3/25/2013
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ISBM
Principles & Best Practices in Brand
Portfolio Strategy & Architecture
March 25, 2013
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Common questions
Background & Context
Brand Definition/Requirements:
What is the difference between a brand, a trademark and product name, and what are the implications
for how they should be managed?
What kind of financial investment is required to launch a brand and grow it over time?
Brand Portfolio Strategy:
What is the optimal number of brands for my company?
When does it make sense to create a new brand versus launch a new product under an existing
brand?
How “elastic” is my brand? What is its ability to stretch horizontally (across categories and markets),
and vertically (across price ranges)?
Brand Architecture:
Should brands within my portfolio be linked to one another?
If yes, what is the optimal way to link brands (e.g., sub-branding, co-branding, endorsement)?
When does it make sense for my corporate brand to endorse my product brands?
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Polling Question #1
Background & Context
Which of the previous groups of questions are most pressing and/or pose the greatest
challenges in your organization?
A) Brand Definition/Requirements
B) Brand Portfolio Strategy
C) Brand Architecture
D) All of the Above
E) None of the Above
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Perspectives on Brand
Brand Portfolio Strategy
Brand Architecture
Process & Approach
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A brand is not just…
Perspectives on Brand
A Jingle
A Product A Spokesperson
A Symbol An Ad A Logo
A Slogan A Name
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A brand is…
Perspectives on Brand
A promise
A company’s most strategic asset
The reflection of a customer’s entire experience with a company
Built and protected by entire organization, not just the marketing department
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Powerful brands create significant economic value
Perspectives on Brand
Source: Interbrand, Brand Values 2011
• 1% increase in customer satisfaction leads to a 3% increase in market cap
• 2% increase in customer loyalty leads to a 10% cost reduction
• 5% increase in customer retention increases customer lifetime value by 25%
• 5% increase in customer loyalty can result in up to a 95% increase in profitability
• 50% of customers will pay 20–25% more for brands they are loyal to
Sources: Brandkey, Bain and Mainspring, Marketing News
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Perspectives on Brand
Brand Portfolio Strategy
Brand Architecture
Process & Approach
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Brand Portfolio Strategy vs. Brand Architecture
Brand Portfolio Strategy
Portfolio Strategy
• An articulation of how a
company should define its
portfolio to drive profitability
• Specifies the optimal number,
scope, and role for every
brand in the portfolio
Architecture
• A depiction of the optimal
relationship between any two
brands within the portfolio
• Dictates both whether and
how brands should be related
to on another
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Five indicators you may have a portfolio problem…or opportunity
Brand Portfolio Strategy
Revenue growth is slowing 1
2
3
4
5 Brands’ funding/support misaligned with profitability/potential
Products increasingly seen as commoditized
Poor cross-sell or up-sell between brands
M&A activity has resulted in a bloated portfolio
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Portfolio organizing frameworks
Brand Portfolio Strategy
Customer
Segment
Need/
Benefit
Price
Tier
Industry/
Category
Channel/
Distribution
Loyal
Enthusiasts Speed Good
Financial
Services Direct
Bargain
Hunters Convenience Better
Consumer
Products Retail
Knowledge
Seekers Simplicity Best
Medical &
Healthcare Online
Thoughtful
Planners Performance Luxury
Federal
Government Wholesale
One-stop
Shoppers Productivity Value
Industrial &
Manufacturing Distributor
Attitudinal & Behavioral Demographic/Firmographic
(Most Powerful) (Most Common)
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Brand portfolio spectrum
Brand Portfolio Strategy
Branded House House of Brands
Customer Segments Few Many
Investment in Branding Low High
Business Make-up Homogenous Heterogeneous
Brand Mgmt. Capability Simplistic Sophisticated
Corporate Relevance High Low
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Brand Portfolio Strategy guiding principles
Brand Portfolio Strategy
1 Build & Leverage a Strong Corporate Brand
2 Define Strategic Objectives for Brands
5 Maximize the Extendibility of Brands
4 Build Relevance Across Value Tiers
3 Employ Simple & Clear Brand Architecture
• Strategic financial asset
• Primary point of reference
• Leveraged across portfolio
• Strategic roles
• Financial objectives
• Clear positioning
• Relatively flat hierarchy
• Easy navigation
• Consistent nomenclature
• Maximize customer reach
• Avoid premium dilution
• Avoid value cannibalization
• Across markets & regions
• Across categories & segments
• Across offer dimensions
Overarching Goal: Fewer, stronger global brands
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Components of a Brand Portfolio Strategy
Brand Portfolio Strategy
Strategic Role/Business Objectives
Price/Value Relationship
Brand Positioning/Identity
Brand Relationship to Master Brand Positioning
Brand Architecture/Linkage
Brand Extendibility/Elasticity
• What specifically is the brand charged with doing for the Company? What objectives should be set for the brand from a
volume and financial perspective? What role does/should the brand serve from a channel perspective?
