Towards more effective branding

Marketers of branded goods, despite spending heavily on advertising and promotion are
finding it increasingly difficult to deliver results. There are three main reasons for this
phenomenon – poor segmentation, lack of understanding of customer needs and unwieldy
brand portfolios.

The key to effective branding is to combine clever market segmentation with a deeper
understanding of customer needs, and back it up with a portfolio approach towards brand
management. Segmentation must challenge conventional wisdom. This is possible only
when marketers go below the surface to understand what exactly the customers are
looking for. A portfolio approach means defining categories carefully and looking at
brands in each category in a holistic rather than piecemeal manner.

Marketers have traditionally segmented their customer base on the basis of size, income,
age, ethnicity, consumption pattern, loyalty; lifestyles, needs, attitudes etc. But such
traditional segmentation efforts are proving to be ineffective because of imitation by
competitors. The key to identifying the right segments often lies in identifying and
anticipating trends. Some such as demographic trends, as the great management guru
Peter Drucker mentioned time and again, are easy to predict while others such as
lifestyles are more complicated.

Once marketers target the most promising future segments, they must be clear about what
the brand must deliver to customers. Brand proliferation and rapid imitation have reduced
the effectiveness of advertising. Even celebrity sponsors are proving ineffective in many
cases. Instead of introducing superficial differences, looking at the core of the brand may
yield better results. A thorough understanding of customer needs, both functional and
emotional must be the starting point of brand building.

All brand managers stress differentiation but many fail to achieve it in practice. Certain
features may differentiate a brand from its competitors but don't matter to customers. On
the other hand, some attributes are important even though customers take them for
granted. In the hotel industry, providing clean, fresh, comfortable facilities is a benefit that
does not distinguish a player from other competitors but is taken for granted by customers.
A budget hotel cannot afford to offer dirty rooms or uncomfortable beds. Similarly, a luxury
business hotel must offer fax and Internet facilities. The most successful brands
emphasize features that are important to consumers and unique and distinctive when
compared to those of competitors.

Traditionally, marketers have attempted to identify what is valuable to customers by posing

direct questions to them about a brand's functional benefits and analyzing the results
through techniques such as conjoint analysis. But this approach runs the risk of
overlooking a brand's subtler, intangible dimensions. Radical innovations are more likely
when marketers probe various tangible and intangible brand attributes and uncover the
core need underlying customer desires, which are difficult to articulate and can only be
sensed or felt. Meeting such needs is the essence of effective brand building.

For effective branding, a portfolio approach is necessary. Managing brands as a portfolio

not only avoids consumer confusion but also prevents investments in overlapping product-
development and marketing efforts. And by eliminating weaker or ill-fitting brands, it
ensures that resources are not spread thin. A portfolio approach to brand management not
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only reduces the complexity of the marketing effort but also generates better returns for
the marketing investment. This has been precisely the goal of Hindustan Lever’s power
branding strategy in the past five years.

But most companies find it difficult to practice portfolio management as it calls for a new
mindset. In an era of fragmenting customer needs, managers find it easier to expand
rather than prune their brand offerings. Managers’ compensation is often linked to the
growth of their business. Withdrawing brands is not easy when the remaining portfolio
must compensate for a discontinued brand's volume. Indeed, Hindustan Lever has been
under fire in the past five years, for failing to meet the growth expectations of
shareholders.

To eliminate unnecessary brand proliferation, marketers must first clarify the needs that
brands can satisfy and then assess both the economic attractiveness of meeting them and
their fit with the positioning of existing brands. The starting point is to define categories in
terms of the core benefits offered to customers. Take the case of the carbonated soft
drinks industry. All nonalcoholic beverages, not just carbonated ones can quench thirst.
Which is probably why Pepsi and Coke offer fruit juice and mineral water along with their
cola drinks.

Within a given frame of reference, marketers need a disciplined way of evaluating their
branding opportunities. According to Nora A. Aufreiter; David Elzinga and Jonathan W.
Gordon1 marketers must scrutinize "need states" — the intersection between what
customers want and how they want it. Many marketers know the importance of need
states. Yet, they often define their brands by product features instead of consumer needs.
Thinking through need states often suggests new ways for existing brands to satisfy the
needs of customers, rather than keep launching new brands.

When a few years back, Unilever Europe wanted to restructure its ice creams business, it
focused on need states. The company found that people consumed ice cream for different
reasons on different occasions. Unilever identified six need-state segments based on a set
of fundamental global needs such as Socialisation, Indulgence, Craving, Treat, Fun,
Wholesomeness, Value, Refreshment, Gapfill, Hunger and Energy2 (See Figure). This
became the basis for a new marketing strategy driven by a rationalisation of the brand
portfolio.

Then comes the positioning issue. Effective positioning is possible only when marketers
understand each brand's unique contribution to the portfolio. Mapping current brands
against the universe of relevant need states is a helpful starting point. Statistical market
research tools are available to assess the relationship between the things customers value
in a given need state and the attributes that differentiate the brand for them.

1
Aufreiter Nora A., Elzinga David and Gordon Jonathan W., “Better branding,”  McKinsey Quarterly, 2003,
Number 4.
2
Zoran Svetlicic and Nader Tavassoli, “Brand Consolidation: Re-Positioning Unilever’s European Ice Cream
Business,” London Business School Case, 2005.
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A perceptual map of the relations between the six need-state segments, Unilever’s
brands, and related categories3.

Portfolio management ultimately boils down to two broad approaches. First, companies
can restructure their brands by repositioning, consolidation or divestment of brands.
Restructuring effectively means realigning the brands that serve existing customers.
Alternatively, a new brand can be launched to target a new category of customers.

In general, the big brands, should be left undisturbed, especially if they are performing
well. But when they are not doing well, their positioning must be adjusted before redefining
the roles of other brands. In turn, this often implies a good understanding of whether
cannibalization is taking place.

While measuring whether each brand is fulfilling its role in the portfolio, metrics are useful.
Metrics also indicate the chances of converting prospects into customers and for retaining
customers in target segments; and levels of customer satisfaction. If it is found that the
managers of several brands in the same portfolio are tracking identical metrics, it is an
indication that the brands are positioned too closely together and look too similar.

Implementation is possibly where the biggest challenges are encountered. The portfolio
manager must get the buy in of individual brand groups. Incentives that reward managers
for the whole portfolio's performance must be put in place. The portfolio manager should
also reconcile the portfolio strategy with the priorities of individual departments in the
company.

3
Zoran Svetlicic and Nader Tavassoli, “Brand Consolidation: Re-Positioning Unilever’s European Ice Cream
Business,” London Business School Case, 2005.
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Marketers are often uneasy about brand-portfolio management. But a portfolio approach
can yield good results by reducing complexity and improving the bottom line even if sales
reduce temporarily. Indeed, companies must learn to view brand portfolio management as
an integral part of their marketing strategy.

In short, creative segmentation, better understanding of customer needs and a portfolio

approach to managing brands can go a long way in improving the effectiveness of a
company’s branding initiatives.