Chapter 1: Brand Portfolio Strategy

We hire eagles and teach them to fly in formation.

-- D. Wayne Calloway, former CEO of PepsiCo

You don't get harmony when everyone sings the same note.

-- Doug Floyd

Nobody has ever bet enough on a winning horse.

-- Richard Sasuly

The Intel Case

During the 1990s, Intel achieved remarkable success in terms of increase in sales, stock return, and market capitalization. Sales of its microprocessors went from $1.2 billion in 1989 to more than $33 billion in 2000. Its market capitalization grew to more than $400 billion in just over thirty years. Intel's ability and willingness to reinvent its product line again and again -- making obsolete business areas in which it had big investments -- certainly played a key role in its success. Its operational excellence in creating complex new products with breathtaking speed and operating microprocessor fabrication plants efficiently and effectively was also critical.

Intel's brand portfolio strategy, however, played a critical role as well. And this brand portfolio strategy could not have emerged without the brilliance of Dennis Carter, Intel's marketing guru during the 1990s, and the support of Andy Grove at the very top of the organization. Few organizations, particularly in the high-tech sector, are blessed with such assets.

Intel's brand story really starts in 1978, when it created the 8086 microprocessor chip, which won IBM's approval to power its first personal computer. The Intel chip and its subsequent generations (the 286 in 1982, the 386 in 1985, and the 486 in 1989) defined the industry standard and was the dominant brand.

In early 1991, Intel was facing pressure from competitors exploiting the fact that Intel failed to obtain trademark protection on the X86 series. These firms created confusion by calling their "clone" products names like the AMD386, implying that they were as effective as any other 386-powered PC.

To respond to this business challenge, Intel in the spring of 1991 began a remarkable ingredient-branding program ("Intel Inside"), with an initial budget of around $100 million. This decision was very controversial within Intel -- such a large sum of money could have been used for R&D, and many argued that brand building was irrelevant for a firm that only sold its products to a handful of computer manufacturers. Within a relatively short time, however, the Intel Inside logo became ubiquitous, and the program became an incredible success. The logo, shown in Figure 1-1, has a light, personal touch, as if someone wrote it on an informal note -- a sharp departure from the formal corporate logo (Intel with a dropped e).

The Intel Inside program involved a tightly controlled partnership between Intel and computer manufacturers. Each partner received a 6 percent rebate on its purchases of Intel microprocessors, which was deposited into a market development fund that paid for up to 50 percent of the partner's advertising. (To qualify, the advertising needed to pass certain tests, the main one being to present the Intel Inside logo correctly on product and in the ad.) Computer partners were required to create subbrands for products using a competing microprocessor so buyers would realize that they were buying a computer without Intel Inside. Although the program became expensive -- its structure caused the budget to grow to well over $1 billion per year as sales rose -- it also created a huge differential advantage over competitors trying to make inroads with computer manufacturers.

The bottom line was that for many years, "Intel Inside" meant a roughly 10 percent premium on the sales price of a computer featuring the logo. Because of the exposure of the branding program, Intel was given credit for creating products that were reliable, compatible with software products, and innovative, and for being an organization of substance and leadership. All this happened even though most computer users had no idea what a microprocessor was or why Intel's were better.

There were important secondary benefits. The Intel Inside program caused advertising for computers to explode. Ironically, advertising agencies, at first unhappy having their artistry compromised by foreign logos, became creatively flexible when they realized that advertising billings were going to skyrocket. In addition, the computer partner firms became attached to the advertising allowance; in fact, with margins squeezed, they had a hard time competing without it. The program thus became a significant loyalty incentive for Intel. "Intel Inside" became one of the most important brands in their portfolio.

In the fall of 1992, Intel was ready to announce the successor to the 486 chip in the face of increasing competitor confusion, even given the Intel Inside campaign. A huge decision loomed. Should the successor be called Intel 586, thereby leveraging the Intel Inside brand and providing a familiar and logical roadmap to customers who had adapted the X86 progression? Or should it be given a new name, such as Pentium? It was a very difficult decision.

Four key issues guided the decision to develop the Pentium brand. First, despite the success of the Intel Inside program, the basic confusion issue would remain if the product was named Intel 586, thanks to market entries such as AMD586. Second, the cost of creating a new brand and transitioning customers to it, although huge, was within the capacity and will of Intel -- few new products in any industry are so blessed. The fact that a new brand had news value would make the job easier. Third, the Intel Inside equity and program, rather than being wasted, could be leveraged by linking the two brands. A visual presentation of the Pentium brand was integrated into the Intel Inside logo, as shown in Figure 1-1; in essence the Intel Inside brand became an endorser for the Pentium brand. Finally, the new product was judged to be substantive enough to justify a new name, even though a new name for every future generation would ultimately be costly and confusing. Because a costly new fabrication plant needed healthy initial demand to pay off, one motivation for the new brand was to signal to customers that the new generation was worth an upgrade.

Intel subsequently developed an improvement to the Pentium that provided superior graphic capability. Rather than naming the chip a Pentium II, or giving it an entirely new name, the branded technology name MMX was added to the Pentium brand (the graphical representation is shown in Figure 1-1). The Pentium brand would thus have more time to repay its investment, and a new-generation impact could be reserved for a time in which the advance was more substantial. Later generations did emerge, leveraging the Pentium brand and equity with names like Pentium Pro (1995), Pentium II (1997), Pentium III (1999), and Pentium 4 (2000). The advent of the Pentium 4 ushered in a new visual design (shown in Figure 1-1) to emphasize its newness and to provide a look that suggested substance, reliability, and quality.

Clearly, a crucial, ongoing brand portfolio strategy issue is how to use branding to identify product improvements. When the improvements are minor or involve corrections of prior mistakes, then it is not appropriate or worthwhile to signal a change. When the improvements are significant, the choice lies between a branded feature (like MMX), a new generation (like Pentium III), or a totally new brand (like the replacement of the X86 series with Pentium). The communication cost, the risk of freezing sales of the existing brand, and the degree of preempting the news value of future technological developments will all depend on which of the three brand signals is used.

