The temptation for most businesses and indeed most brand managers is to look for growth right across their portfolios. But that’s far harder and far less effective than it sounds. The secret, it seems, is focus.
The paths to extracting greater value and growth for brands are well-trodden. Perhaps too well-trodden – because many are now unquestioned assumptions. Brands looking to grow are expected to advertise heavily, grind out efficiencies, invest in areas that show promise and push their portfolio out to demographic segments in the hope of gaining their attention and their loyalty.
The problem, according to Strategy+Business, is that flat economies have stalled market growth, cost cutting has become more difficult, and the cash to drive meaningful innovation has become harder to source as investors look for returns within timeframes that are increasingly short. So fewer and fewer brands can afford to blindly speculate across their entire portfolios in the hope that some areas will prosper and that those wins will make up for losses elsewhere. Yet they persist.
“In many markets, one-third of customers or products typically generate more than 100 percent of the company’s value, while one-third create no value and the remaining third actually consume value,” the authors note. Lovers of segmentation may see this as a repudiation of Dr Sharp’s views on brand growth. But, before you rejoice, look a little closer. The secret is not segmentation, per se. It’s profitable segmentation: resourcing those areas of the portfolio that deliver the greatest returns with services and experiences that help those customers feel recognized and rewarded.
The observations are timely because they remind marketers that brand lift is never uniform, and for that reason, brand managers and owners should be careful in how they identify and support the brands that are in their care. Instead of treating all their brands as precious, brands should work from heat maps that reveal where and why value is concentrated in terms of return on internal resourcing, comparative market profitability and likely future value based on dependable market trends.
In the ebb and flow of today’s markets, some brands will thrive, some will remain steady, some will stall and some will decline. By investing in those brands that are displaying the strongest growth and rethinking those that are not hitting their benchmarks, brand owners can ensure that every brand is working to its full potential. That’s important because it turns brand portfolios into meritocracies, driven by a 6 point framework of actions:
1. Resource generously – winning brands should be rewarded with priority. They should receive a greater share of the resources to achieve targets that are set higher than other brands in the portfolio.
2. Maintain strongly – steady evergreens should be tasked with keeping the middle-earning part of the portfolio accelerating over at a good period. Done right, these brands underpin returns and provide much-needed reliability.
3. Re-energize decisively – brands that are flagging should be restructured so that they are able to better achieve their returns. That may mean actively looking for new efficiencies, repositioning of the brand to appeal to a part of the market with higher yields, or the injection of new value to boost market interest.
4. Simplify aggressively – too many brands can cause a company to lose focus. I often find that businesses are reluctant to rationalize their portfolios because they don’t want to send a signal to the market that they are cutting back. The key to distilling your portfolio is to do so confidently and with intent.
5. Remove objectively – these are the hardest decisions, but often the most important. Taking the brands that are holding you back out of your portfolio via divesting, parking or dis-establishing not only lifts your returns, it also enables you to redirect those resources to your top performers.
6. Introduce regularly – just as your sales teams must look to bring in new leads, so you should be looking to extend or expand your current brands where that makes sense, and to introduce new brands to test market viability. Those extensions, expansions or new brands should then be evaluated via the five criteria above to determine next actions.
Interesting to see Revlon choosing to prioritize their brands over their distribution as their key growth driver. Reach is vital – no-one’s denying that – but at a time when consumers are less picky about where they shop, ownership of targeted relationships through brands matters more than ever. You need to be as close to your customers as you can. But you also must represent as much of what your customers want as possible. Valuable is much more profitable than available. More brands really need to get that.
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