A brand portfolio is simply a collection of multiple brands that co-exist under a single organization. Portfolio structures offer clarity on how those brands are organized and deployed to cover various targeted products, markets and audiences without overlap. The brands within the portfolio draw from and reinforce the overarching strategy of the parent company.
The need for an established portfolio structure is critical to avoid confusion, both internal and external. It becomes mandatory as organizations grow and compete in multiple product categories, segments, channels, and geographies.
There are several ways to portray a portfolio structure and selection depends on what fits the current business scenario best.
Here, brands are logically grouped under a common characteristic. They may be categorized by segment, product type, quality, benefit, technology, distribution channel, activity, etc. For instance, we could classify Marriott hotels by quality – Marriott for luxury and Fairfield Inn for economy stays. HP printer offerings are categorized by technology – DeskJet, OfficeJet and LaserJet series. Classification by segment, product-type and quality feature in many portfolios as they tend to prevail in most markets.
Hierarchy trees are two-dimensional diagrams and showcase the portfolio horizontally and vertically. Horizontally, it reflects the scope of business and vertically, it illustrates the number of master brands, sub-brands or endorsed brands needed to support the product-market strategy. Hierarchy trees categorize business using relevant grouping parameters. Hierarchy trees are the most common form of representing a portfolio and are the most simple to interpret by all stakeholders. For instance, consider Ford’s partial brand portfolio shown below for illustration.
Networks are graphical representations of portfolio brands indicating links and influences among them. Aaker, in his book, “Brand Portfolio Strategy“, used Nike as an example of a networked portfolio architecture, a partial representation of which is listed below. The trouble with networks is that they can easily become complicated and difficult to comprehend as the portfolio grows and gets modified with time. They also make it difficult for external stakeholders to make sense of easily.
Goals of Portfolio Architecture
Reduce confusion and achieve clarity for all stakeholders. Internal stakeholders must understand the over-arching business strategy and help individual brands attain desired objectives. Customers should find it easy to navigate the organization’s offerings most relevant to their needs.
By the organization of the brands and their roles within the portfolio, it becomes easier to make decisions when it comes to new product-market extensions.
A clear structure helps determine where gaps and opportunities exist. It also helps sort out and correct overlaps where applicable.
Resources can be allocated strategically among the various brands based on future potential, business climate, competition, technological change, and other possible factors.
Given the changes in the external environment, it becomes necessary to add, delete or modify some brands in order to maintain relevancy. It may warrant brand alliances or co-branding programs. The portfolio structure must accommodate for such changes.
Portfolio structures must be logical and non-complex. Each brand should operate within its scope of activity and work in sync with the parent company’s strategic direction.
Decisions pertaining to the addition, modification or deletion of any master brand, sub-brand or endorsed brand, must involve those with a complete perspective of the portfolio. There is nothing more destructive than decentralized decision making that results in a cluttered portfolio where confusion reigns.