Q: Over these past 2 to 3 Fridays, you've been basically talking about brand addition to the brand portfolio. Isn't this the case with your preceding columns on brand extensions, new product insighting, and crafting reasons-to-believe liners for positioning a new or extended brand?
But in your brand management seminars, we've heard you tell us (in passing) that if we have brand addition policy, we ought to have as well brand "deletion" policy. This issue of brand deletion ends with just a mention in your seminars. In fact, seminars and each seminar time preoccupy themselves with brand addition questions and issues. So please tell us why we should bother about deleting brands in our brand portfolio and when and how we should go about doing this.
A: YOU ARE ABSOLUTELY RIGHT about the current excessive attention to the brand addition issue in brand portfolio seminars and fora. It's unfortunate that this comes at the expense of the equally important issue of brand deletion. So we'll do something about this imbalance by answering your 3 related questions: why bother about deleting brands, when and how.
Visiting websites of multinational consumer companies like Unilever, P&G, and Nestle regarding their brand portfolio management is as educational as attending seminars on the subject. For example, in 2000, Unilever acquired Bestfoods. At that time, Unilever's website reported that Bestfoods had 1,600 different brands worldwide. Unilever decided that the situation clearly called for efficiency and lending a focus. The website announced an internal campaign called "Path to Growth," which included a systematic process of deleting some 1,200 brands from among the 1,600. Here's how the site summarized the logic of the campaign: "The plan's cornerstone is the focus of product innovation and brand development on a portfolio of around 400 leading brands, which will lead to less fragmentation of resources and bigger hit innovations."
The last sentence gives the two major reasons why you should consider deleting brands. The first is the risk of "fragmentation of (marketing) resources;" the second, the reward of gaining "bigger hit innovations." We now consider the first reason for brand deletion.
"Excess brands"
Over time, as you continue expanding your brand portfolio via new product intros and brand acquisitions, you can be unlucky and find that your brand portfolio has become unwieldy. Several brands formerly participating in different market segments may find themselves just in one market segment because consumers have come to treat the two segments as just one. This happened to the fruit juice segment and the bottled water segment. Today, more and more consumers regard the 2 as just one, namely, the thirst quenching segment. And so we see the hybrid fruit-flavored water coming around. Or else, you may find 2 formerly differentiated brands in the same market segment becoming undifferentiated because evolving consumer experience found them more and more to be the same. This happened and is happening to each pharma company that carries several multi-vitamin supplement brands. The pharma company has insisted and is insisting that its 3 or 4 multi-vitamin brands are differentiated. But that's marketer-conceived differentiation as against consumer-perceived differentiation which in this case is absent, that is, consumers find all 3 or 4 as performing one and the same function.
In either of these 2 situations, the "excess" brands if they remain in the portfolio eat up money, time and effort that are more profitably allocated elsewhere. This is what is meant by the risk of fragmentation of resources.
Focus
The second major reason for adopting a brand deletion policy is the prospect of being blessed with "bigger hit innovations." The released budget, hours and days from the deleted unprofitable brands when now reallocated to the more profitable and more promising brands will aid those brands to grow faster and even better. That's a consequence of more and sharper focusing of money and time to those more promising brands.
The preceding analysis has also somehow hinted at the answers to your questions of when and how to delete. You delete a brand from your portfolio when it has lost its differentiator with its consumers and has become unprofitable. We'd like to repeat that we're talking about consumer-perceived differentiation and not marketer-conceived differentiation especially when these 2 diverge.
As to profitability, we refer to a protracted period of unprofitable performance. A brand may still be selling but over, say, the past 3-5 years, its revenue no longer has been enough to pay for even just its variable costs. It has therefore no contribution anymore to profit and to recovering fixed costs. It is effectively being subsidized by what the other profitable brands are earning. It's time to pull the plug on this brand.
Coke C2?
How to delete? There are at least 2 ways. The first is the simplest way and that's to pull out the brand from the market. There's a downside to this approach, namely, another company picking up the deleted brand's trademark. This happened to Coke C2. Coca-Cola decided to take out Coke C2 brand in the U.S. market so it can focus on Coke Zero. Later URC got the legal rights to the C2 trademark as the brand for its natural bottled tea drink, now a threatening challenger brand to Coke.
The second way of deleting is to divest. That's to sell the brand to another company. (Just like when San Miguel Corp sold the Magnolia ice cream brand to Nestle in 1996). This approach has the advantage of leveraging on the deleted brand's value, whatever remains of it. Its downside is similar to the first, i.e., it can give rise to a new competitor. So be careful.
And there you are: your answers and Marketing Rx's for your concerns about why, when and how to delete brands in your brand portfolio.
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