by Reshma Shah, PhD., Emory Goizueta Business School
In this article, you will learn:
1. How companies expand their product portfolios into other lines;
2. How companies expand the number of variations within a product line;
3. How a portfolio analysis can help identify opportunities for introducing a new line of products.
Most brand managers understand that brands are highly valuable assets of the company. But they seldom have mechanisms in place to reveal where a company is not fully leveraging the opportunity to apply existing brands to new products.
Brands can be leveraged in two ways.
- First, by expanding a product portfolio; in other words, by increasing the number of different lines a company offers. For example, Colgate Palmolive's product line currently consists of five areas: oral care, personal care, household surface cleaners, fabric care and pet foods. In contrast, its competitor, Clorox, offers more than 10 different product lines, including laundry care, household cleaners, dressings and sauces, fireplaces and wraps and containers.
- Second, a company can use a brand to expand the number of variations within each product line. In the five lines that Colgate Palmolive operates, it offers only nine major brands with one or two variations in most of its lines. Clorox's product lines exist under 42 different brands, each with dozens of variations.
Brand portfolio assessment can also help identify situations where leveraging a brand has gone too far, where sales or perceptions of products can be hurt. Some extensions can be potentially damaging to their parent brands because they have the potential to dilute a brand's position in the mind of the customer. Further, managers often fail to make room for new brands by removing poorly performing old ones. A disorganized product and brand mix can confuse customers.
Portfolio analysis can help to identify opportunities for introducing new brands in situations where existing brands are not ideal for sustaining long-term competitive advantage. For example, when Toyota was interested in higher-value segments of the market, it introduced Lexus rather than extend the Toyota brand.
Brands are among a company's most valuable assets. While most executives recognize this, few view branding as a strategic means of generating growth. A formal assessment of the brand portfolio will reveal which branding options are best pursued under certain situations. Those who manage their brands as actively as their product and financial portfolios will be best placed to harness this potential for growth.
Reshma Shah is an assistant professor in the practice of marketing at Goizueta Business School, Emory University.
© 2008 The 60 Second Marketer
