Nestle’s bulk profit came from 2.5% of its brand portfolio where it owned more than 8000 brands. Diageo’s 8 brands out of 35 gave 70% profits. Unilever’s 90% of profit were from 1/4th of its brands.
Ever wonder why Companies have an endless array of brands even when most of them don’t even make as much money? On the contrary, many out of them could be substitutes, even cannibalistic, or old.
No matter how established the Company is, Brand killing has always remained an underused tool in the marketing kitty. It is relatively easy to boost profit by deleting loss-making brands; but when it comes to taking a methodical call on brand deletion, it’s often understood as something based only on market feedback, brand-recall, or even preference.
So, how do you decide that it’s time to pull the plug?
Ask yourself some of these questions before you decide to prune your portfolio,
Does the brand continue to serve the purpose- profit/ reputation/ loyalty that it was designed for?
Is the brand able to deliver a competitive advantage?
Are your brand retailers stocking a subset of your portfolio?
And most importantly, while the brand is profitable, is it still relevant?
Brand Relevance is the much needed matrix capable of reversing the whole equation. While your brand can still be functional and profitable, yet it may need rationalization and therefore a re-evaluation. Kodak is still remembered as a brand that changed the definition of photography, yet saw its fate when it was at its peak. Nokia was a market leader before it got disrupted.
Despite performance and profitability, if the brand is not able to keep pace with changing customer needs or emerging market trends, it’s a reason enough to evaluate the same for its redundancy.
No wonder Companies today are waking up to these facts and are therefore faced with unprecedented complexities even if they were to euthanize certain brands. There is a temptation to keep the brand alive and reap on its heritage. Pull offered by existing portfolio and its pet brands, makes it an emotionally charged decision, and a half-cooked call can even antagonize all stakeholders otherwise.
For example when P&G had to rightly position its two cannibalistic, yet successful brands- Ivory and Camay, over time Camay struggled for survival within, however the name still resonates in its customers’ mind. Wal-Mart’s “White Cloud” returned as rival to haunt its very originator, and challenged “Charmin”- the brand against which it was dropped!
However, over time Companies have attempted to put some method to this madness.
We all know of GE which retains only those brands that are either number one or two in market share or/ and profit. Unilever adopted a portfolio approach for rationalization and choose potential- current or future- and scalability as top two matrix. As a result 1200 brands from its portfolio were erased!
Electrolux succeeded in its turnaround only when it gave up the typical, accepted norm of high-medium-low market segmentation. It instead started to target based on its pruned brand portfolio. It had deleted 12 of its brands that were hot-selling in local markets and replaced them with four pan-European brands, a move considered fatal by some. Result, the division reported profit of 37 million dollars in 2001 from a position where it was struggling with operating losses.
Establishing a brand rationalization program should not be, therefore, a priority solely left for marketers and for customer feedback survey. Done right, it has the potential that will result in a portfolio poised for growth.
By constantly cutting the tail, and more importantly, by deciding with precision as to what would actually constitute that tail, Companies can not only ensures a healthier, less-complex offering, but would also free their resources and market share which can be used to maximize profits.