This document summarizes brand architecture and strategies for maximizing the value of a brand portfolio. It defines brand architecture as how companies organize, manage, and market their brands. Effective brand architecture aligns with business goals and market dynamics. The document outlines strategies like relationship mapping, pooling, trading, partnerships, consolidation, and acquisition to strengthen relationships between brands and identify opportunities to increase portfolio value from a customer perspective.

1. Brand architecture:
building brand portfolio
value
Michael Petromilli, Dan Morrison and Michael Million
Michael Petromilli is a Director and Dan Morrison and Michael Million are engagement managers with Prophet
(www.prophet.com), a consulting firm specializing in brand and business strategy, headquartered in San Francisco. The
authors, all located in the firm's Chicago office, can be reached by e-mail at: mpetromilli@prophet.com,
dmorrison@prophet.com and mmillion@prophet.com
O
ne of the consequences of operating largest losses in brand equity saw their ROI average a
opportunistically in the boom years of the 1990s negative 10 percent.
was the proliferation of products and brands. You Where much of an organization's brand-building efforts
developed a new Internet technology ± you launched it as a once focused on acquiring, launching, or aggressively
new product. You wanted to enter a new market ± you extending brands to expand the brand and business
acquired a company with successful products. You needed portfolio, today's focus is on trying get the most from existing
scale ± you found a merger partner whose products and brands through better organizing and managing brands and
brands more or less complemented your line. Today, many brand inter-relationships within the existing portfolio.
businesses are paying the price of this opportunism with a
collection of products, brands and businesses that ultimately
overlap so much that they are fighting each other for ``By looking at their offerings from this
customers and for corporate resources. Some are so
unrelated to the core business that no one knows what to do customer perspective, the company
with them.
It matters less what is in the corporate portfolio when the could start developing a strategic
economy is expanding rapidly and all new products and
emerging brands seem to offer prospects of contributing to brand architecture.''
the creation of shareholder value. Assessing the portfolio
takes on a decidedly new relevance, however, now that Changing market dynamics and new business strategies
customers have less to spend and are scrutinizing every have forced a critical re-evaluation of how the various pieces
purchase, and looking harder to find the best partner and of the brand portfolio fit together ± or how they do not. The
brand to fit their needs. Corporations must now ask, how way these pieces are structured, managed and perceived in
should we allocate existing financial and human resources terms of how they relate to each other and add value to the
among our brands to grow shareholder value? organization is known as brand architecture.
As a result, branding is increasingly discussed during
strategic planning session conversations among senior level
decision makers and in boardrooms throughout the
corporate world. That is because of the substantial impact a
well-managed brand can have on the bottom line. Total
Research Corporation's much-respected EquiTrend study The current issue and full text archive of this
shows that firms experiencing the largest gains in brand journal is available at
equity saw their ROI average 30 percent; those with the http://www.emeraldinsight.com/1087-8572.htm
Strategy & Leadership 30,5 2002, pp. 22-28, # MCB UP Limited, 1087-8572, DOI 10.1108/10878570210442524
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2. Defining brand architecture A customer builds a relationship with a brand through
Let us start by defining the term brand broadly as all the both direct and indirect experience, often within the context
expectations and associations evoked from experience with of exposure to another, related brand. Think of the woman
a company or its offerings. Logos, taglines, advertising who buys and reads Martha Stewart Living magazine,
jingles, spokespeople or packaging are merely the watches Martha Stewart's cable television show and then
representations of the brand. The actual brand is how inspects her house wares line at Kmart. This customer
customers think and feel about what the business, product eventually forms an impression of each product ± and the
or service does.
Martha Stewart brand overall.
Next we define brand architecture as the way in which
companies organize, manage and go to market with their
brands. Brand architecture is often the external ``face'' of ``Today's focus is on trying get the most
business strategy and must align with and support business
goals and objectives. And different business strategies may from existing brands through better
require different brand architectures. Two of the most
common types of brand architectures are called the organizing and managing brands and
``branded house'' and the ``house of brands.''