In 1998 Intel decided that it needed to participate in the market for mid-range and higher servers and workstations. To address this market, Intel developed features that allowed four or eight processors to be linked to supply the power needed for these higher-end machines. A branding issue then arose. On one hand, the Pentium brand was strongly associated with lower-end personal computers for homes as well as businesses, and as such it would not be regarded as suitable for servers and workstations. On the other hand, the market would not support developing yet another standalone brand alongside Intel Inside and Pentium. The solution was to introduce a subbrand, the Pentium II Xeon. The subbrand distanced the new microprocessor enough from Pentium to make it palatable for the higher-end users. It had the secondary advantage of enhancing the Pentium brand. Another practical consideration was that the use of the Xeon name by itself had some trademark complications that disappeared when it was merged with the Pentium II name.

In 1999 another problem -- or opportunity -- emerged. As the PC market matured, a value segment emerged, led by some Intel competitors eager to find a niche and willing to undercut the price points of the premium microprocessor business. Intel needed to compete in this market, if only defensively, but using the Pentium brand (even with a subbrand) would have been extremely risky. The solution was a stand-alone brand, Celeron, that was not directly linked to Pentium (as Figure 1-1 shows). The brand-building budget, like that of many value brands, was minimal: the target market found the brand, rather than the other way around.

A decision was made to link the Celeron to Intel Inside, so there was an indirect link to Pentium. The trade-off was the need for the Intel endorsement to provide credibility to Celeron, versus the need to protect the Pentium brand from the image tarnishment of the lower-end entry.

In 2001, the Intel Xeon processor was introduced with the logo shown in Figure 1-1. Several factors combined to allow the subbrand to step out from behind the Pentium brand. Technological advances such as NetBurst architecture rather dramatically improved the processor's power, and now that the Xeon brand had been established it was thus more feasible to support it as a stand-alone brand (the initial trademark issues over the use of the brand name had been resolved). Finally, the target market became even more important to Intel, and having a brand devoted to it became a strategic imperative.

That same year, the Itanium processor was introduced as a successor to the Pentium series. Why not call it the Pentium 5? The processor had been built from the ground up with an entirely new architecture, with 64-bit power (as opposed to the 32-bit Pentiums) based on a branded design termed Explicitly Parallel Instruction Computing (EPIC). Capable of delivering a new level of performance for high-end enterprise-class servers, a new name was needed to signal that this processor was qualitatively different than the Pentium. The logo for the second generation of Itanium is shown in Figure 1-1.

In 2003, Intel introduced the Intel Centrino mobile technology, which provided laptops with enhanced performance, extended battery life, integrated wireless connectivity, and thinner, lighter designs. Its promise is to fundamentally affect personal lifestyles and business productively by enabling people to unconnect, to "Unwire Your Life." The new Centrino logo (shown in Figure 1-1) reflects the Intel vision of the convergence of communication and computing, and it also represented a new approach to product development. Rather than simply pushing the performance envelope, for this product Intel responded to real customer needs as determined by market research.

The most dramatic element of the Centrino logo is its shape, a sharp departure from the rectangular design family that preceded it. The two wings suggest a merger of technology and lifestyle, a forward-looking perspective, and the freedom to go where you will. The magenta color used for the Centrino wings balances the Intel blue and visually provides energy and excitement while suggesting a connection between technology and passion, logic and emotions. The Intel Inside logo has evolved as well. More precise, sophisticated, and confident, it now provides a link to the classic dropped-e Intel corporate logo and reflects a world in which the positives of the corporate connection and the loyalty program can be dialed up.

Intel used its brand name to enter other business areas. One of the most important was in the communications sector. A branding problem common to any firm with a strong well-defined brand is that it is confining; Intel is so closely associated with microprocessors and Pentium that creating credibility in other areas can be a challenge. Subbrands and branded components can help combat this problem. Intel operates an important segment of its business under the brand Intel Network Processor, with the Intel Inside brand nowhere to be found. In addition branded components such as the Intel Xscale microarchitecture processor (which provides the ability to tailor a general-purpose processor to specific tasks, avoiding the need for special-purpose processors) are developed.

Intel over the years has purchased many firms, and in each case it has had to make judgments about what to do with the brands that accompanied those firms. Retaining the brands in their present roles would capitalize on their equity and the customer relationships that they represented, while dropping them would allow for transferring the business areas to the Intel brand or one of the brands in the Intel portfolio. Finally, another role could be found for the brands, perhaps as a subbrand for a defined segment or as a value brand.

For example, in 1999 Intel bought Dialogic, a company providing building blocks relevant to the converging Internet and telecommunication markets. The new organization was initially "Dialogic, an Intel company," but then changed to become a product brand within the Intel Communication Systems Products organization (for example, Intel Dialogic Boards).

It is clear that a host of critical brand portfolio decisions were made at Intel. New brands enabled the firm to address competitive threats and enter new markets. The relationships between brands were particularly important in defining new and transitioning business arenas, while the umbrella Intel Inside brand provided an essential synergetic force in the portfolio. Many of the branding decisions were difficult and internally controversial. But again and again, the portfolio structure reflected and enabled the business strategy, thereby enhancing the firm's chance to succeed. At times, it influenced the market environment and actually defined product categories. In doing so, Intel's effort to position itself as a differentiated leader brand was enhanced.

Too often, the implicit assumption is made that brand strategy involves the creation and management of a strong brand like HP, Viao, 3M, Ford, or Tide. Yet virtually all firms face the portfolio challenges created by multiple brands. Intel, for example, has a host of important brands, including Intel Inside, Pentium, Xeon, Centrino, Xscale, and Dialogic. For too many firms, the management of their portfolio is often deficient or nonexistent, despite the fact that there is often a huge competitive upside to getting it done better.

There are at least five reasons why understanding and managing the brand portfolio can be a key to both the development of a winning business strategy and its successful implementation. First, a portfolio in which each brand executes a clear role can create competitively decisive synergies. A key element of brand portfolio management is to make sure that each brand has a well-defined scope and role(s) to play in each context in which it is expected to contribute. Another is to make sure that the brands, acting within their roles, actively reinforce and support each other to provide a consistent synergistic team. Looking at brands as stand-alone silos is a recipe for suboptimization and inefficiency.

