Question

Pick a company.

As completely as possible, characterize its brand portfolio and brand hierarchy.

How would you improve the company’s branding strategies?

Answer 1

Top marketers are increasingly concerned with brand architecture and brand portfolio strategy due to increasing: M&A activity creating vast, complex and overlapping portfolios; technology convergence blurring the lines between product types and changing the way customers think about and shop the category; and cost pressures making it increasingly difficult for companies to support large numbers of products and brands.

The two terms are often misunderstood and so clarification can often help demystify the meaning and importance of each concept. Brand portfolio strategy aims to maximize market coverage and minimize brand overlap through the effective creation, deployment, and management of multiple brands within a company. It serves as an inward-facing tool for the organization to ensure that the company’s brands are effectively targeting all key segments within the marketplace, working together to maximize sales rather than competing against one another for customers’ attention.

In contrast, brand architecture serves as an outward-facing navigation tool for customers. It helps minimize customer confusion by laying out the product structure in a way that makes it easy for customers to find what they are looking for and to understand what the company has to offer.

While many multi-brand companies such as Unilever or RBS have traditionally been more aware of the benefits that come from optimizing their brand portfolio and architecture strategies, we believe that these concepts and practices are just as important for single-branded companies like AT&T and IBM. Single-brand companies can apply the same theories and techniques to strategically develop and present a product and sub-brand portfolio in which offers can be bundled and presented in a way that is more relevant and clear for customers. This approach ultimately maximizes business results.

Case Study: IBM

In the mid 1990s, like most technology companies, IBM was organized internally around product types (i.e., personal computing, software, and servers divisions) resulting in them presenting their offer in a product-led rather than customer needs-driven way. Sales with the B2B sector were lagging, as many B2B customers wanted solutions rather than separate products and services. Additionally, IBM’s “stodgy, mainframe” associations prevented the brand from resonating with B2B customers who wanted a more flexible, dynamic, services-oriented provider.

In order to become a customer-centric company, IBM rearranged their offering to be more solutions-based. They arranged their portfolio into categories that made sense to the customer, anchored around solutions by industry or functional area. Additionally, they created the “e-business” brand, which helped to address customer needs, simplify purchase decisions and improve relevance for customers. This new sub-brand also helped reposition IBM as a leading, agile, cutting-edge IT service company.

As a result, IBM grew its services business significantly—from 29% to 41% in 5 years as part of global IBM revenues.

Key Takeaways

• Become more customer centric. Organize your portfolio in a customer-centric way—for instance, ensure that the portfolio strategy drives your R&D strategy rather than allowing R&D to determine how your company goes to market. Both AT&T and IBM saw strong business growth as a result of this shift in mentality.
• Create clarity of offerings through architecture. Make sure that your product/service offering is clear to both your customers and your employees. If they are not able to understand what you are offering, it is a signal that the current architecture is not working. As the example of AT&T shows, arranging the offer in more than one way may be a viable way forward.
• Simplify product navigation. Product portfolios that are targeted at multiple customer segments need multiple navigation possibilities—IBM has four ways of navigating through their product portfolio online to match the way different customers think about the category and purchase their products.
• Keep your portfolio up to date. Portfolio strategy should not be static. Remember that customer needs change over time, particularly in technology categories, and new entrants change the way customers think about the marketplace.

Companies with customer-centric brand architectures and portfolios, offering clear solutions and easy product navigation and selection, will ultimately be more successful than those companies with an inside-out approach.