``Branded house'' architecture employs a single (master) brand inter-relationships within the
brand to span a series of offerings that may operate with
descriptive sub-brand names. The sub-brands often add existing portfolio.''
clarity and further definition to the offering. Market leaders
like Boeing and IBM that seek to dominate entire markets Direct and indirect links or synergies between brands
and categories through a single, highly relevant and highly experienced in a similar context can present the greatest
leveraged master brand typically employ the branded house
opportunity to increase the value of individual brands and of
structure.
the overall portfolio. To achieve this requires a brand
At the other end of the spectrum, ``house of brands''
architecture characterizes a group of stand-alone brands. architecture that is based on the evolving set of relationships
Here, each brand operates independently to maximize its between the portfolio's brands. Less important than a
market share and financial return. In such an approach, the brand's position in the portfolio is the way it can and does
belief is that the sum performance of the range of influence other brands in the portfolio.
independent brands will be greater than if they were A customer perspective is the foundation for determining
managed under the banner of a single master brand. strategy for this brand architecture. It requires the brand
Examples of house of brand companies include General management team to answer such questions as:
Motors, Viacom, and Procter & Gamble. & Which brands do customers perceive as being in our
Neither strategy is inherently better than the other, and portfolio?
some companies employ a mix of the two. Numerous & What relationships do customers see between brands in
competing companies ± like General Mills (house of brands) the portfolio?
and Kellogg's (branded house) in the cereal business ± use & Do customers transfer the value ± positive or negative ±
the different brand architecture strategies effectively and that they see in one brand to others in the portfolio? (see
successfully. The key to success is to have an overriding
Exhibit 1).
brand architecture strategy that is well defined and is
grounded in and informed by a clear understanding of Answers to these questions can only come from the
market dynamics, the brand strategies being employed by marketplace and from current and potential customers
key competitors, and alignment with internal business goals themselves. These answers can be gleaned from a variety of
and objectives. sources. Market trend data, information from the sales force,
advertising tracking studies, competitive analysis, and
Analyzing brand architecture customer satisfaction studies are all data sources that are
The first step in taking a more strategic approach to
generally compiled by a company on an ongoing basis and
maximizing brand architecture is to first take stock of your
that begin to answer many of these questions. In addition,
brand portfolio and its individual brands as seen from the
perspective of your customers. After all, it is the customer customer focus panels, sales force inquiries, Internet
who ultimately determines a brand's success. Keep in mind, surveys, and targeted qualitative research in the form of
however, that customers experience brands inter- customer interviews and focus groups should supplement
dependently rather than independently. Moreover, their views existing data sources and help to provide answers to these
of brands change over time. critical questions in both a time and cost-effective manner.
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3. Exhibit 1 Ð Alternative branding approaches
Relationship mapping identifies opportunities Relationship mapping is the type of decision framework that
to create value is particularly valuable to businesses faced with the challenge
After taking steps to understand the customer context, the of integrating new brands into the portfolio as a result of a
next step is to look at the brand portfolio as a whole (versus merger or acquisition. It addresses such questions as:
by individual brand or product categories) in order to identify & Does the acquired brand support the company's brand
potential opportunities to increase its overall value (see vision and strategy?
Exhibit 2). This is a process called ``brand relationship & Does the brand strengthen the company's presence in
mapping.'' It is designed to reveal, as the name suggests, existing markets or allow it to enter new markets?
& Does the brand, in relation to others in the portfolio, add
relationships between brands across the portfolio, where fits
and disconnects exist and could be better leveraged (or not) or enhance perceived value to customers?
to create more value to the organization. Most companies The strategic relationship mapping process described above
today use this process simply as a means to inventory, uncovers opportunities to enhance the value of an
classify, and group existing brands in a portfolio. organization's brand portfolio. But can and should those
Strategically oriented brand relationship mapping, however, opportunities be acted on? And how? To get at these
requires the brand management team to look more broadly decisions requires measuring these opportunities against
at the brand portfolio to define: three distinct, but inter-related criteria. These are:
& brand relevance and credibility to address various & The perceived or potential credibility of the brands in that
customer needs; space ± the perceptual license.
