Portfolio strategy & architecture

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This was a webinar conducted for ISBM members to help them understand the key components that comprise a brand portfolio strategy, and how these components relate to and inform brand architecture decision-making. This requires developing a thoughtful brand portfolio strategy; one that defines the optimal number, scope and strategic role for each brand within the portfolio. The webinar leverages best practices, guiding principles, and real-world examples.

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Portfolio strategy & architecture

  1. 1. Proprietary and Confidential ISBM ISBM Principles & Best Practices in Brand Portfolio Strategy & Architecture March 25, 2013
  2. 2. Proprietary and Confidential ISBM Common questions Background & Context Brand Definition/Requirements: ! What is the difference between a brand, a trademark and product name, and what are the implications for how they should be managed? ! What kind of financial investment is required to launch a brand and grow it over time? Brand Portfolio Strategy: ! What is the optimal number of brands for my company? ! When does it make sense to create a new brand versus launch a new product under an existing brand? ! How “elastic” is my brand? What is its ability to stretch horizontally (across categories and markets), and vertically (across price ranges)? Brand Architecture: ! Should brands within my portfolio be linked to one another? ! If yes, what is the optimal way to link brands (e.g., sub-branding, co-branding, endorsement)? ! When does it make sense for my corporate brand to endorse my product brands?
  3. 3. Proprietary and Confidential ISBM Polling Question #1 Background & Context Which of the previous groups of questions are most pressing and/or pose the greatest challenges in your organization? A)  Brand Definition/Requirements B)  Brand Portfolio Strategy C)  Brand Architecture D)  All of the Above E)  None of the Above
  4. 4. Proprietary and Confidential ISBM Perspectives on Brand Brand Portfolio Strategy Brand Architecture Process & Approach
  5. 5. Proprietary and Confidential ISBM A brand is not just… Perspectives on Brand A Jingle A ProductA Spokesperson A SymbolAn Ad A Logo A Slogan A Name
  6. 6. Proprietary and Confidential ISBM A brand is… Perspectives on Brand ! A promise ! A company’s most strategic asset ! The reflection of a customer’s entire experience with a company ! Built and protected by entire organization, not just the marketing department
  7. 7. Proprietary and Confidential ISBM Powerful brands create significant economic value Perspectives on Brand Source: Interbrand, Brand Values 2011 •  1% increase in customer satisfaction leads to a 3% increase in market cap •  2% increase in customer loyalty leads to a 10% cost reduction •  5% increase in customer retention increases customer lifetime value by 25% •  5% increase in customer loyalty can result in up to a 95% increase in profitability •  50% of customers will pay 20–25% more for brands they are loyal to Sources: Brandkey, Bain and Mainspring, Marketing News
  8. 8. Proprietary and Confidential ISBM Perspectives on Brand Brand Portfolio Strategy Brand Architecture Process & Approach
  9. 9. Proprietary and Confidential ISBM Brand Portfolio Strategy vs. Brand Architecture Brand Portfolio Strategy Portfolio Strategy •  An articulation of how a company should define its portfolio to drive profitability •  Specifies the optimal number, scope, and role for every brand in the portfolio Architecture •  A depiction of the optimal relationship between any two brands within the portfolio •  Dictates both whether and how brands should be related to on another
  10. 10. Proprietary and Confidential ISBM Five indicators you may have a portfolio problem…or opportunity Brand Portfolio Strategy Revenue growth is slowing1 2 3 4 5 Brands’ funding/support misaligned with profitability/potential Products increasingly seen as commoditized Poor cross-sell or up-sell between brands M&A activity has resulted in a bloated portfolio
  11. 11. Proprietary and Confidential ISBM Portfolio organizing frameworks Brand Portfolio Strategy Customer Segment Need/ Benefit Price Tier Industry/ Category Channel/ Distribution Loyal Enthusiasts Speed Good Financial Services Direct Bargain Hunters Convenience Better Consumer Products Retail Knowledge Seekers Simplicity Best Medical & Healthcare Online Thoughtful Planners Performance Luxury Federal Government Wholesale One-stop Shoppers Productivity Value Industrial & Manufacturing Distributor Attitudinal & Behavioral Demographic/Firmographic (Most Powerful) (Most Common)
  12. 12. Proprietary and Confidential ISBM Brand portfolio spectrum Brand Portfolio Strategy Branded House House of Brands Customer SegmentsFew Many Investment in BrandingLow High Business Make-upHomogenous Heterogeneous Brand Mgmt. CapabilitySimplistic Sophisticated Corporate RelevanceHigh Low
