BRAND PORTFOLIO:Segment variance, Constraints, Developing the model – multi-brand portfolio

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Brand Management (MKT624)

Lesson 26

BRAND PORTFOLIO

Introduction

Due to limitations of line and brand extensions, companies have to go for a portfolio of brands.

Portfolios offer advantages. At the same time, they also are not without disadvantages. The

lecture discusses both.

Brand portfolio and segmentation

Every market can be segmented by product, customer expectation, or the type of customers. A

chain of hotels may like to have its presence in different segments of the hotel market by

having three-, four-, and five-star hotels. Its presence in three different segments addresses

different needs of customers within those segments.

Customers in the three-star segment are economy-oriented audience interested in neat

accommodation with no frills at affordable pricing in a middle class area of town. Conversely,

customers in the five-star segment are desirous of high comfort, pampering, sophisticated

ambience, and high status. Customers in the four-star category fall in between the two ends of

the spectrum.

The example illustrates different products and different types of customers with different

expectations. Considering the variance of factors among different segments, it is obvious for

the company not to sell its services through three kinds of hotels under the same brand name.

With the same name, customers in the five-star segment will feel degraded and under-served,

while those in three- and four-star segments will expect to have upgraded service offered at the

five-star set-up at the pricing of three- and four-star accommodations. It will lead to quite a

confusing situation devoid of a rationale.

The company therefore should consider different brand names for the simple reason that all

three products relate to a particular set of corporate objectives through segmentation and

differentiation. This implies that depending on the corporate objectives, degree of competition,

and company's resources, the

The Positioning Map

company should decide about the

Multi-brand portfolio

number of brands it should be

having. In this case, it looks

Price

apparent to have three brand

names for three different hotels.

It, however, is a multi-stage

Own

process that drives one to decide

Competition

the practical number of brands.

The stages are related with a

historical study of the segments

that you have been in or are

interested in.

Quality

Low

High

All strategies flow out of two

areas of marketing segmentation

and differentiation. That owes to

the external growth factor of the

total category. As mentioned

above, given the degree of

competition

and

historical

perspective of the whole category,

Figure 31

you position different brands in

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Brand Management (MKT624)

different segments. To address differentiation, you may not successfully do that by way of

having just one brand do all the jobs for you. It is graphically illustrated.

Segment variance

If the variance in terms of segments is too broad like in the case of the hotel, then one brand

will work at cross purposes. You have to have different brands. If the variance is narrow, then

you may go for an extension. But, you may still go for some distinction in name that signifies

differentiation. It can be exemplified by way of calling one economy and the other executive.

By competing at the bottom of the top segment (top right quadrant), you are defining new

boundaries, repositioning the competition, and keeping it off-limits to your top-of-the-line

offering, which is surrounded by two direct competitors. You are a little more expensive there,

but less expensive at the bottom of the segment where you have a nice fighting brand with

higher quality than those offered by two others.

The variance in segmentation corresponds to different positions. That is, different positions on

the positioning grid necessitate different brand names. A multiple brand policy therefore

corresponds to a segmented market, where various expectations in each segment are not only

different, but also seen as incompatible by consumers.

The above means customers in upscale segment will never accept the same brand name unless

there is differentiation between their brand and the one that is perceived inferior. You may go

back to the hotel example. As a comparison and conclusion, we can say that

· while brand extensions correspond to a strategy of domination and competitive

advantage via low costs

· the multi-brand strategy is a logical consequence of a differentiation strategy and as

such cannot coexist with low costs in view of reduced scale economies, technical

specialization, specific sales networks, and necessary advertising budgets

Yet it should not mean that companies are prepared to spend unlimited sums in the areas of

multi-brands. The objective to cut costs never escapes managers' attention. They like to offer

differentiation at the end of the production process, thus trying to make brands appear different.

The tendency to achieve productivity gains via fragmentation of the assembly line at the fag

end of the process kills two birds with one stone:

· Companies try to achieve differentiation there and

· Companies try to reap the benefits of the learning curve, which is characterized by a lot

of common features

Most of the multi-brands of cars make use of such productive gains. Look at the models by

Toyota and see the differences between the base model and the saloon model. Differentiation

seems to take place after having had the gains of productivity in terms of the shape of the

model. Even the latest "Altis" with a bigger engine is subjected to the philosophy of production

harmony and cohesion.

What makes it necessary to have different brands?

1. Collective play

One brand cannot develop the market. It's the collective positions and communication

campaigns that educate the customers about different features different brands offer.

When different players collectively promote their respective differences, it tends to

promote the market collectively. Combined advertising offers a combined view of the

whole category thus improving the whole category. Multiplication of players, therefore,

becomes essential.

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Brand Management (MKT624)

2. Market coverage

The role played by multiple players automatically strengthens the concept of

segmentation, because they all opt for different segments by positioning them uniquely.

Such situations lead to coverage of the market that is not possible with just one brand.

Different price-quality-indexes (PQIs) emerge and one brand revolving around all PQIs

is bound to lose its identity.

3. Effective fight to competition

You introduce a new brand to position it right below established competitors' pricing.

You don't do that with the original brand, for that amounts to cutting brand's pricing

and hurting its image. Refer to figure 31. In other words, it offers you to create the

territory of marketing battle away from that of your original brand.

4. Fills the market and keeps the competition out

It offers you the opportunity in line with the fundamental that says a multiplication of

players is important. A strong player can take on the role of a multi-supplier by having

different brands and hence keeping the competition out.

5. Protects the main brand image

If the new entry is not successful, it doesn't hurt the original brand.

6. Responsive to retailers' needs

A multi-brand policy fulfills needs of different retailers, because different retailers cater

to the needs of a different level of clientele and, hence, needing an array of different

brands for different customers with different demographic backgrounds is essential.

Actually, the identity of retailers is defined by the selection of different brands they

carry and specialize in selling.

7. Takes over where extensions feel limited

A multi-brand policy emerges from the limitation of extensions to look after all the

segments of the market. A sophisticated market is bound to be confused by extension of

one brand, if it addresses different quality and needs-fulfilling criteria across different

zones of customers' attitudes. Electronics offer a perfect example. Japanese electronics

companies offer more than one brand of televisions and musical instruments by being

sensitive to the following psychographics.

· There are customers who buy on the basis of technical innovation and, hence, don't

care about the price.

· There are customers who buy on the basis of basic need-fulfillment, and hence, are

economy-oriented

· There are customers who buy on the basis of reliability and durability

If you classify customers in the above three segments, you may like to have different

brands for those segments. You, therefore, have to relate different features and benefits

with the brands' attributes. One brand extension cannot do that.

Constraints

1. Clear meanings

In multi-brand portfolios, each brand must have its clear meaning. If the differential

between brands is minimal and not meaningful, then not only the customers, but also

sales people feel confused and offended.

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2. Cost management

Costs always remain a prime objective of all businesses. They try to keep so many

common features, which should not expose themselves to the point of undesirability.

Should consumers perceive commonalities not appealing and rather offending, then

managing costs for the sake of keeping them low can endanger brand's image capital?

Businesses must maintain a balance between such cost management and image capital

of the brand.

Developing the model multi-brand portfolio

· Just on the lines of brand extensions, we have to go by the following steps:

· Look for opportunities and growth areas.

· Analyze and assess the potential each opportunity offers in targeting customers in each

segment.

· Go for the brand strategy that explains its positioning, its reason for being, and the

strategic framework for executions of tactics.

Suggested readings:

1. Jean-Noel Kapferer: "Strategic Brand Management Creating and Sustaining Brand

Equity Long Term"; Kogan Page (281-285)

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