& perceived limitations that might inhibit brand and, thus, & Whether or not the organization currently has or can
business growth; develop competencies in that space ± the organizational
& brands that overlap and can be consolidated into others capabilities.
or divested; & Whether the size and current or potential growth of the
& gaps in the brand portfolio and the relative size of market is significant enough to merit exploitation and
potential opportunities. investment ± the market opportunity.
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4. Exhibit 2 Ð Brand relationship mapping
When opportunities fit against all three parameters, you have designed to enhance the value of the entire brand portfolio
what is known as the ``sweet spot.'' These are the types of are not rewarded.
opportunities that are most often identified and pursued Mining the value of opportunities where perceptual
through traditional brand architecture and management. The license, organizational capabilities, and marketing
best brand builders have capitalized on expanding, over opportunity do not neatly intersect may require innovative
time, their opportunities to develop brands that align with all branding techniques such as:
three criteria. This has allowed them to extend the relevance & ``Pooling'' and ``trading''. These are two branding
of existing brands while adding new capabilities that strategies that help strengthen relationships between
capitalize on emerging market needs and opportunities. For disparate brands in the portfolio. Brand pooling puts
example, Clorox bleach has effectively taken advantage of its multiple and distinct brands in a portfolio to work in a
operational capabilities and brand associations of safe, concerted way to address a spectrum of consumer
powerful cleaning to expand its franchise from the laundry needs. Each brand in the portfolio possesses unique
room to the bathroom and more recently to the kitchen, with equities and provides its own set of values to the
the introduction of Clorox disinfecting wipes and its new customer. But it is by ``pooling'' the benefits of the
kitchen floor scrubber. collective brands that the portfolio gains its strength:
achieving greater relevance to a broader market, and
More innovative techniques for integrated making the most of cross-selling and loyalty-building
strategies opportunities across the brands in the portfolio. Thus,
But what approach should be taken with opportunities that pooling creates top-line growth by generating greater
do not meet all three criteria? Some situations require revenue, and bottom-line growth by achieving greater
integrated corporate branding strategies. These may yield efficiencies across the portfolio of brands.
the greatest, long-term value for the brand, the brand The architecture of Procter & Gamble consumer
portfolio as a whole and for the business in terms of added product brands is an example. Procter & Gamble has
growth and all that comes with it. But they are often leveraged its manufacturing capabilities to develop a
overlooked in traditional brand management settings where host of laundry detergent brands ± Tide, Cheer and
the focus is on individual brands, and all too often initiatives Gain. Each targets a different segment of the market
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5. and offers different benefits, but Procter & Gamble has longer strategically aligned or desired, they provide the
``pooled'' them together by presenting the entire portfolio ability for rapid and low-exposure departure from a
to the trade in order to capture more shelf space and category.
ultimately, gain additional market share. & Strategic brand consolidation. Opportunities to
In the ``trading'' strategy, two or more brands are used consolidate the number of brands in a portfolio can
together in an effort to trade off each other's values. This emerge after a strategic evaluation of the structure and
approach helps fill gaps in a portfolio and can also relationships between all the brands (taking into account
create a combined offering with value that a single brand the customer's perspective). This analysis is weighed
could not match. against the contribution of these brands to the bottom
For example, Disney effectively utilizes trading to line and the company's overall strategic objectives (see
support its ``wholesome family entertainment'' brand the case example, ``How a leading software company
identity. The Disney master brand is used and creates applied brand architecture principles''.) Streamlining the
value in its sub-brands, whether they are Disney World, portfolio benefits the company and customers alike by
Disneyland, or the Disney Stores. Each sub-brand has creating an opportunity for more efficient allocation of
its own value, as fun theme parks or shopping organizational resources and by creating more
destinations. But they also benefit from the halo effect of compelling and beneficial brands.
the Disney master brand associations. Strategic brand consolidation is an area that can
Identifying opportunities for pooling and trading deliver immediate and significant benefits to the top and
between brands in the portfolio enables more cost- bottom line. Eliminating or consolidating brands that are
effective and higher-returning investments. More inherently weak or non-strategic within an existing
traditional brand-building approaches focus on portfolio should lead to direct cost reductions from
managing brands and brand investments individually savings in areas as diverse as marketing (reduced
and focus on returns being delivered from investments support costs), manufacturing (fewer runs), materials
in brand ``A'' and brand ``B'' individually. In contrast, (fewer parts, paint, etc.), and distribution (fewer SKUs).