It is like an American football team with dozens of people playing different positions, each with its own role. On the defensive line, there are pass rushers and run stoppers. The strong safety has a different role to play than the free safety. The outside linebacker's role differs from that of the middle linebacker. One of the coach's jobs is to place each player in the right position. The very best offensive lineman may fail as a defensive lineman, just as a great endorser brand may make a weak master brand in a particular context. Another coaching task is to teach technique and create drills to make sure that each player plays up to his capabilities. On successful teams, every player is assigned to a role in which he can succeed, understands the role, and is well prepared to execute that role. Brands similarly need to be placed in roles to which they are suited, and given the resources needed to succeed.

The football team also needs to work together, with players executing in tandem to achieve success. The defensive line needs to work with the linebackers, and the linebackers with the defensive backs, to reflect the strategy that is in the game plan. Often the team that best works together wins, rather than the most talented team. The successful coaches strive to make teamwork a priority and make sure that individuals do not focus on their statistics to the detriment of the team. Similarly, strategic brand leadership requires that brand team goals be optimized as well as those of the individual brand players.

Second, a portfolio view can ensure that the brands of the future get the resources they need to succeed. In a silo organization, high-potential brands are often starved of resources, in part because their business is still small. The assignment of clear brand roles will help guide brand-building resources in the most productive directions to create future brand assets.

On any successful football team, coaches will devote the most resources to impact players and potential future impact players. The 320-pound freshman tackle, for example, may be a weak performer now, but could be a star if given extra coaching and opportunities to play. A sophomore who already plays well may have the potential to become a dominant force on the field if properly trained and motivated. The star player can, with work, become even better. High-potential brands need similar attention and resources; all brands and all brand roles are not created equal.

Third, understanding the perspectives, tools, and methods of brand portfolios can enable organizations to address competitive challenges by adjusting strategies. One branding challenge is to maintain or recapture points of differentiation and energy, without which a branded offering will be vulnerable. Portfolio tools such as subbrands and branded features can provide avenues to achieving this goal. Responsive strategies to create or maintain relevance within a market that is changing (perhaps at a rapid rate) can be enabled by the use of subbrands, endorsed brands, or co-brands, or by the development of new brand platforms. Chapters 4, 5, and 6 will detail the portfolio approach to these challenges.

A football team may need to adapt when it senses a deficiency. If, for example, a weakness is found among the offensive linemen, a team response might address the problem. A new player might be acquired from another team, or perhaps a strong defensive lineman might be shifted to offense. An adjacent lineman could be called on to compensate by playing a different role, or the offensive strategy could be changed to make the point of vulnerability less visible. The brand portfolio needs to be similarly flexible and dynamic to respond to dynamic markets.

Fourth, strategic growth challenges can be addressed through portfolio tools. Virtually all organizations eventually run into a wall and need to find new sources of growth. Strategically, this usually means entering new markets, offering new products, or moving into upscale or value arenas. Any such strategy will need to be enabled with brand assets, however, whether by leveraging existing brands (perhaps with the use of subbrands or endorsed brands) or acquiring or developing new brands. Chapters 7 and 8 will discuss the brand portfolio as a device to enable growth.

A football coach needs to have a vision of the team's style, character, and strategy. Will it be a finesse or power team? Will it emphasize passing, running, or defense? Has it assembled the right set of players to execute the strategy? It is not enough to have the best players; a team must have the players that fit its strategy. A brand portfolio likewise will need to develop brands that will enable the business strategy.

Winning football coaches will fully exploit the talents of their players. If a team has an outstanding linebacker, the defense might be designed so that opposing running backs are funneled to that linebacker. If a defensive back is extremely fast, he might be asked to also play wide receiver at times, to get him on the field so that he can make plays. An offensive tackle might add size to the defensive front in goal-line situations. Similarly, a key of portfolio management is to identify key facets of strong brands and leverage them through brand extensions and added role responsibilities.

Fifth, an offering can get too complex, confusing customers and even employees. The result can be damaging to the customer relationship. More visibly, it can cause waste in brand-building efforts because the message is too cluttered to be retained. Chapters 9 and 10 will discuss ways to gain focus and clarity in the brand portfolio.

A football team can easily create an offensive strategy that provides so many options, and counters so many competitor actions, that it ends up confusing the team. The players end up thinking so much about the complexity that they do a poor job of their more basic tasks of running, blocking, and passing. Simplifying the offense -- reducing it to a few basic plays that are well executed -- can result in dramatic performance improvements.

Brand portfolio strategy becomes especially critical as brand contexts are complicated by multiple segments, multiple products, varied competitor types, complex distribution channels, multiple brand extensions, and the wider use of endorsed brands and subbrands. Brands such as Coca-Cola, Bank of America, Procter & Gamble, HP, Sony, Visa, Textron, and Volvo all operate in diverse markets and over multiple (sometimes disparate) products and channels. The resulting complexity often creates customer confusion, inefficiencies, and a brand strategy that seems muddled and unmotivated in the eyes of employees and brand-building partners. In the face of competitive pressure, a cohesive, well-defined brand portfolio becomes imperative.

Brand portfolio strategy is defined in the next section, after which its five components and the portfolio objectives are described. In the process, concepts will be defined and illustrated, some of which, like branded differentiators and branded energizers, are introduced for the first time. In the chapter that follows, key building blocks of brand portfolio strategy (master brands, subbrands, and endorsed brands) will be described, and their relationship will be modeled with the brand relationship spectrum. In Chapter 3, four types of inputs to the development of a brand portfolio strategy (market forces and dynamics, business strategy, brand equities and identities, and the brand portfolio audit) will be presented, along with a discussion of the portfolio management process itself.

In Part II of the book, the use of brand portfolios to help create relevance, differentiation, and energy is presented. Part III looks at growth avenues: horizontal and vertical brand extensions. Part IV discusses how to achieve clarity and focus in a portfolio.

What Is a Brand Portfolio Strategy?

The brand portfolio strategy specifies the structure of the brand portfolio and the scope, roles, and interrelationships of the portfolio brands. The goals are to create synergy, leverage, and clarity within the portfolio and relevant, differentiated, and energized brands. The portfolio brands, both owned brands and brands linked through alliances, should be considered a team of brands working together, each with assigned roles to enable and support business strategies.

