Brand Portfolios

All brands have boundaries — a brand can only be stretched so far. Multiple brands are often necessary to pursue multiple market segments. Any one brand is not viewed equally favorably by all the different market segments that the firm would like to target. Some other reasons for introducing multiple brands in a category include:

1. To increase shelf presence and retailer dependence in the store;
2. To attract consumers seeking variety who may otherwise have switched have switched to another brand;
3. To increase internal competition within the firm;
4. To yield economies of scale in advertising, sales, merchandising, and physical distribution.

The brand portfolio is the set of all brands and brand lines a particular firm offers for sale to buyers in a particular category. Different brands may be designed and marketed to appeal to different market segments.

A brand portfolio must be judged by its ability to maximize brand equity. The optimal brand portfolio is one where each brand maximizes equity in combination with all other brands in the portfolio. In designing the optimal brand portfolio, marketers generally need to trade off market coverage and these other considerations with costs and profitability. If profits can be increased by dropping brands a portfolio is too big; if profits can be increased by adding brands, a portfolio is not big enough. In general, the basic principle in designing a brand portfolio is to maximize market coverage, so that no potential customers are being ignored, but to minimize brand overlap so brands are not competing to gain customer approval. Each brand should be clearly differentiated and appealing to a sizable enough marketing segment to justify its marketing and production costs.

Brand portfolios need to be carefully monitored over time to identify weak brands and kill unprofitable ones.

Cases of Brands:
In the late 1990s, consumer durables manufacturer Electrolux offered a range of professional food service equipment in Western Europe. By 1996, the company had 15 brands in the professional food service equipment market, but only one, Zanussi, was sold in more than one country in Europe. By moving from segmentation scheme based on price — low, medium, and high to one based on consumer needs from basic to prestige gourmet Electrolux was able to go from 15 local brands to having four pan-European brands. The resulting economies of scale and scope helped turn Electrolux’s fortunes around, so even though it deleted many brands, its professional kitchenware division’s sales never dwindled and it was finally able to turn a profit in 2001.

Brand lines with poorly differentiated brands are likely to be characterized by much cannibalization and require pruning. Kellogg’s Eggo waffles come in 16 flavors. Investors can choose among 8,000 mutual funds. Students can choose among hundreds of business schools. For the seller, this may spell hyper-competition. For the buyer, this may spell too much choice.

Besides these considerations, there are a number of specific roles brands can play as part of a brand portfolio.