Now Reading | The Brand in the Boardroom | OM
Brand architecture and naming are two critical areas of expertise for Fierce Strategy + Creative. I spent the weekend doing some reading on how other agencies approach this important subject and loved this particular excerpt from “The Brand in the Boardroom.” It resonated most with my personal philosophy on the significance of this process. Tying its success to brand valuation first is brilliant:
Decisions about brand architecture and brand naming can have major business consequences. This is certainly true at the level of individual brands. Eliminating a strong brand can drive away customers and lead to declining market share. If the new brand is unknown or, worse, comes with baggage, you can expect a significant drop in sales. For example, Coco Pops, a Kellogg’s cereal brand in the UK for 28 years, changed its name to ChocoKrispies to be consistent with other markets. Sales dropped 20%, and there was a national outcry. Almost a million people contacted Kellogg’s to complain and the company had no choice but to apologize and change the name back.
These factors are also true at the portfolio level. Having too many brands will fragment your marketing budget and reduce its effectiveness. Trademark registration and protection costs will rise disproportionately to the value they confer. If your brands overlap, customers will be confused and more likely to turn to competitors. On the other hand, if there is no obvious relationship between your brands, cross-selling and upselling will be difficult. Without a clear organizing principle that sets out the purpose and benefits of each brand, your offer will be less relevant to customers.
Brand architecture decisions are difficult to make, especially in the aftermath of an acquisition. The issues are emotional and political. The CEO of the acquired brand will almost always claim that changing the name will lead to loss of sales. Sometimes this is very true, sometimes not true at all, and, most often, partly true.
Brand valuation injects objectivity into the debate. The first step is to include valuation in an assessment of the strength and effectiveness of each brand in question. Alternative brand architecture scenarios can then be run through the brand valuation model.
This makes it possible to identify the optimal solution, the one that will generate most future revenues, profits, and value for the business, taking into account the different levels of investment that each option will require.
Brand architecture & portfolio strategy — [Case Study]
Since the late ’90s, under the leadership of Peter Brabeck, Nestlé has outperformed other major consumer products companies, including Unilever, Kraft, and P&G. A dramatic brand portfolio architecture reorganization has played a major part in this. Nestlé drastically trimmed the total number of brands in its portfolio from about 6,000 to 800. Moreover, they identified a core set of six to eight global strategic brands that were nominated to serve as range brands that could endorse other product brands. Nestlé wanted to create a structure that tapped the power of global brands while allowing a large amount of flexibility to respond to local market needs. The strategic brands today account for about 70% of sales. Both Unilever and P&G have since undertaken similar rationalizations.