pooling and trading enables investments to be better & Brand acquisition. Since most M&A activity is focused
directed across brands, resulting in collective returns on achieving bottom-line growth, few businesses think
that are greater than the sum of the individual returns. about applying brand relationship mapping principles to
& Branded partnerships. While this branding strategy is the potential acquisition. As a result, many acquisitions
less risky than creating or acquiring a new brand to fill a add to brand proliferation and market confusion instead
gap in the portfolio, it still requires careful selection and of achieving new brand synergies and brand value
planning. creation. However, if brand strategy is brought into the
Branded partnerships are designed to enable a brand discussion before the deal is finalized, a mergers and
to extend into markets where it would not be perceived acquisitions strategy can fill the gaps and expand the
to have a strong presence on its own. By partnering, one relevance and reach of brand portfolios.
brand's attributes and benefits complement and add to Household product manufacturer S.C. Johnson is
those offered by another. Trek and Volkswagen among the forward-thinking companies that have used
employed the strategy effectively by offering a Trek bike well-defined brand architectures and strategies to
and bike rack with the Jetta. The upshot for Jetta was a consistently guide the selection, integration and
15 percent jump in sales and a reinforcement of brand leverage of new brands and businesses. This is
perceptions such as ``fun'' and ``sporty.'' exemplified by its approach to purchasing the Ziploc
It is important to avoid the pitfalls of this strategy by brand. Prior to pursuing the Ziploc opportunity, Johnson
ensuring that the approach addresses the needs of the first defined how that brand would potentially
customer. Too many organizations have gotten caught complement its existing portfolio, where future brand
up in partnerships that were more focused on synergies and consolidations could lie, and what stream
capitalizing on a trend than on filling a real gap in their of related new products could help drive growth and
portfolios. redefine the brand's role within the overall brand
From a financial standpoint branded partnerships portfolio.
provide a highly cost-effective, non-capital intense, and & New brand creation. This should be the last option
relatively low-risk means to take existing brands into new considered when seeking to fill portfolio gaps and
markets or categories and thus generate new revenue maximize portfolio value. It should only be considered
and profit streams. If successful, branded partnerships when other strategies to use brand to create value are
can provide an effective base on which to formally not viable. Creating a whole new brand is both risky and
extend existing brands with a moderate and gradual expensive. Even the renowned brand-builder Procter &
level of investment. If they prove unsuccessful or are no Gamble has focused on other approaches, believing the
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6. expense of creating new brands would leave it with done in a strategic manner and planned and supported
inadequate resources to fund, support and grow its well, the payoff and returns can be significant.
current portfolio.
Sometimes, however, brand creation may be the best The need for new mindsets, guidelines
or most viable means to help an organization meet both Brand management must take a more strategic role that
business and brand portfolio objectives. In this case, the emphasizes the portfolio-wide approach and the business-
new brand's development and launch should combine wide implications of brand-oriented decisions. Category
traditional brand management approaches with managers in multi-brand companies must assume a more
principles of strategic brand architecture designed to active role in the brand strategy, taking on ownership of the
support the value of the whole portfolio. This requires brand portfolio and management responsibilities for the
evaluating the new brand's role within the context of the brand architecture. They should be intimately familiar with the
existing brand portfolio. Issues to consider are: how well equities of each brand, as well as the relationships between
it complements and is supported by other brands; them. Further, brand managers must be given financial
where opportunities lie to create synergies between incentives to ensure their perspectives and decisions
them; and how these will enhance the overall portfolio's support the optimization of the entire portfolio ± and, thus,
value (see Exhibit 3). the entire business' performance.
