water brand Evian, as well as local brands like Hayat in Turkey.
It is too easy to diminish or even destroy existing brand value by stretching your brand and taking it where it doesn’t fit. You break the crucial ties that bind your brand with customers by confusing them about what your brand really stands for. We see it all the time. Is Samsung Galaxy stronger in its almost desperate struggle with Apple’s iPhone because it also makes refrigerators? I don’t think so. But Apple is certainly stronger with its iPhone because of the individuality, elegance, and creativity the Apple brand also brings to Macintosh, iTunes, and Apple TV. You see, they’re linked together with a common family of brands that all share a common identity based on those three shared brand pillars – individuality, creativity, and elegant design. The other brands in the big Apple family brand portfolio all support each other. Starting with Apple founder Steve Jobs, to current Apple CEO Tim Cook, to Apple Senior VP of Worldwide Marketing Greg “Joz” Joswiak, they’re all 100% clear on what Apple means to customers and how to add new users (promoting Apple TV in the COVID pandemic, increasing transaction size by having value added products like Apple Air or iPhone 11 Plus, and growing frequency (by continuously updating their core products with new capabilities and services like iTunes).
The products within a brand portfolio either belong together or they don’t. The customer often gets that even if you don’t. The temptation to extend your brand is sometimes overwhelming. The efficiency of a brand portfolio is when you advertise one product in the portfolio, other products in the portfolio benefit like the old saying: “All ships rise with the tide.”
But be very careful. It is never you as the brand manager that ultimately determines the positioning of your brand – it’s the customer. You either help them or hinder them in associating positive and meaningful value to your brand with what your brand does and what you communicate.
As marketers we often use words like mega-brand, brand umbrella, sub-brands, brand extensions, and so many different terminologies that it is easy to get confused in establishing an effective brand portfolio strategy. What you include in the portfolio and why is at the heart of what we’re really talking about here: when and how you can stretch your brand to attract new customers.
There are four basic formats for a brand portfolio strategy.
Fanta is always fruit flavor and has an exuberant brand personality so all the extensions can easily fit under the Fanta brand umbrella. Dove is a little more complicated because although it is primarily known as a skin care brand, it has extended into hair care. However, the emotional brand benefit of inner beauty and confidence is so strong it is able to make it work.
Family Brand Portfolios
Apple, as I mentioned earlier, has always been clear about what can be included in its brand family and why its sub-brands (iPhone, Apple Air, and Apple TV) communicate strong family values of creativity, individuality, and elegant design. Some feel that Porsche has undermined its brand position as the ultimate sports car with the brand extensions of Cayenne SUV and Panamera luxury sedan, but it took this highly analyzed step after studying existing users and realizing that sports car buyers don’t buy a new model very often, yet luxury SUV and luxury sedan customers buy a new model every 2-3 years. Porsche made the sound business decision to reposition from sports cars to luxury cars and is now the number one luxury brand in the world. They gave up a little to gain a lot, but they were fully aware of the consequences on their brand positioning each step of the way. It didn’t take this major step on a whim, but by looking closely at who was buying their brand and who was not…and why for each. Brands aren’t religions, their tools to help you sell more stuff, to more people, more often, for more money as my old boss at Coca-Cola, Sergio Zyman, used to remind us. Porsche did exactly that and is a more powerful brand a more profitable company by doing so. Imagine where Apple, the most valuable company in the world would be if they would have strictly kept their brand only in personal computers.
Endorser Brand Portfolio
Most of the large consumer products companies use an endorser brand approach such as P&G, Unilever, and Mondelez. Procter & Gamble may be the first brand ever when in 1879 it started marking its wooden crates of soap that happened to float with the iconic moon and stars logo. But over the years the customer need for different types of soaps required more branding expertise to differentiate (Ivory, Coast, Safeguard, etc.) and the company also moved into new product categories like potato chips (Pringles) and peanut butter (Jiff).
Alliance Brand Portfolio
I’ve never been a big fan of the alliance brand portfolio. Usually, it comprises two companies that lack expertise in a new category and mistakenly think that combining with another will communicate added value. Sony, a brand known for high-definition screen quality, combining with Ericsson, a Swedish telecommunication component manufacturer, to make and market a superior smart phone was a losing process. It is an example of two companies talking to themselves about product functional features instead of to their customers to understand of the power of connecting functional features with emotional brand benefits. Nike, however, famously involved superstar basketball player Michael Jordan in the design of the shoe that leveraged Jordan’s personality and distinctive style (soaring through the air to score) with Nike’s ‘personal best’ emotional brand positioning.
It starts with the consumer
What are the need states and occasions available in the market to increase total consumption among current brand customers (frequency or transaction size) and/or capture interest and appeal from new customer segments?
If you are looking to capture new customers, then you must fully understand what they are seeking within your category both in terms of functional benefits (need states) and emotional benefits (lifestyle desires and tension points).