• What are the optimal pricing structures and price points for the brand? What sort of price differential should exist between it
and its most direct competitors? What sort of promotional support should the brand receive?
• How should the brand be positioned to the consumer, taking into consideration its strategic role within the portfolio, consumer
wants/needs, and its current equities? What is (or should be) its unique point of difference?
• What is the brand’s contribution to the Master Brand proposition? To what extent does it help the Company deliver on its
brand promises? Does the brand help the Company reinforce desirable equities?
• What is the optimal relationship between the brand and the Company brand? Should there be an explicit relationship between
it and other brands within the brand portfolio? If yes, what is the best way to establish this linkage?
• What is the brand’s “bounds of extendibility?” From a category perspective, where can the brand credibly go today, or in the
near or intermediate future? What should be considered off-limits for the brand?
Brand 2 Brand 3 Brand 4 Brand 5 Brand 6 Brand 1
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Perspectives on Brand
Brand Portfolio Strategy
Brand Architecture
Process & Approach
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Five indicators you may have an architecture problem…or opportunity
Brand Architecture
Brands are cluttered and confusing to both customers and employees 1
2
3
4
5
There is no internal system for managing how new brands are developed
Not getting enough leverage from key brands such as the corporate brand
Brand architecture is not aligned with business strategy
No plan for integrating recently acquired brands into existing architecture
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A common B2B brand architecture hierarchy
Brand Architecture
Business
Unit Level
Corporate
Level
Group/Soluti
on Level
Product/Of
fering
Level
The name of the company; often but not always the legal entity
The name of a BU/subsidiary. May or may not be a derivative of corporate brand
The name of a group of product lines that share a common benefit or solution
The lowest level in the hierarchy – may not warrant “branding” (i.e., name only)
(Johnson &
Johnson)
WorkCentre™ 6505 (Xerox)
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Polling Question #3
Brand Architecture
At which level of the hierarchy would you say the majority of brand equity resides within
your company’s portfolio?
A) Corporate Level
B) Business Unit Level
C) Group/Solution Level
D) Product/Offering Level
E) None of the Above
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Brand equity flow considerations
Brand Architecture
Direction
Corporate
Brand
?
Division/Product
Brands
Deskjet
Intensity
Division/Product
Brands
Corporate
Brand
Polarity
Corporate
Brand
Division/Product
Brands
(-/+)
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Brand linkage options
Brand Architecture
Brand Type Definition Illustrative Examples
Master A brand that serves as the primary frame of reference,
often carrying the corporate name
Co- An equity overtly linked to the master brand, receiving
equal emphasis vis-à-vis the master (i.e. logo lock)
Endorsed An equity that is endorsed by the master brand,
deriving benefit from it by virtue of the association
Descriptive An equity that is purely functional/descriptive in
nature, with a logo lock to the master brand.
Stand-alone A brand that stands independent from the master
brand with no overt or implicit link to the master
Un-branded A brand that stands independent from the master
brand with no overt or implicit link to the master Strategic Outsourcing
IBM Software
Master Brand
Co-brand Endorsed
Brand Descriptive
Brand Un-branded
Equity
Stand-alone
Brand
Netezza by IBM
Emphasis on
Master Brand
Emphasis on
‘Other’ Brand
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Brand Architecture decision tree
Brand Architecture
1.
Revenue
Does the equity
have direct
revenue-
generating
responsibility?
2.
Market Need
Does the equity
offer a
differentiated
POV in the
marketplace?
3.
Competitive
Does the equity
hold competitive
precedence that
establishes
independence?
4.