  13. 13. Proprietary and Confidential ISBM Brand Portfolio Strategy guiding principles Brand Portfolio Strategy 1 Build & Leverage a Strong Corporate Brand 2 Define Strategic Objectives for Brands 5 Maximize the Extendibility of Brands 4 Build Relevance Across Value Tiers 3 Employ Simple & Clear Brand Architecture •  Strategic financial asset •  Primary point of reference •  Leveraged across portfolio •  Strategic roles •  Financial objectives •  Clear positioning •  Relatively flat hierarchy •  Easy navigation •  Consistent nomenclature •  Maximize customer reach •  Avoid premium dilution •  Avoid value cannibalization •  Across markets & regions •  Across categories & segments •  Across offer dimensions Overarching Goal: Fewer, stronger global brands
  14. 14. Proprietary and Confidential ISBM Components of a Brand Portfolio Strategy Brand Portfolio Strategy Strategic Role/Business Objectives Price/Value Relationship Brand Positioning/Identity Brand Relationship to Master Brand Positioning Brand Architecture/Linkage Brand Extendibility/Elasticity •  What specifically is the brand charged with doing for the Company? What objectives should be set for the brand from a volume and financial perspective? What role does/should the brand serve from a channel perspective? •  What are the optimal pricing structures and price points for the brand? What sort of price differential should exist between it and its most direct competitors? What sort of promotional support should the brand receive? •  How should the brand be positioned to the consumer, taking into consideration its strategic role within the portfolio, consumer wants/needs, and its current equities? What is (or should be) its unique point of difference? •  What is the brand’s contribution to the Master Brand proposition? To what extent does it help the Company deliver on its brand promises? Does the brand help the Company reinforce desirable equities? •  What is the optimal relationship between the brand and the Company brand? Should there be an explicit relationship between it and other brands within the brand portfolio? If yes, what is the best way to establish this linkage? •  What is the brand’s “bounds of extendibility?” From a category perspective, where can the brand credibly go today, or in the near or intermediate future? What should be considered off-limits for the brand? Brand 2 Brand 3 Brand 4 Brand 5 Brand 6Brand 1
  15. 15. Proprietary and Confidential ISBM Perspectives on Brand Brand Portfolio Strategy Brand Architecture Process & Approach
  16. 16. Proprietary and Confidential ISBM Five indicators you may have an architecture problem…or opportunity Brand Architecture Brands are cluttered and confusing to both customers and employees1 2 3 4 5 There is no internal system for managing how new brands are developed Not getting enough leverage from key brands such as the corporate brand Brand architecture is not aligned with business strategy No plan for integrating recently acquired brands into existing architecture
  17. 17. Proprietary and Confidential ISBM A common B2B brand architecture hierarchy Brand Architecture Business Unit Level Corporate Level Group/ Solution Level Product/ Offering Level The name of the company; often but not always the legal entity The name of a BU/subsidiary. May or may not be a derivative of corporate brand The name of a group of product lines that share a common benefit or solution The lowest level in the hierarchy – may not warrant “branding” (i.e., name only) (Johnson & Johnson) WorkCentre™ 6505 (Xerox)
  18. 18. Proprietary and Confidential ISBM Polling Question #3 Brand Architecture At which level of the hierarchy would you say the majority of brand equity resides within your company’s portfolio? A)  Corporate Level B)  Business Unit Level C)  Group/Solution Level D)  Product/Offering Level E)  None of the Above
  19. 19. Proprietary and Confidential ISBM Brand equity flow considerations Brand Architecture Direction Corporate Brand ? Division/Product Brands Deskjet Intensity Division/Product Brands Corporate Brand Polarity Corporate Brand Division/Product Brands (-/+)
  20. 20. Proprietary and Confidential ISBM Brand linkage options Brand Architecture Brand Type Definition Illustrative Examples Master A brand that serves as the primary frame of reference, often carrying the corporate name Co- An equity overtly linked to the master brand, receiving equal emphasis vis-à-vis the master (i.e. logo lock) Endorsed An equity that is endorsed by the master brand, deriving benefit from it by virtue of the association Descriptive An equity that is purely functional/descriptive in nature, with a logo lock to the master brand. Stand-alone A brand that stands independent from the master brand with no overt or implicit link to the master Un-branded A brand that stands independent from the master brand with no overt or implicit link to the master Strategic Outsourcing IBM Software Master Brand Co-brand Endorsed Brand Descriptive Brand Un-branded Equity Stand-alone Brand Netezza by IBM IBM SmarterRetail Emphasis on Master Brand Emphasis on ‘Other’ Brand
