Managing The Brand
19 February 2008 Sarah Essex
Sarah Essex highlights the benefits of optimising brand portfolios and architecture strategies for single-brand companies.
Top marketers are becoming increasingly concerned with brand architecture and brand portfolio strategy. Increasingly, they are faced with complex M&A activity with overlapping portfolios, technology convergence that blurs the lines between product types and cost pressures making it difficult for companies to support large numbers of products and brands.
BRAND PORTFOLIO AND BRAND ARCHITECTURE
The differences between brand portfolio and brand architecture are often misunderstood.
A brand portfolio aims to maximise market coverage and minimise brand overlap through the effective creation, deployment and management of multiple brands within a company. It serves as an inward-facing tool for the organisation to ensure that the company’s brands are effectively targeting all key segments within the marketplace, working together to maximise 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 minimise 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.
UTILISE TO MAXIMISE
Many multi-brand companies, such as Unilever or RBS, have traditionally been more aware of the benefits that come from optimising brand portfolios and architecture strategies. At Prophet, we believe that these concepts and practices are just as important for single-branded companies, such as 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 maximises business results.
In 2001, AT&T’s flagship Managed Services division was facing falling sales. It had over 12,000 offerings, the majority of which were sold to customers under the AT&T Managed Services brand. At this time, two major problem areas became apparent: both customers and the sales force were confused by AT&T’s vast and complex offering, and customers perceived AT&T as a ‘ports & pipes’ product company rather than a organisation capable of providing value-added services as the "Managed Services" name implied.
In order for AT&T to optimise its product architecture, it had to understand what target customers wanted from a telecommunication solutions provider. AT&T uncovered two distinct customer segments, each having fundamentally different needs and ways of thinking about telecoms solutions.
- ‘Product Buyers’ look for specific product sets and sophisticated components, requiring a wide variety of distinct products.
- ‘Solutions Buyers’ are less expert and seek holistic business solutions that are all-inclusive and off-the-shelf.
Armed with this insight, AT&T developed a dual-brand architecture model that presented the same products in two different ways, enabling each segment to find what they were looking for. This new, restructured architecture allowed Product Buyers to navigate offerings by product category and type, while Solutions Buyers could choose between different groupings of offers that met their overall needs.
As a result, customers could more easily access AT&T’s entire product portfolio based on their specific purchasing mentality and the sales force could more easily communicate what AT&T could offer. Additionally, AT&T renamed the division 'AT&T Enterprise' in order to reflect the broader focus on strategic business functions.
In the mid 1990s, IBM, like most technology companies, was organised internally around product types (personal computing, software and servers divisions) resulting in it presenting offers 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.
In order to become a customer-centric company, IBM rearranged its products to be more solutions-based. It arranged its portfolio into categories that made sense to the customer, anchored around solutions by industry or functional area.
Additionally, it 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 five years as part of global IBM revenues.
FOCUS AND CLARITY
As the above examples demonstrate, brand management requires simple but effective rules:
- Become more customer centric. 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 approach.
- 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 with AT&T, 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 its 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.