The development and management of a brand portfolio strategy involves making brand decisions such as whether to:

• Add, delete, or prioritize brands or subbrands
  
• Extend a brand into another product category with a descriptor or a subbrand, or as an endorser
  
• Extend a brand into the superpremium or value space
  
• Use the corporate brand on an offering, or expand its use as an endorser
  
• Develop a brand alliance
  
• Define or associate with a new product category or subcategory
  
• Create and/or dial up a branded differentiator, a branded feature, ingredient or technology, service, or program that differentiates
  
• Develop a branded energizer, a branded sponsorship, product, promotion, or other entity that is linked to the target brand adding associations, interest, and energy
  

Brand portfolio strategy can be further elaborated in terms of six dimensions: the brand portfolio, product-defining roles, portfolio roles, brand scope, portfolio structure, and portfolio graphics. Each of these, in which the tools and concepts of brand portfolio strategy reside, will be illustrated and discussed in the next section. A baker's dozen indicators of the existence of brand portfolio problems or opportunities, listed in the insert, also provide a perspective on brand portfolio strategy.

The brand portfolio strategy should not have an internal perspective that aims to reflect an organizational chart. While the internal organizational structure may change frequently as the firm adapts to its changing environment, the customer-facing brand architecture should be more stable. Customers will not be motivated to learn new organizational labels. In developing a sound brand portfolio strategy, the business-card concern (in other words, what will the organizational unit be on my business card) should not influence portfolio design decisions. The only concern should be making the offering clear and appealing from the customer perspective.

Figure 1-2 summarizes the six dimensions and five objectives of brand architecture. The following section will define each of the dimensions, followed by a presentation of the portfolio objectives.

Dimensions of the Brand Portfolio Strategy

The development of a brand portfolio strategy involves six dimensions. The first of these is the brand portfolio itself, which provides the set of brands to be drawn upon to achieve the portfolio objectives. Two others, product-defining roles and portfolio roles, specify the varied set of roles that each brand could potentially play. The brand scope reflects the product categories or subcategories for which each brand will be relevant (both at present and in the future) and the relationships between brand contexts. The portfolio structure formalizes the relationships between the brands, and portfolio graphics indicate how they are to be presented by themselves and relative to other brands.

Brand Portfolio

The brand portfolio includes all of the brands managed by the organization, including the master brands, endorsers, subbrands, branded differentiators, co-brands, branded energizers, and corporate brands, even if they seem dormant. Branded differentiators and branded energizers will be illustrated in more detail later in this section. A corporate brand is a brand that represents a corporation -- or, more generally, an organization -- and reflects its heritage, values, culture, people, and strategy. As already noted, portfolio brands also include brands external to the organization whose link to internal brands are actively managed, such as branded sponsorships, symbols, celebrity endorsers, and countries or regions.

A basic portfolio issue is the composition of the brand portfolio. Should one or more brands be added? There are certainly situations in which a portfolio can be strengthened by the addition of brands. However, brand additions should always have a well-defined role. Further, the decision to add a brand should be made or approved by a person or group with a portfolio perspective. Too often, such decisions are left to decentralized groups that have little feel for (or incentive to care about) the total brand portfolio, which creates a bias toward brand proliferation. The goal should be to have the fewest relevant brands needed to meet business goals.

Or perhaps the question is, should brands be deleted? If the number of brands is excessive, there may not be adequate resources to support them. Perhaps worse, superfluous brands can contribute confusion simply by being there. The solution is to prune the brand portfolio, painful though that might be. Chapter 10 pursues this issue and suggests methods that help the process.

Product-Defining Roles

When an offering is proposed, it needs to be identified to customers by a brand or set of brands. The brand set with product-defining roles reflects an external view of the brands from the customer's perspective. Each brand will be in one of the following roles: master brand, endorser brand, subbrand, descriptor, product brand, umbrella brand, branded differentiator, or brand alliance.

• A master brand is the primary indicator of the offering, the point of reference. Visually, it will usually take top billing, such as 3M in the brand 3M Accuribbon.
  
• An endorser brand serves to provide credibility and substance to the offering (e.g., General Mills endorses Cheerios). Its role is to represent an organization and its credibility and substance is based on the strategy, resources, values, and heritage of that organization.
  
• A subbrand augments or modifies the associations of a master brand in a specific product-market context (e.g., Porsche includes the subbrand Carrera). Its role is to create a brand that will be significantly different from the master brand, perhaps by adding an attribute dimension or a personality element, and thus be appropriate for a particular product or segment.
  
• Descriptors describe the offering, usually in functional terms (e.g., aircraft engines, appliances, light bulbs). Although not brands per se, descriptors play key roles in any portfolio strategy.
  
• A product brand defines a product offering consisting of a master brand and a subbrand (Toyota Corolla), or a master brand plus a descriptor (Apple-Cinnamon Cheerios).
  
• An umbrella brand defines a grouping of product offerings (Microsoft Office Word, Microsoft Office Excel, etc.) under a common brand (Microsoft Office). The umbrella brand such as FedEx eBusiness Tools, can be a more appropriate and effective vehicle to gain relevance, visibility, and differentiation than individual product brands, such as eShipping Tools, eCommerce Solutions, and eCommerce Builder.
  
• A driver role reflects the degree to which a brand drives the purchase decision and defines the use experience. While master brands usually have the dominant driver role, endorsers, subbrands, or even descriptors or second-level subbrands (that is, subbrands to subbrands) can also play driver roles that can vary in intensity. Toyota plays more of the driver role than Corolla, but both have influence.
  

Chapter 2 describes these brand roles in more detail and provides insights into how their power can be channeled into the creation of strong, flexible brands. The remaining roles -- branded differentiators, covered in Chapter 4, and brand alliances, the subject of Chapter 6 -- are worth introducing here in order to complete this overview of brand portfolio strategy.

Branded Differentiators

A branded differentiator is a brand or subbrand that defines a feature, ingredient, service, or program. The customer-facing offering could be Lipton Tea, with a Flo-Thru bag as a branded differentiator. Creating a point of differentiation for a master brand makes the branded offering appear superior, or it augments the offering so that it provides more functions and benefits. Some examples of the various types of branded differentiators are as follows:

A branded feature is an owned attribute of the offering that creates a benefit for the customer:

Ziploc Sandwich Bags -- ColorLoc Zipper

Whirlpool Electric Range -- Whirlpool CleanTop, AccuSimmer Element

Reebok -- 3D UltraLite-sole design

A branded ingredient (or technology) is built into the offering and implies a benefit and/or feeling of confidence:

Cisco Aironet Access Point -- LEAP technology

North Face parkas -- Gore-Tex

Cheer -- Advanced Color-Guard Power

A branded service augments the offering by providing a service:

American Express -- Round Trip (a package of services for the corporate travel office)

Ford/Mercury/Lincoln -- Quality Care

United Airlines -- Arrivals by United, United Red Carpet Club, United Mileage Plus, Ground Link, Business One

A branded program augments the offering and thus expands the brand by providing a program that is linked to the offering and brand:

Hilton Honors

Kraft Kitchens

GM BuyPower

The value of a branded differentiator has been demonstrated in a variety of contexts. A consistent finding is that it provides a boost, particularly to a new or less established brand.

