Portfolio Management – do you need to worry about brands treading on each others’ toes ?

Should you worry if you have several brands that are rather similar ? Should you collapse them together, sell some, or strive to position them differently ?

In general, the answer is don’t worry.

Companies often find themselves with similar brands, that sell to similar, or the same, populations. Mars have Milky Way (Mars Bar) and Snickers. P&G has Tampax and Always. General Motors has Saturn Astra and Chevy Aveo. Coke has Diet Coke and Coke Zero (and Regular Coke for that matter).

This in itself isn’t something to worry about. It’s normal for brands in a category to compete against one another and sell to near identical customer bases. Even brands that are obviously quite different (e.g. KFC and McDonalds, Visa and AmEX) still compete pretty much head on.

McDonalds doesn’t worry that it sells coffee as well as burgers, Heinz doesn’t worry that it offers Tomato soup as well as Vegetable. Similarly you shouldn’t worry about having similar brands. If a fantasy soft-drink company were started up and it could choose to own/market any two brands should it choose Coke and something like Fanta ? No it should choose Coke and Pepsi, these are the biggest brands globally.

What you should worry about is whether or not your brands are distinctive.  Are they easy to recognise and distinguish from others ? Without this your advertising can’t work for your brand. And consumers won’t see you on shelf. So your brands should look different (this is what branding is about) even if they don’t really compete as differentiated brands.

And you should be aware of (and calculate) the total portfolio effects of price promotions. When you put one of your brands on special you aren’t only giving away some full priced sales that would have happened anyway, you are also stealing full-priced sales from your other brands.

If brands grow they will always steal from all the other brands in the same product category. The exact amount of cannibalisation you should get between your own brands can be predicted by the Duplication of Purchase law. What you need to watch out for is excessive cannibalisation, firms tend to be good at stealing sales from themselves because their brands go through the same sales force, same distributors etc. You need to acknowledge and accept this, but then be on the look-out for excessive cannibalisation.

Finally, the decision to drop, phase out or sell brands should be largely made on viability, cost and operating issues. Not on how similar you think the brand is to another of your brands.

Professor Byron Sharp, 2008.

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