Coca Cola, for example, saw that it was missing out Such changes require guidelines that articulate the brand
on a significant opportunity in the bottled drinking water strategy and approach, how different types of brands will be
category. Evian water had gone from a niche product to leveraged, the role each plays in the portfolio, their equities,
a category creator and Coke was left on the sidelines and how they inter-relate with each other. At the same time, it
until it developed its Dasani brand of water. By is necessary to establish what exceptions will be allowed,
leveraging its distribution capabilities and trade helping to establish clear criteria while removing subjectivity
relationships, Coca Cola quickly created the second and emotion from the decision-making process.
largest bottled water brand. Despite the drawbacks of Finally, it is extremely difficult for managers focused on a
this approach, it is often the only viable option for single brand to gain the broader perspective of the brand
capitalizing on new value creation opportunities. As the portfolio. To this end, a brand council should be formed as a
case with Dasani and numerous other brand launches, if forum to team brand managers, category managers and
Exhibit 3 Ð Assessing brand choices
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7. other, non-marketing, senior-level decision-makers to & How many different products do the customers want
oversee the performance of the brand portfolio and to ensure offered to them?
that guidelines are being upheld. & Do customers understand the value proposition of 200
A dynamic, forward-thinking brand architecture may well products?
be one untapped source enabling organizations to get more & Does the current organization of the brands reflect the
from their existing brands and derive real value from those customers' perspective?
that they acquire. When managed strategically and used as
a structure to anticipate future business and brand needs, Raising these questions helped the company understand its
concerns, and issues, brand architecture can be the critical customers' needs ± and how the brand portfolio could be
link to business strategy and the means to optimize growth structured to provide the most value to them, and to the
opportunities and brand portfolio value. And achieving such company itself. The answers came from a careful analysis of
benefits may well be the means for competing and winning in research that segmented the company's markets vertically
the long term. by industry. It was based on such parameters as the size of
the target company and sophistication of its IT organization.
This type of outside-in market segmentation is particularly
``Strategic brand consolidation is an crucial to high-tech innovators where products often evolve
from technological breakthroughs rather than customer
area that can deliver immediate and needs.
A final analysis studied three key issues to ensure
significant benefits to the top and alignment of the brand architecture strategy with strategic
business imperatives:
bottom line.'' & Selling enterprise solutions (or bundled ``suites'' of
products) versus single-product ``point'' solutions.
& Managing partnerships and alliances.
Case: how a leading software company applied & Managing new products and services.
strategic brand architecture principles The result was a new brand architecture that allowed the
A leading software provider grappled with the challenges of company to sell both point products and suites of products.
managing a complex mix of more than 200 product and It also provided a structure against which brand extensions
service offerings that had resulted from aggressive growth. could be planned and acquired products could be more
The company recognized that it needed to better organize,
effectively integrated. Finally, it reflected the company's
prioritize and distinguish its brand portfolio because its sales
strategic imperatives.
force could not effectively sell such a large number of
To facilitate implementation of the brand architecture
branded products. Nor could its customers keep track of
strategy, the company adopted a set of tools. The three
them.
primary tools were:
For its first attempt at organizing its portfolio, the company
(1) Brand approval process.
adopted a product indexing approach that segmented its
(2) Brand architecture decision framework. This essentially
offerings into three categories based on functional product
organizes the brands in the portfolio in a logical fashion,
benefits. Each of these categories had a group brand name
answering such questions as:
that described its product mix adequately. But, the names & Should a product/suite solution/service be its own
bore little relation to customer buying decisions ± the critical
brand?
information required to shape strategic brand architecture. & What brands should be supported?
Research showed that the company's customers buy & Which should be divested or absorbed into
software by platform (mainframe or open systems) and by
another?
activity or usage. By looking at their offerings from this
(3) Naming guidelines. Particularly for complex brand
customer perspective, the company could start developing a
architectures, the guidelines help managers quickly and
strategic brand architecture.
efficiently select a brand name from a pre-approved list.
The first step was to assess the brand equity ± that is, the
monetary and perceived value ± of the portfolio's major To better meet its customers' needs, the company
brands and sub-brands. Key questions that needed reorganized into several strategic business units. It can now
answering: deliver the complete software solutions its customers want.
& What do the brands and sub-brands stand for? Furthermore, it has minimized overlap among brands and
& How are the products viewed from an external and achieved more efficient allocation of its resources by
internal perspective? consolidating and divesting brands within its portfolio.
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