Brand Alliances-Co-Branding

Brand alliances involve brands from different firms that combine to engage in effective strategic or tactical brand building programs or to create co-branded market offerings. Thus, a sponsorship such as NFL football or a personality such as Tiger Woods that has a long-term role in building the equity of a portfolio brand would become part of the portfolio to be actively managed.

Co-branding occurs when brands from different organizations (or distinctly different businesses within the same organization) combine to create an offering in which brands from each play a driver role. One of the co-brands can be an ingredient brand, such as Pillsbury Brownies with Nestlé syrup, or an endorser such as Healthy Choice cereal from Kellogg's. It can also be a co-master brand, such as the credit card that has three master brands (Citibank, American Airlines, and Visa). Or it can be a joint brand-building effort, such as a cross-promotion involving a Universal movie and Burger King.

Co-branding has significant rewards, as the discussion in Chapter 6 will explore. The offering can capture two sources of brand equity and thereby enhance the value proposition and point of differentiation. It can also enhance not only the co-branded offering but the associations of both brands. And it can allow a firm to respond quickly and strategically to a dynamic market.

The Nature of Product-Defining Roles

The specification of a set of product-defining brands for an offering is where the rubber meets the road from a brand perspective. What should an offering be called? What is the customer-facing brand? A Bose QuietComfort stereo headset with TriPort headphone technology is one such brand set. It has a master brand (Bose), a subbrand (QuietComfort), and a branded differentiator (TriPort headphone technology). Each of the brands that come together to identify an offering will have a well-defined role that will influence how that brand is managed. Three more examples are as follows:

• Cadillac Seville, with a Bose CD player and a Northstar engine endorsed by GM
  
• HP Color LaserJet 5500, with HP ImageREt technology
  
• Venus Shaving System from Gillette for Women, with aloe and the DLC Blade Edge
  

In the first, there is a master brand (Cadillac), a subbrand (Seville), a co-brand (Bose), an endorser brand (GM), and two branded differentiators (Bose and Northstar). In the second, we see a master brand (HP), a subbrand (Color LaserJet 5500), and a branded differentiator (HP ImageREt technology). In the third, there is a master brand (Venus), a product brand (Venus Shaving System), an endorser (Gillette for Women), and two branded differentiators (aloe and DLC Blade Edge).

Brand Scope

Every brand has a scope dimension that reflects the extent to which the brand spans product categories, subcategories, and markets.

Although all portfolio brands need to manage scope, master brands have the most critical scope judgments to make. Some master brands (like A-1 Steak Sauce) are very focused, often because they are tied to a product category and expansion would dilute the brand. Others, like 3M, GE, and Toshiba, cover a wide variety of product and market settings. For example, the GE master brand appears in financial services, aircraft engines, appliances, and other product settings, and within appliances serves such diverse segments as consumers, designers, and builders. Others, like Audi, have a wide umbrella under a single product category.

One objective of a brand portfolio is to leverage brand assets by extending strong brands whose associations will travel across product categories. When feasible, this approach can lead to more visible, stronger brands with more efficient and effective brand-building programs. It follows a central business strategy dictum -- fully employ your strongest assets. However, there are limits as to how far any brand, especially a master brand, can go. Stretching the brand too far can cause it to lose differentiation and relevance in some contexts. Worse, some extensions may weaken or damage the brand because of the associations created.

The scope of the master brand can be extended by the use of subbrands and co-brands. The brand can range even further as an endorser, since an endorser brand is asked to do less and risks less. So firms have a variety of tools and options in terms of leveraging a master brand.

Brand portfolio management must consider not only the current scope of the brand but the scope it will have going forward. Brands are best leveraged as part of a long-term plan that sets forth the ultimate product scope, what sequence will take them there, and what associations are needed to be successful. Chapter 7 elaborates on this concept.

When the brand scope spans product categories and markets, the brand portfolio strategy needs to be involved in deciding the nature of those relationships. For example, what is the relationship between the Cadillac Escalade SUV and the Cadillac Seville sedan? Or the Cadillac Escalade sold to fleets versus that sold to consumers? Is the Cadillac brand the same in each context, or is it modified? Meanwhile, Gillette offers the Gillette Mach3Turbo for men and the Gillette Satin Care Crystal Essence shave gel from Gillette for Women. Both products are sold in Europe and elsewhere, as well as in the United States. Is the Gillette brand the same in all contexts?

Portfolio Roles

Portfolio roles reflect an internal, managerial perspective on the brand portfolio. When managing a brand portfolio as a whole, each brand is not a silo, nor is each brand manager an island. Treating brands as silos "owned" by individuals or organizational units can lead to a misallocation of resources and a failure to create and exploit synergy across brands. Portfolio roles in part serve the function of creating more optimal allocation of brand-building and brand management resources.

The portfolio roles include a strategic brand, a branded energizer, a silver bullet brand, a flanker brand, and a cash cow brand. These roles are not mutually exclusive. A brand could be simultaneously a strategic brand and a silver bullet brand, for example. Further, the same brand could at one point be a strategic brand and evolve into a cash cow brand.

The portfolio roles can differ by market context. A brand that is a strategic brand in one market, such as the United States, may not be one in the Far East. Similarly, a brand that is a silver bullet in the business market may not necessarily serve that role in the home market.

Strategic Brand

A strategic brand is one with strategic importance to the organization. It is a brand that needs to succeed and therefore should receive whatever resources are needed. The identification of strategic brands is a huge step toward ensuring that brand-building resources are allocated to the strategically most important business arenas.

There are, in general, three types of strategic brands:

• A current power brand (or megabrand) now generates significant sales and profits and is not a candidate for cash cow status. Perhaps it is already a large, dominant brand and is projected to maintain or grow its position. Microsoft Windows is in this category.
  
