And yet, despite the relative lack of corporate attention placed on them, portfolio and architecture issues are the main source of brand pain and profit trauma within most of the companies I have worked with. The reason most marketers underestimate their importance is simple – neither presents itself explicitly as a problem. You don’t wake up one morning and realise you need to trim your portfolio.
Instead, you uncover a problem with internet landing pages or business cards or cannibalisation or sales force conflict, and eventually, after much sleuthing, you realise the issue is either down to too many brands or that they are organised in an inappropriate manner.
In more severe cases, you never work out that the wrong portfolio or architecture is killing your marketing effectiveness. I remember one tragic chief marketing officer at a very a large car brand that continued to extol the fact that “we don’t have too many brands, we just don’t market them well enough” until he was eventually fired. To this day, he does not realise that the second part of his observation was directly related to the first.
There are strong clues to the importance of trimming the portfolio. The best case studies are Procter & Gamble and Unilever. When I was a marketing undergraduate, these two beasts had more than 2,000 brands between them. Today they make most of their profits from a combination of 30 brands. I worked recently for an Australian organisation that had 42 brands. The easiest way to point out the madness of their approach was to point out that despite enjoying less than 0.2 per cent of the profits of Unilever, they were operating more than double the number of brands.
There are equally clear examples of the importance of brand architecture. I always cite McKinsey – a pure branded house that runs everything under a single brand. If the world’s greatest strategy firm has opted for a single branded house approach, perhaps there is something to be said for less being more.
The big problem for many British firms is they think more brands will make them more successful but they have neither the architecture nor the ability to manage a multiplicity of brands well. When God created branding, he intended it to be executed using a brand house and a single brand derived from the name of the founder.
Remember that, because although there is much to be said for sub-branding and big brand portfolios, most companies should stick with the more basic, original approach. As McKinsey has long appreciated, the single branded house approach presents clear strategic advantages related to economies of brand, strategic focus, a single employer brand and a clear and efficient internal operation.
In contrast, have a look at Accor Group. It’s like a jungle inside its operational chart. It has 14 brands, many formed from sub-brand structures and all of which are endorsed by the mother brand. So its current ad campaign features Ibis, Ibis Styles and Ibis Budget – all of which are endorsed by the Accor master brand. I call the technical name for this approach a “dog’s dinner” and it is usually achieved when you employ a naive brand manager fresh out of a textbook or have engaged a brand consulting firm that is being paid by the yard.
Whatever the reason, Accor will struggle because it has too many brands and its architecture is a big old mess and it will eventually feel the pain. Its marketing will appear dull and ineffective because it is spread too thinly. Profitability will suffer as too many brands suckle from the corporate teat. And the organisation will suffer as internal confusion and contradiction erupts around the muddled design. Architecture might look relatively simple, but like a blockage in the windpipe, it will soon cause much more serious complications to arise.
The crucial challenge for organisations facing the explicit questions of how many brands and which structure is to start with a single brand in a branded house structure and then ask: do you need more?
The answer might, and I underline might, be yes. But you’ll be surprised how few brands you actually really need to get the job done. If you like complexity, organisational charts and inflated sales figures, the more brands the merrier. But if, like me, you prefer impactful marketing, strategic focus and disgustingly impressive profits (despite potentially lower revenues) – less is invariably more.