Excerpt of further issues topics: Brand Equity and Brand Strategy, Brand Equity and Brand Diffusion, Brand Equity and Company Success, Brand Equity and Sales and Acquisition of Brands or Companies, Brand Equity and Marketing Investment

Companies Consolidate Their Brand Portfolios

Since the beginning of this century a global trend towards the reorganization of brand portfolios has become apparent. In light of today’s flood of brands the question arises how many brands does a business need, or in other words, how many brands can a business really afford? Globalization but also the national competition force an examination of established brands. The luxury of supporting brands for each corporate division or market segment contradicts today’s necessity for higher efficiency and better economy of scales.

Most of all consumer goods businesses consolidate and bring into focus the quantity of their brands. For instance, Unilever reduced the number of its brands from formerly 1,600 to 400 by the end of 2004 due to its restructuring program called “path of growth”. These 400 brands account for about 90% of today’s turnover. In the whole world there are a multitude of company, product and service brands.

At the same time this cut-throat competition, generated through excess capacity in production and sales floor, leads to pricing wars which in turn reduce or even endanger profitability.

The mere quantity of brands, the costs involved in operating them and the depleted retentiveness of the consumer lead to a rethinking with the consequence that brand equity and a return-on-investment of the brand require anything but the common brand management. In many companies brand equity is a kind of ‘hidden reserve’. Being the case, this should be changed. Brands are no hidden reserves. They are so essential for current and future successes that they need to be managed, developed and protected like assets. The same way that property values of companies are used, brands need to be utilized.

What distinguishes successful brands from others in this difficult environment? There is the view that these brands distinguish themselves through a strong brand identity, meaning they express credibly and in the long run the values a brand stands for. Successful brands are no coincidental product of entrepreneurial action. They are rather the result of consequent and continuous brand leadership, which does not orient itself on short-term increases in turnover but rather at the long-term development of customer relations through identification with the brand.

The development of such a brand identity in accord with the product and service world requires adequate resources, organizational skills and structures as well as processes, guaranteeing continuity and the sacrosanct attributes of the brand which had been defined previously in order to create respect for the brands with the customer. Is that not given, one runs the risk of calling into question the marketing strategy after every change of leadership personnel. A change of advertising agency should not automatically mean a change of concept, if one does not want to risk inconsistencies that could create a lack of credibility between the established and new brand identity, which could weaken the brand.