• A future power brand is projected to generate significant sales and profit in the future, even though it now is a small or emerging brand. Centrino would qualify for Intel.
  
• A linchpin brand will indirectly influence (as opposed to generate) significant sales and market position in the future, serving as the "linchpin" or leverage point of a major business area or of a future vision of the firm. Hilton Rewards is such a brand for Hilton Hotels, because it represents the future ability to control a substantial and critical segment in the hotel industry -- frequent travelers. If a competitor's rewards program for these travelers became dominant for any reason, Hilton would be at a strategic disadvantage. Yet the Hilton Rewards brand does not directly control significant sales and profits.
  

The classic problem is that if future power brands and linchpin brands have no current sales base, they get starved of resources. The ethic in a decentralized organization is that you earn your right to invest behind the brand -- the business unit that earns the money should be able to invest it. Further, such investment is not painful to the firm because the earnings can support it. When there is no organizational mechanism to take a total portfolio view, the default strategy is to let each decentralized unit set its own budget. As a result, not only are future power brands and linchpin brands inadequately funded, but also there is overinvestment behind large power brands. The identification of strategic brands provides a vehicle to allocate brand-building resources with more wisdom and strategic perspective.

The other side of the coin is when emerging areas and the linchpins of the future organizational vision get too much attention, and the existing power brands get neglected. Procter & Gamble struggled during the 1990s in part because of an excessive investment in new brands. A new CEO in early 2000 turned around the firm by redirecting the focus to P&G's top billion-dollar brands: Tide, Crest, Charmin, Downy, Pampers, Folgers, Bounty, Ariel, Pringle's, Always, Pantene, and Iams. The idea was simple -- instead of finding new products, just sell more Tide and other established brands. Growth in major brands represents big numbers and avoids the costs and risk inherent in establishing new products.

Discipline must be used in identifying and prioritizing strategic brands based on future prospects. Wishful thinking from optimistic brand managers may result in an excessive number of strategic brand nominees. The solution is solid analyses of the nominees. Will the market area really develop in a reasonable time -- or is it like the checkless society that took a half-century to get traction, or much of the dot.com world that was a mirage? Will there be profits for survivors -- or will it be like the wireless space, with too many competitors destroying the market? Will the brand be able to create a sustainable point of differentiation that will result in a profitable market position? Tough questions like these need to be asked.

The identification of strategic brands should be guided by the business strategy. For example, AAA Insurance is a strategic brand for the American Automobile Association because the future of the organization is to move beyond roadside services. Nike All Conditions Gear (ACG) is a strategic brand for Nike, as it provides the basis for a position in the outdoor-adventure arena. Slates is a strategic brand for Levi Strauss, as it is one of the foundations for a position in men's slacks for business or casual settings.

Branded Energizer

A branded energizer, as discussed in detail in Chapter 5, is any branded product, promotion, sponsorship, symbol, program, or other entity that by association significantly enhances and energizes a target brand. The association of the branded energizer with the target brand should be actively managed over an extended time period. Unlike a branded differentiator (which supports the offering by making it better or by augmenting it so that it does more), the branded energizer is an entity that can live beyond the product and its use. It can be owned and managed by the firm, as in the following examples:

• The Pillsbury Doughboy is a branded symbol that adds fun and energy to Pillsbury.
  
• Budweiser has a host of branded energizers (including the Clydesdales, the "Whassup!" commercials, and the Miss Budweiser racing team) that serve to add interest and energy to the Budweiser brand.
  
• The Chrysler PT Cruiser provides energy to the Chrysler brand.
  

A branded energizer also can be owned and managed by another firm, although the link to the target brand still needs to be actively managed. For example:

• The Mercedes Open golf tournament creates energy for Mercedes.
  
• The San Jose Sharks major league hockey team has changed the image of the city of San Jose, which had been stuck in the shadow of San Francisco.
  
• Serena Williams provides energy and a face to Puma.
  

Silver Bullet Brands

Branded energizers and differentiators can be sorted into high, medium, and low priorities in terms of their impact on the target brand and the cost involved. The most important are considered silver bullet brands -- the brands that can play a strategically significant role to positively change or support the image of another brand.

The specification of a silver bullet role creates some rather fundamental changes in how a brand should be funded and managed. When a brand or subbrand such as IBM's ThinkPad is identified as a silver bullet, the communication strategy and budget would logically no longer rest solely with the brand-level business manager. The parent brand group (IBM corporate communications, in this case) should also be involved, perhaps by augmenting the silver bullet's communication budget or featuring its brand in corporate communications.

Flanker Brands

If a brand is attacked by a competitor with a value offer or unique position, any response can risk its image and brand equity. The solution is to use a flanker or fighting brand to fight a competitor, thereby insulating the original brand from the fray. For example, when Pepsi launched a clear cola, Coke did not want to risk its namesake franchise to compete, and yet it also could not leave Pepsi to distort the cola marketplace. The solution was to come out with a flanker brand, Tab Clear, which positioned the new subcategory as being in the Tab world, perceived by most to have inferior taste. In fact, Tab (itself a diet cola that preceded Diet Coke) lives not only because of a small hard-core loyal customer group, but because it is convenient to use as a flanker brand.

A flanker brand gets its label from a war metaphor. When an army advances to meet another army head-on, it keeps a small portion of its forces facing outward to protect its flanks. A flanker brand analogously protects the brand from a competitor that is not competing head-on with attributes and benefits the brand has cultivated. The concept of a flanker brand is to undercut the competitor brand where it is positioned without forcing the main brand to change its focus.

A flanker brand is often used when a competitor comes in with a low price position, intending to undercut a price premium. If a brand were to respond with price cuts to protect its market share, the profitability of the brand (if not the category) would be threatened. A flanker brand -- in this case, a price brand -- would seek to neutralize the competitor's position, preventing the latter from occupying an attractive niche without any resistance.

Cash Cow Brands

Strategic, silver bullet, and flanker brands require investment and active management so that they can fulfill their strategic mission. The point of labeling a brand as belonging to one of these categories is to create additional corporate resources, as the involved brands may not be able to justify appropriate programs based on their current profit streams.

