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Towards more effective branding

Marketers of branded goods, despite spending heavily on advertising and promotion arefinding it increasingly difficult to deliver results. There are three main reasons for thisphenomenon poor segmentation, lack of understanding of customer needs and unwieldybrand portfolios.

The key to effective branding is to combine clever market segmentation with a deeperunderstanding of customer needs, and back it up with a portfolio approach towards brandmanagement. Segmentation must challenge conventional wisdom. This is possible onlywhen marketers go below the surface to understand what exactly the customers arelooking for. A portfolio approach means defining categories carefully and looking atbrands 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 suchtraditional segmentation efforts are proving to be ineffective because of imitation bycompetitors. The key to identifying the right segments often lies in identifying andanticipating trends. Some such as demographic trends, as the great management guruPeter Drucker mentioned time and again, are easy to predict while others such aslifestyles are more complicated.

Once marketers target the most promising future segments, they must be clear about whatthe brand must deliver to customers. Brand proliferation and rapid imitation have reducedthe effectiveness of advertising. Even celebrity sponsors are proving ineffective in manycases. Instead of introducing superficial differences, looking at the core of the brand mayyield better results. A thorough understanding of customer needs, both functional andemotional 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. Onthe other hand, some attributes are important even though customers take them forgranted. In the hotel industry, providing clean, fresh, comfortable facilities is a benefit thatdoes 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 luxurybusiness hotel must offer fax and Internet facilities. The most successful brandsemphasize features that are important to consumers and unique and distinctive whencompared to those of competitors.

Traditionally, marketers have attempted to identify what is valuable to customers by posingdirect questions to them about a brand's functional benefits and analyzing the resultsthrough techniques such as conjoint analysis. But this approach runs the risk of

overlooking a brand's subtler, intangible dimensions. Radical innovations are more likelywhen marketers probe various tangible and intangible brand attributes and uncover thecore need underlying customer desires, which are difficult to articulate and can only besensed or felt. Meeting such needs is the essence of effective brand building.

For effective branding, a portfolio approach is necessary. Managing brands as a portfolionot only avoids consumer confusion but also prevents investments in overlapping product-development and marketing efforts. And by eliminating weaker or ill-fitting brands, itensures 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 forthe marketing investment. This has been precisely the goal of Hindustan Levers powerbranding 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 expandrather than prune their brand offerings. Managers compensation is often linked to thegrowth of their business. Withdrawing brands is not easy when the remaining portfoliomust compensate for a discontinued brand's volume. Indeed, Hindustan Lever has beenunder fire in the past five years, for failing to meet the growth expectations ofshareholders.

To eliminate unnecessary brand proliferation, marketers must first clarify the needs thatbrands can satisfy and then assess both the economic attractiveness of meeting them andtheir fit with the positioning of existing brands. The starting point is to define categories interms of the core benefits offered to customers. Take the case of the carbonated softdrinks 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 theircola drinks.

Within a given frame of reference, marketers need a disciplined way of evaluating theirbranding opportunities. According to Nora A. Aufreiter; David Elzinga and Jonathan W.Gordon1 marketers must scrutinize "need states" the intersection between whatcustomers want and how they want it. Many marketers know the importance of needstates. 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 theneeds 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 differentreasons on different occasions. Unilever identified six need-state segments based on a setof fundamental global needs such as Socialisation, Indulgence, Craving, Treat, Fun,Wholesomeness, Value, Refreshment, Gapfill, Hunger and Energy2 (See Figure). Thisbecame the basis for a new marketing strategy driven by a rationalisation of the brandportfolio.

Then comes the positioning issue. Effective positioning is possible only when marketersunderstand each brand's unique contribution to the portfolio. Mapping current brandsagainst the universe of relevant need states is a helpful starting point. Statistical marketresearch tools are available to assess the relationship between the things customers valuein 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 Unilevers 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, Unileversbrands, and related categories3.

Portfolio management ultimately boils down to two broad approaches. First, companiescan 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 performingwell. But when they are not doing well, their positioning must be adjusted before redefiningthe roles of other brands. In turn, this often implies a good understanding of whethercannibalization 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 retainingcustomers in target segments; and levels of customer satisfaction. If it is found that themanagers of several brands in the same portfolio are tracking identical metrics, it is anindication that the brands are positioned too closely together and look too similar.

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

3Zoran Svetlicic and Nader Tavassoli, Brand Consolidation: Re-Positioning Unilevers European Ice Cream

Business, London Business School Case, 2005.

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Marketers are often uneasy about brand-portfolio management. But a portfolio approachcan yield good results by reducing complexity and improving the bottom line even if salesreduce temporarily. Indeed, companies must learn to view brand portfolio management asan 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 acompanys branding initiatives.