Nirmalya Kumar’s article “Kill a Brand, Keep a Customer” provides a welcome strategy for companies that are in need for some in house brand cleansing. In days where companies saturate many markets with their products with many of them competing for shelf space as well as market share, we have reached a point where too many choices are available not only for the consumer but also for the company. The surprising aspect is that many of these brands are not profitable in any sense, so it would be best for these companies to heed to Kumar’s advice and proceed with brand deletion. By engaging in a brand rationalization program, companies will find themselves with more profits, more time to dedicate to brands that are integral to company success, and more resources (such as human capital) to allocate towards the remaining brands.
Brand rationalization is a not a lengthy process, but it can become bogged down by numerous complaints and arguments simply because of the extensive impact it will have within an organization. Initially, the CEO of the company must gather all the brand executives/managers and perform a brand audit of all the brands offered by the organization. The audit includes a number of facets such as the amount of profit a brand garners, the number of competitors the brand has in that category (including within the company), and the brand’s position in that category (luxury, basic, value). After an in-depth analysis (with managers of all levels the company) that includes the tedious task of allocating costs, the executives are often shocked as to why the company has so many brands that are “cash users” as opposed to “cash generators.”
This leads into the pruning process, or a trimming of the company’s offerings. There are two methods to go about this process:
1. The Portfolio Approach: The logistics behind this process involve formulating a list of criteria that will hold as guidelines as to whether a brand will continue to endure or whether it will receive the ax. Guidelines to retain may be that the brand must be a top three (most popular) brand within a market, or it will be removed. Many firms adjust the selection criteria based on their position within the global marketplace and further within categories. As a result, only brands that meet the parameters set by the company continue to exist while the others are put up for deletion.
2. The Segment Approach-As opposed to the portfolio approach which looks at the company as a whole, the segment approach breaks down the products into the different types of customer segments they cater towards. Divisions disregard brand position (such as price offered, features) and hone in on the consumers and their perception of the brand.
Usually a company engages in a bit of portfolio pruning (which tends to remove a lot of brands) and then some segmenting pruning (which has a tendency to eliminate fringe brands) to arrive at their final brand mix. There are a number of pitfalls that a company can come across, most dealing with disgruntled managers and workers who will undoubtedly be afraid that the removal of a brand from the company will result in a loss of their job. However, in order to be a more profitable and efficient organization these tough cuts must continue to ensure top performance from the remaining brands.
After a company has concluded which brands to eliminate, they must decide the manner in which to go about this elimination. Kumar states four methods in his delineation on the topic:
- Merge-Usually this is the most popular method and it involves amalgamating the resources of the deleted brand with the brand leader within the company. Merging includes a blending of product features. The merging process can be a long drawn out process(of three plus years duration) or a relatively quick one if the market is not wide reaching.
- Selling brands-If a brand is not in harmony with company goals and it has the ability to be sold for a healthy amount, many companies will sell the brand to other organizations.
- Milking Brands-For traditional or sentimental brands, companies cease all marketing promotions for that brand and limit the areas in which the brand is sold. Eventually the brand is distributed in a very narrow scope until it’s following is virtually nil. Then the brand is eliminated.
- Elimination-Most brands can be eliminated with little or no backlash. This is done through a strategy of offering coupons/discounts/sales for the brand which the company is keeping which removes attention from the eliminated brand.