A cash cow brand, conversely, is a brand that does not require as much investment as other portfolio brands. The sales may be stagnant or slowly declining, but there is a hard-core loyal customer base that is unlikely to leave the brand. Campbell's Red & White label is such a brand -- it is the heart of the Campbell's equity, but the company's real vitality is elsewhere. Other cash cows could be large brands that simply need less support because they are so established or hold a strong market position because of patent protection or market power. Microsoft Office and Sony Walkman are both probably in this position. The role of a cash cow brand is to generate margin resources that can be invested in strategic, silver bullet, or flanker brands that will be the bases for the future growth and vitality of the brand portfolio.

Brand Portfolio Structure

The brands in the portfolio have a relationship with each other. What is the logic of that structure? Does it provide clarity to the customer, rather than complexity and confusion? Does the logic support synergy and leverage? Does it provide a sense of order, purpose, and direction to the organization? Or does it suggest ad hoc decision making, leading to strategic drift and an incoherent jumble of brands?

The brand portfolio structure can be best understood and analyzed if there is a way to present its logic clearly and concisely. Several approaches can be useful, including brand groupings, brand hierarchical trees, and brand network models. The key is to use or adapt the one that fits the best.

Brand Groupings

A brand grouping or configuration is a logical grouping of brands that have a meaningful characteristic in common. Polo Ralph Lauren, for example, has a brand portfolio structure that is in part driven by brands grouped with respect to four characteristics:

• Segment. Polo (with the polo-player symbol) is a men's wear brand, and Ralph Lauren a women's fashion brand.
  
• Design. Polo Sport for men and Ralph Lauren Polo Sport for women are more contemporary and youth oriented than Polo and Ralph Lauren.
  
• Quality. Chaps by Ralph Lauren is the moderately priced version of Polo. In the women's arena, Ralph and Lauren are more affordable than the Ralph Lauren brand, and the Ralph Lauren Collection is more exclusive.
  
• Product. Ralph Lauren Home Collection, Ralph Lauren White Linen, and Ralph Lauren Paint Collection all signal product types.
  

The groups provide logic to the brand portfolio and help guide its growth over time. Three groupings used by Polo Ralph Lauren -- segment, product, and quality -- often play a role in many portfolios in creating logical groupings, since they are dimensions that define the structure of many product markets. In the hotel industry, for example, Marriott is structured according to segment (Courtyard Inn for business travelers versus Fairfield Inn for the leisure traveler), product (Marriott Residence Inns for extended stays versus Marriott for single nights), and quality level (Marriott for luxury versus Fairfield Inn by Marriott for economy). Portfolio brands grouped along such basic product-market segmentations tend to be more easily understood by consumers.

Other useful categorical variables are benefits, application, technologies, and distribution channels. Prince tennis rackets include the benefit-defined Thunder (for power), and Precision (for shot placement) models. Nike has a set of brands for individual sports and activities, creating an application logic to their branding strategy. HP has the Jet series that includes LaserJet, InkJet, and ScanJet to denote technology. L'Oréal uses the Lancôme and Biotherm brands for department and specialty stores, while the L'Oréal and Maybelline brands are used for drug and discount stores, and another set (including Redken) is for beauty salons.

Brand Hierarchy Trees

The logic of the brand structure can sometimes be captured by a brand hierarchy or family tree, as illustrated in Figures 1-3 and 1-4. The tree structure looks like an organizational chart, with both horizontal and vertical dimensions. The horizontal dimension reflects the scope of the brand in terms of the subbrands or endorsed brands that reside under the brand umbrella. The vertical dimension captures the number of brands and subbrands that are needed for an individual product-market entry, reflecting a key brand portfolio dimension. The hierarchy tree for Colgate oral care, for example, shows that the Colgate name covers toothpaste, toothbrushes, dental floss, and other oral hygiene products.

A firm with multiple brands will require trees for each; in effect, a forest may be needed. Colgate has three toothpaste brands (Colgate, Ultra Brite, and Viadent) and dozens of other major brands, including Mennen, Softsoap, Palmolive, Irish Spring, and Skin Bracer. In addition, some trees may be too extensive to present on a single page and thus will need to be broken into major trunks. Since the Colgate oral care products will be difficult to display in one tree structure, it may be useful to consider the toothbrush trunk separately.

The tree presentation provides perspective to help evaluate the brand portfolio. First, are there too many or too few brands, given the market environment and the practical realities of supporting brands? Where might brands be consolidated? Where might a new brand add market impact? Second, is the brand system clear and logical, or confused and ad hoc? If logic and clarity are inadequate, what changes would be appropriate, cost-effective, and helpful?

A brand portfolio strategy objective is to achieve clarity of offerings, both to the customer and to those inside the organization. Having a logical hierarchy structure among subbrands helps generate that clarity. When the subbrands are each indicators of the same characteristic, the structure will appear logical. When one subbrand represents a technology, another a segment, and still another a product type, however, an organizing logic will be missing and the clarity may be compromised.

Network Model

Another approach to representing brand portfolio strategy is a network model, which shows graphically the portfolio brands that influence each master brand and the associated customer purchase decision. An example is shown in Figure 1-5. In the figure, some major brands that affect Nike are shown. The thickness of the link shows the impact of one brand on another; thus, the Niketown, Nike Air, Michael Jordan, LeBron James, and Tiger Woods are denoted as being important drivers of the Nike brand. One advantage of such an approach is that it includes portfolio brands that are not product brands. Another is that it portrays indirect relationships as well as direct ones.

The approach could be expanded. Hill and Lederer proposed a three-dimension "molecule" model that gives meaning to the size of the circles, the distance to the master brand and the color of the circles (white is positive, black is negative, and gray neutral). The problem with pushing this presentation approach, however, is that it quickly gets complex and hard to interpret.

A closely related alternative is the universe model, which visually represents the portfolio as a set of stars orbited by planets of various sizes, each themselves surrounded by moons. A very informative exercise is to create small disks for each brand and ask managers relevant to the brand (or customers) to arrange them using a universe model. Have them identify the various "suns" and their respective planets and moons, then ask them to explain the logic. Compare the resulting structures and logic. How are the major brands linked? How do the brands cluster? There are usually some interesting commonalities and differences across participants that shed light on the existing portfolio structure and its problems. There are also some brands that turn out to be unclear, in that some people locate them in different places in the universe and others cannot place them at all.

