EXTENDING YOUR BLOG WITH MORE FEATURES
Manufacturers, forced to provide a more compelling value proposition to retailers, have responded not by pulling back, but by introducing a steady stream of new brands in an effort to spark growth. These companies are discovering, however, that new products do not necessarily translate into market share growth. In a crowded category, only the top performers tend to grow, while weaker performers lose ground as the landscape becomes littered with more and more offerings that are not meaningfully differentiated from one another.
Not only does a larger portfolio often fail to deliver expected returns but also the complexity of managing multiple brands imposes additional hidden costs across an organization. A growing portfolio affects the entire brand life cycle: from product development and sourcing to sales and channel management (increased training needs, a decrease in per-brand focus by the sales force) to marketing and promotions (more
documentation, a need for greater coordination of marketing. In addition, as new brands are added, marketing resources are often stretched, rendering some underresourced brands vulnerable to competitors.
With these factors in play, why are manufacturers so hesitant to trim back their portfolios? Once they invest in a new brand or a line
extension, companies have a legitimate concern that if they pull the brand, they won’t get the shelf space – or the revenues – back. In
practice, the economics of eliminating a brand often appear unattractive. Our experience indicates that the remaining brands in
a portfolio may need to capture as much as 45 percent of the volume of a discontinued brand in order to break even. This is more than what most companies would consider “fair share” – the amount of volume they expect to recapture from the lost brand.
With a more crowded playing field and less efficient underlying economics, manufacturers may find themselves hard-pressed to resolve these brand-related issues. Companies cannot stop launching or acquiring new brands, nor should they casually lop off a significant portion of their portfolio. But they can become smarter about managing their portfolios – as opposed to individual brands – in a way that can affect top- and bottom line growth.Tapping into these sources of value requires a more structured approach to portfolio management that comprises three main
elements:
�� Positioning your brands to deliver success for the overall portfolio;
�� Developing a stronger customer-versus-category perspective across all the brands in the portfolio;
�� Adopting a capital-allocation mind-set for brand investment.