Challenging Conventional Wisdom in Retail Brand Portfolio Management
I am a big believer in focus – it is a huge part of the work I do with companies, to help them make strategic choices about where their priorities are, and what they need to walk away from. So I love to see companies approach a portfolio strategy with a commitment to identifying their priority brands. However, I’ve recently decided that the phrase “power brand” can be a distraction to setting good strategy in many settings – and particularly with retail brand portfolios. Too often, leaders hear power brand and jump right to the biggest and/or most profitable business. And in some cases, that is fair. But for organizations trying to shift, adapt, and find new avenues for growth in a highly competitive marketplace, the biggest, most established brands will rarely be the lever to drive the kind of transformational growth that retailers will need to survive in the future.
That is why I’ve started using a different classification for brand portfolio work, one that acknowledges the scale and foundational nature of an organization’s largest brands, but also creates more urgency behind those brands that have greater potential to create differentiation and relevance.
The lowest priority brands, in terms of resource allocation, are the Functional brands, or labels. These are brands that don’t need any marketing support because they are a pure value play. They compete against national brands by offering a comparable product at a lower price. Their entire value proposition hinges on the direct comparison, at the shelf, to the national brand alternatives.
At the core of a portfolio are the Foundational brands. These are the large brands, with solid business results. They probably play in broadly-appealing categories and product lines. But the reality is that can operate on cruise-control. They don’t require a lot of marketing support to explain their value proposition, because they are often well-established and closely tied to the equity of the master retail brand. They are probably already capturing a disproportionate share of the category vs. their national brand competitors. They provide the reasons to believe for the overall store.
Neither Foundational nor Functional Brands are going to fundamentally shift the trajectory of a retailer’s brand equity and sales. That job is left to the Strategic Brands. These are brands that are truly differentiated, and are designed to play to a more narrow strategic target (or one different that the current core customer). They may not be as big as the foundational, but they should be more directly linked to a more specific strategic priority – whether that is a customer segment that represents future growth, or a brand equity or association the retailer is looking to build. And they should have a disproportionate potential to drive growth.
An Owned Brand portfolio should be designed not only to capture margin and support the master equity, but importantly – to selectively support and build the organization’s most important strategic initiatives. These aren’t always going to be the biggest brands in the portfolio – but they have a clear role in the overall strategy, and should drive greater growth and progress against organizational priorities.