Equity Flow
Is the equity
charged with
infusing unique
equity into the
Master Brand?
5.
Risk
Does association
with the equity
place potential
risk on the Master
Brand?
Determination
Stand-alone Brand
Co-brand Brand
Un-branded Equity
YES
START
NO
YES
NO
YES
NO
YES
NO
YES
NO
Endorsed Brand
Descriptive Brand
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Perspectives on Brand
Brand Portfolio Strategy
Brand Architecture
Process & Approach
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High-level approach
Process & Approach
Step 1: Current State Assessment
Step 3: Portfolio Scenarios & Business Case Step 4: Portfolio Migration Road Map
Step 2: Customer Insights & Brand Profiling
Need State 2
Segment 2
Segment 6
Segment 3
Segment 1
Need State 5
Need State 3
Segment 4
Segment 5
Need State 1
Need State 4
Brand 11
Brand 2
Brand 10
Brand 6
Brand 7 Brand 12
MGM Grand
Brand 8
Brand 9
Brand 13
Brand 15)
Brand 3 Brand 14)
Trump (All) Brand 17)
Brand 1
Brand 5)
Brand 4
Non - Gaming Amenities ( - )
Gaming/ Comps ( - )
Non - Gaming Amenities (+)
Gaming/ Comps (+)
Need State 2
Segment 2
Segment 6
Segment 3
Segment 1
Need State 5
Need State 3
Segment 4
Segment 5
Need State 1
Need State 4
MGM Grand
Trump (All)
Non - Gaming Amenities ( - )
Gaming/ Comps ( - )
Non - Gaming Amenities (+)
Gaming/ Comps (+)
5% 10%
Location
• Most properties benefit from excellent locations…
Physical Features
• Highly variable - décor tends to be generic…
Ambiance
• Disconnected experience • Lowest common denominator approach
Observed Customer
• The typical customer is older (>45), working class…
Offer
• Focuses primarily on gaming, particularly slots…
Service/Staff
• Staff appears to be friendly and enthusiastic…
Property anomalies within properties
• New Orleans décor has unique layout and
design featuring branded slot courts
• Tahoe offers a more sophisticated
• The customer experience needs to better match brand positioning by prioritizing key touchpoints that will…
• St. Louis and Atlantic City may be best practice examples for property standards to handle variability in quality
Atlantic City New Orleans
Lake Tahoe St. Louis
Joliet
Las Vegas
L
V
C
P
HP
1 2 3
4
5 6
7
8
9
10
11
12
13
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Research techniques
Process & Approach
Segment 1 Segment 2 Segment 3 Segment 4
Brand C
Brand E
Brand F
Brand B Brand D
Brand A
Portfolio A
Portfolio B
Brand G
Portfolio C
Discrete Choice Modeling Portfolio Concept Testing
Determines the impact of different
brand portfolio and architecture options
on customer purchase intent
Helps determine the extent to which
various brand portfolio options help
create clarity and preference
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Business case assessment
Process & Approach
0
13
28.8
34 34.7
2005 2006 2007 2008 2009
14.8
20.322.2
-37.8
-2.52005 2006 2007 2008 2009
0.0
24.8
57.5
71.4 72.3
2005 2006 2007 2008 2009
Revenue Impact
$Millions
EBITDA Impact
$Millions
Cash flow Impact
$Millions
Incremental IRR 18%
What is it: Financial analysis of value creation opportunities which allows the team to test brand portfolio
moves and inform final recommendations (feasibility), value creation estimates, and high-level
implementation plan
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Brand portfolio migration
Process & Approach
Strengthen, manage (BAM), & promote
2011 2012 2013
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
First Test Second Test
(per test results)
Strengthen & Manage (BAM) Promote & begin endorsing division brands as Brand J brand strength / equity is increased
(per test results) No immediate brand action Rationalize brand Endorse w/ Brand J
(per test results) No immediate brand action Rationalize brand Endorse w/ Brand J
(per test results) No immediate brand action
Rationalize Brand Endorse Brand C w/ Brand J
Strengthen, manage (BAM) Brand C
Br B
Br A
Br C
Br D
Br E
Br F
Current State
1 2 3
4
Future State
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Contact Information
Mitch Duckler
Senior Partner
(312) 451-2414