For example, what price tiers can brand extensions or sub-brands operate within to capture interest from new customer segments without undermining the mother brand? This question is more complex that it initially seems. Be very careful when launching a brand extension, or even a flanker product under another brand name. Look carefully at margins and profit contributions. It is an easy decision to upgrade customers to a more profitable new brand/product. But it is very dangerous to introduce a lower priced (and lower profitability) extension brand within an existing brand portfolio. Not only do you shoot yourself in the foot by selling volume that delivers a lower profit contribution, but you also erode the value perception of the mother brand. However, package extensions with reduced price for larger ‘family pack’ sizes or multi-packs could be another way to capture new growth or added-value promotions that offer the customer something extra (e.g. party packs for Lays Potato Chips or a free cover for a new iPhone).
Currently, with a difficult economy, you may need to introduce a lower priced flanker brand based on the premise that competitive economy brands are already cannibalizing your existing brand. If that is happening, better that you flank yourself and get the price/value customer volume than your competitor. But this is difficult to pull off without hurting company profits. Make sure you build the stronger emotional benefits of your core brand while you emphasize functional benefits of your lower-priced flanker brand.
What does your core brand stand for?
Step two is taking a fresh look at the brand you intend to extend by adding new sub-brands or product extensions into that brand’s portfolio. What is the core brand equity (emotional and functional) that all new portfolio members must share to connect them? What additional but related functional and emotional benefits areas are available in the market that you can add to your existing brand, or do you need to establish a new brand because the benefits are unrelated, such as what Mercedes did with Smart Car, or the Coca-Cola Company did with launching Cappy juices rather than extending Fanta into non-carbonated drinks. Non-carbonated juices taste a bit like the fruit flavors of Fanta, but carbonation connects to the core emotional benefit of exuberance that is Fanta.
The key question you must answer is whether a product with an extended offer or a new benefit area helps or hinders the core brand of the pre-existing mother brand. I’ve already mentioned the price value factor and how Lays Potato Chips and Apple add value without undermining the fundamental value equation of their mother brand. Other areas where you can undermine current brand equity is by bringing in new customer segments that are negatively perceived by existing customers. The biggest risk is offering a benefit with the brand extension that is contrary to the core values of your existing brand. All Coca-Cola brand extensions must be inclusive, authentic, and optimistic. How Coca-Cola brand managers over the years communicate the important brand pilar of optimism while they encourage sharing and inclusiveness to drive frequency doesn’t happen by accident. They are all following the same brand strategy. Even when they launch new flavors like Coca-Cola Vanilla or Cherry Coke and even or lower calorie alternatives (Coke Zero targeting men and Coke Light targeting women) to add or retain consumers, they all reflect the core brand values of the mother brand – Coca-Cola.
The Mercedes A Class was launched to make the brand more accessible for the everyday guy, but it undermined the core Mercedes brand values of prestige and exclusivity. Its ok to add line extensions add new benefits aligned with core brand values, but if not, launch another brand if you want to capture new customer segments with contradictory brand benefits such as the Smart Car, which few people realize is made by Mercedes’s parent company, Daimler AG.
The final analysis
Once you’re clear about who your customers are and what potential new and existing customers can derive from your brand, then comes the final brand portfolio step. Can you deliver your new product idea as a brand extension in an existing brand portfolio, or do you need a separate brand? What you want to determine is what brand extension strategy will optimize the portfolio in terms of meeting the needs of both existing and new customers and potentially driving purchase frequency and transaction size.
As you contemplate a new product and how it can be added to your existing product portfolio(s), it is important that you keep the reason you’re doing this prominently in your mind. Are you wanting to:
Do these new benefits resolve any barriers some customer segments may have to purchase or consumer more frequently from your product category?
Each step of this brand portfolio and brand extension process can be complex and may require additional research after you have effectively mined all available research from your customer segmentation and any brand equity studies you have done in the past. There are many questions that will pop up throughout the process depending on your category and conditions in the marketplace. This will at least give you a viable and workable process to help guide you through an effective portfolio extension project.
The following graphic will help you make decisions as you go through the brand portfolio analysis process on the criteria required for a new entry to fit into an existing brand portfolio, which type of brand portfolio – brand umbrella portfolio or brand family portfolio, Or should it be a standalone brand offering.
Brand family portfolios are a preferred option for most companies because they tend to add brand equity to the portfolio by extending the core brands’ customer appeal to new segments and adding new usage occasions with the opportunity to increase price and earn higher margins, but you must be able to answer yes to all of the process points highlighted in red. Otherwise, you are looking at your new product idea as an umbrella brand entrant or a standalone process.
Regardless of where you end up, you’ll do so with far greater confidence that you made the right decision on when, how, and why to launch a new brand or product to grow your business.