Killing Brands Successfully

CoolAvenues Newswire | March 11,2014 10:56 am IST

What is a Brand?
A brand is a combination of several elements:

A name.
A symbol (logo).

The company
A set of attributes and associations, expectations / perceptions (image)
A statement about the customer
The actual product/service
A promise/commitment of some benefit(s)

Branding: A Way of Doing Business
Branding is one of the most scintillating topics in business today. Even the laggards develop an inclination towards the field when the topic arises. It has become the business buzzword. In today's crowded marketplace: the brand defines the unique point of differentiation for the products and services and is, perhaps, the only real opportunity to stand out. The paramount role that brands and branding now play has been accompanied by major shifts in the field of marketing. Brands are seen to be much more than names or logos. The strongest brands tend to be the ones with the most consistent and clearest messages. Brand identities create anticipation in the minds of both consumers who use the brand and the employees who deliver it.

Any brand is clearly more than just its name. Brands are the values, beliefs, and service experiences that underpin them. When put this way, it is easy to see how customer service is a brand in action. Today branding is viewed as interactive communication. It is a dynamic exchange between humans within a defined space that captures, and reflects, the attitudes of the brand. It reinforces, even magnifies, the brand in the hearts and minds of the consumer.

Why Companies go for Brand Killing?
The surprising truth is that most brands don't make money for companies. A research shows that, year after year, businesses earn almost all their profits from a small number of brands-smaller than even the 80/20 rule of thumb suggests. In reality, many corporations generate 80 percent to 90 percent of their profits from fewer than 20 percent of the brands they sell, while they lose money or barely break even on many of the other brands in their portfolios. Take the cases of four transnational corporations: -

Diageo: The world's largest spirits company sold 35 brands of liquor in some 170 countries in 1999. Just eight of those brands-Baileys liqueur, Captain Morgan rum, Cuervo tequila, Smirnoff vodka, Tanqueray gin, Guinness stout, and J&B and Johnnie Walker whiskeys-provided the company with more than 50 percent of its sales and 70 percent of its profits.

Nestlé: It marketed more than 8,000 brands in 190 countries in 1996. Around 55 of them were global brands, 140-odd were regional brands, and the remaining 7,800 or so were local brands. The bulk of the company's profits came from around 200 brands, or 2.5 percent of the portfolio.

Procter & Gamble: It had a portfolio of over 250 brands that it sold in more than 160 countries. Yet the company's ten biggest brands - which include Pampers diapers, Tide detergent, and Bounty paper products - accounted for 50 percent of the company's sales, more than 50 percent of its profits, and 66 percent of its sales growth between 1992 and 2002.

Unilever: It had 1,600 brands in its portfolio in 1999, when it did business in some 150 countries. More than 90 percent of its profits came from 400 brands. Most of the other 1,200 brands made losses or, at best, marginal profits.

The implications are inescapable. Companies can boost profits by deleting loss-making brands. Many corporations don't realize that when they slot several brands into the same category, they incur hidden costs because multi brand strategies suffer from diseconomies of scale. Naturally, those hidden costs decline when companies reduce the number of brands they sell. In fact, some businesses have improved performance by deleting not just loss-making brands but also declining, weak, and marginally profitable brands. By using the resources they've freed to make their remaining brands better and more attractive to customers. Thus, killing brands may sometimes be the best way for companies to serve both customers and shareholders.

Signs of Brand Killing
There are some telltale signs left behind by the brand killing managers. This would help identify whether a company is on its way to destroying a brand. Under no circumstances should one conclude that if one clue is present, "brandicide" is happening there.

Sign 1: Constant cuts in ad budgets year after year.
Sign 2: More sales promotions than advertisements
Sign 3: More emphasis on "push" than on "pull".
Sign 4: Little or no emphasis on consumer research and contact.
Sign 5: Non-marketing people in charge of marketing.

Decisions to be Made Prior to Brand Killing
After companies have identified all the brands they plan to delete, executives need to reevaluate each of them before placing it on one of four internal lists: merge, sell, milk, or kill (in order from the most complex to the simplest to execute.

Merging Brands: Companies often prefer to merge brands rather than drop them, especially when the brands targeted for elimination have more than a few customers or occupy niches that might grow in the future.

When two brands are equally strong, however, smart companies adopt more gradual migration strategies. They use both brands, either as a dual brand or by making one a sub brand of the other for a while before dropping the weaker of the two.

Selling Brands: Despite the instinctive organizational resistance, wise companies sell brands that are profitable when they don't fit in with corporate strategy. For instance, in 2001, P&G sold the Spic and Span and the Cinch cleaner brands, as well as the Biz bleach and Clearasil skincare brands, and recently put the Punica and Sunny Delight juice brands on the block. They were all-profitable but were in categories that the giant did not want to focus on. Smart companies create legal safeguards to ensure that the brands they sell do not return as rivals.


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