Portfolio Graphics

Portfolio graphics are the pattern of brand visual representations across brands and across brand contexts. Often the most visible and central brand graphic is the logo, which represents the brand in nearly all roles and contexts. The primary logo dimensions, color, layout, and typeface, however, can be varied to make a statement about the brand, its context, and its relationship to other brands. In addition to logos, portfolio graphics are also defined by such visual representations as packaging, symbols, product design, the layout of print advertisements, taglines, or even the look and feel of how the brand is presented. Any of these can send signals about relationships within the brand portfolio.

One role of portfolio graphics is to signal the relative driver role of sets of brands. The relative typeface size and positioning of two brands on a logo or signage will reflect their relative importance and driver roles. The Marriott endorsement of Courtyard, shown in Chapter 8, is visually larger and stronger than its endorsement of the more downscale Fairfield Inn. The fact that the ThinkPad brand name has a smaller typeface than IBM on laptops tells the customer that IBM is the primary driver of the product.

Another role of portfolio graphics is to signal the separation of two brands or contexts. In the case of John Deere lawn tractors, color and product design played a key role in separating a value product branded as "Scott from John Deere" from the classic, premium John Deere line. By departing from the familiar John Deere green, the Scott line provided a strong visual signal that the customer was not buying a premium John Deere product. For its home products lines, HP developed a different color set (purple and yellow), a unique package (people are portrayed, unlike in the white corporate-logo packaging used for business customers), and a different tagline ("Exploring the possibilities").

Still another role of portfolio graphics is to visually denote the brand portfolio structure. The use of color and a common logo or logo part can signal a grouping. The use of the Maggi color and package layout, for example, provides a very strong master brand impact over its many subbrands, indicating that they form a grouping with common brand associations.

The brand portfolio audit discussed in Chapter 3 includes illuminating exercises to help review the brand graphics for all contexts. One simple test starts by putting all the visual portrayals of the brand from all geographics and contexts on a large wall. Do they have the same look and feel? Is there visual synergy, whereby the brand graphics in one context support the graphics in another? Or is the brand presented in an inconsistent, confusing, cluttered manner? This visual test is a good complement to the logical test of the brand structure presentations. It is also useful to compare the brand graphics to those of competitors.

Brand Portfolio Objectives

The goals of the portfolio are qualitatively different from the goals of individual brand identities and positions. Creating an effective and powerful brand is still a prime goal, but others are also key to achieving brand leadership. The objectives of the brand portfolio are to foster synergy, leverage brand assets, create and maintain market relevance, build and support differentiated and energized brands, and achieve clarity.

Foster Portfolio Synergy

A well-conceived brand portfolio should result in several sources of synergies. In particular, the use of brands in different contexts should enhance the visibility of the brands, create and reinforce associations, and lead to cost efficiencies (in part by creating scale economies in communication programs). Conversely, the brand portfolio should avoid negative synergies. Differences between brand identities in different contexts and roles have the potential to create confusion and diffuse the brand image.

Portfolio synergy involves allocating resources over the portfolio to support the overall business strategy. Funding each brand merely according to its profit contribution starves high-potential brands with modest current sales, as well as those with important roles in supporting the portfolio. The identification of brands with portfolio roles to play is a key first step in making optimal allocation decisions. In particular, the brand driving a potentially large emerging business needs to be given extra resources, even though the justification based on short-term results may be difficult.

Leverage Brand Assets

Underleveraged brands are unused assets. Leveraging brands means creating strong brand platforms and then making them work harder, increasing their impact in their core market, and extending them into new product-markets as endorsers or master brands. Another dimension of leverage is a vertical extension -- moving a brand upscale, or into a value market. The brand portfolio management system should provide a structure and process to create brand extension opportunities, assess their risks, and adjust the portfolio accordingly. A portfolio perspective will help identify and assess risks of extending the brand, particularly when there is a vertical extension involved.

A brand portfolio strategy should also have its eye on the future and develop brand platforms that will support strategic advances into new product-markets. That might mean creating a master brand with significant future extension potential even if doing so may not be easy to justify with the business of today.

Create and Maintain Relevance

Most markets are affected by trends driven by customers, technology, channels of distribution, and the introduction of a flow of new offerings by competitors. The brand portfolio needs to be capable of adapting existing brands, perhaps by adding subbrands or endorsed brands, and even creating new brands when needed to support offerings that are needed to maintain relevance. A static brand portfolio is likely to invite the risk of losing relevance.

Develop and Enhance Strong Brands

It would be self-defeating not to have strong brands as a brand portfolio architecture goal. Creating strong brand offerings that resonate with customers, have a point of differentiation, and convey energy is the bottom line. A well-conceived brand portfolio strategy can contribute in several ways. It can make sure that each brand is assigned a role in which it can succeed, and it can focus resources to create more muscle behind the most promising brands. Branded differentiators can be developed and actively managed over time. Brand energizers can be employed to add energy and create or change associations.

Achieve Clarity of Product Offerings

A portfolio goal should be to reduce confusion and achieve clarity among product offerings, not only for customers but for employees and partners (such as retailers, advertising agencies, in-store display firms, and PR firms). Employees and partners should know the roles that each brand plays and be motivated to help the brands achieve their objectives. Customers should not be frustrated or annoyed by an overly complicated brand portfolio strategy.

Achieving these portfolio objectives becomes especially critical as markets become more complex. Most firms face multiple segments, new product opportunities, varied competitor types, powerful and disparate channels, reduced differentiation everywhere, and cluttered communication avenues. In addition, nearly all firms have multiple brands reaching a variety of markets and need to manage them as a team that will work together, helping each other rather than getting in each other's way -- a challenge made more difficult by the dynamic setting.

Questions for Discussion

1. Think through the football-team metaphor. How do the concepts apply to your brand portfolio strategy?

2. Pick two product-market contexts and identify the product-defining brand set for some of the major competitors. Why are they different? Is one superior?

3. For each of your major brands, identify the brand's scope as a master brand and as an endorser. Are the brands fully leveraged?

ar4. Identify examples in your brand portfolio of the five portfolio roles.

5. Put on one wall all of the ways that one of your brands is visually presented. Is there consistency?

6. Detail your current portfolio structure using one of the approaches discussed. Is it logical and clear, or a mess? If it is a mess, what alternatives would improve it?

Copyright © 2004 by David Aaker