  21. 21. Proprietary and Confidential ISBM Brand Architecture decision tree Brand Architecture 1. Revenue Does the equity have direct revenue- generating responsibility? 2. Market Need Does the equity offer a differentiated POV in the marketplace? 3. Competitive Does the equity hold competitive precedence that establishes independence? 4. Equity Flow Is the equity charged with infusing unique equity into the Master Brand? 5. Risk Does association with the equity place potential risk on the Master Brand? Determination Stand-alone Brand Co-brand Brand Un-branded Equity YES START NO YES NO YES NO YES NO YES NO Endorsed Brand Descriptive Brand
  22. 22. Proprietary and Confidential ISBM Perspectives on Brand Brand Portfolio Strategy Brand Architecture Process & Approach
  23. 23. Proprietary and Confidential ISBM High-level approach Process & Approach Step 1: Current State Assessment Step 3: Portfolio Scenarios & Business Case Step 4: Portfolio Migration Road Map Step 2: Customer Insights & Brand Profiling Need State 2 Segment 2 Segment 6 Segment 3 Segment 1 Need State 5 Need State 3 Segment 4 Segment 5 Need State 1 Need State 4 Brand 11 Brand 2 Brand 10 Brand 6 Brand 7Brand 12 MGM Grand Brand 8 Brand 9 Brand 13 Brand 15) Brand 3 Brand 14) Trump (All)Brand 17) Brand 1 Brand 5) Brand 4 Non-Gaming Amenities (-) Gaming/ Comps (-) Non-Gaming Amenities (+) Gaming/ Comps (+) Need State 2 Segment 2 Segment 6 Segment 3 Segment 1 Need State 5 Need State 3 Segment 4 Segment 5 Need State 1 Need State 4 MGM Grand Trump (All) Non-Gaming Amenities (-) Gaming/ Comps (-) Non-Gaming Amenities (+) Gaming/ Comps (+) 5% 10% Location •  Most properties benefit from excellent locations… Physical Features •  Highly variable - décor tends to be generic… Ambiance •  Disconnected experience •  Lowest common denominator approach Observed Customer •  The typical customer is older (>45), working class… Offer •  Focuses primarily on gaming, particularly slots… Service/Staff •  Staff appears to be friendly and enthusiastic… Property anomalies within properties •  New Orleans décor has unique layout and design featuring branded slot courts •  Tahoe offers a more sophisticated •  The customer experience needs to better match brand positioning by prioritizing key touchpoints that will… •  St. Louis and Atlantic City may be best practice examples for property standards to handle variability in quality Atlantic City New Orleans Lake Tahoe St. Louis Joliet Las Vegas L V C P HP 1 23 4 5 6 7 8 9 10 11 12 13
  24. 24. Proprietary and Confidential ISBM Research techniques Process & Approach Segment 1 Segment 2 Segment 3 Segment 4 Brand C Brand E Brand F Brand B Brand D Brand A Portfolio A Portfolio B Brand G Portfolio C Discrete Choice ModelingPortfolio Concept Testing Determines the impact of different brand portfolio and architecture options on customer purchase intent Helps determine the extent to which various brand portfolio options help create clarity and preference
  25. 25. Proprietary and Confidential ISBM Business case assessment Process & Approach 0 13 28.8 34 34.7 2005 2006 2007 2008 2009 14.8 20.3 22.2 -37.8 -2.5 2005 2006 2007 2008 2009 0.0 24.8 57.5 71.4 72.3 2005 2006 2007 2008 2009 Revenue Impact $Millions EBITDA Impact $Millions Cash flow Impact $Millions Incremental IRR 18% What is it: Financial analysis of value creation opportunities which allows the team to test brand portfolio moves and inform final recommendations (feasibility), value creation estimates, and high-level implementation plan
  26. 26. Proprietary and Confidential ISBM Brand portfolio migration Process & Approach Strengthen, manage (BAM), & promote 2011 2012 2013 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4Q1 Q2 Q3 Q4 First Test Second Test (per test results) Strengthen & Manage (BAM) Promote & begin endorsing division brands as Brand J brand strength / equity is increased (per test results)No immediate brand action Rationalize brandEndorse w/ Brand J (per test results)No immediate brand action Rationalize brandEndorse w/ Brand J (per test results)No immediate brand action Rationalize BrandEndorse Brand C w/ Brand J Strengthen, manage (BAM) Brand C Br B Br A Br C Br D Br E Br F Current State 1 2 3 4 Future State
  27. 27. Proprietary and Confidential ISBM Contact Information Mitch Duckler Senior Partner (312) 451-2414 mduckler@fullsurgegroup.com

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