When you have a group of brands and you need to sort through the focus, the temptation is to try to hedge your bets and spread a little love to each brand. As I managed 15 brands at Johnson and Johnson, I finally came up with a very simple rule that I affectionately called “a third, a third, a third”. No matter how good the year was, a third of the brands would do amazing, a third would do ok and a third would struggle. To win in the market, and hit my plan, I had to make sure the third that did amazing out-paced the third that struggled.
Some leaders would see that situation and want to spread their resources to that bottom performing brands, just in case the high performing brands didn’t come through. But hedging your bet just means you never fully realize the full potential of those high performers. Here’s the rule: Focus your resources on those brands that can offer the fastest growth and allow them to outpace those that are slower growth.
First Look Externally at the Market
For decades, people used the BCG priority grid, a simple two by two matrix with market growth on one axis and market share on the other. The simplicity of the grid works: how healthy is where you play and what is the opportunity to win where you play? Stars are where you want to invest and dogs are you want to divest.
A very simple improvement on this grid was to go to a 3×3 version of the grid that gives you more flexibility in choices. Plus calling it market attractiveness goes beyond just growth and competitive strength goes beyond just market share. If you want to go deep, I’d encourage you to come up with 3-5 criteria for what each axes can mean. Market Attractiveness can be a combination of growth, size, profitability, ease of servicing, future growth, manageable barriers to entry. Your competitive strength could be a combination of growth, size, aligned resources and assets, competitive advantage (technology, patents, positioning), brand loyalty and strength of the connection to consumers. Each of the 9 boxes has a recommendation for either increasing the market attractiveness or increasing your own brand power.
From the grid, you can see three green investment boxes. Where you have high competitive strength but in a moderately attractive category, it might be worth your while to invest to grow the category. Conversely, where you have moderate strength in a highly attractive category, you want to invest to strengthen your brand. The yellow boxes are moderate investment options and the red boxes represent minimal investment or divest situation.
Then Look Internally at the Market
Once you feel comfortable with how the brands line up externally, it might be worth a second look to compare how they look internally. As you line up your portfolio, the goal is to maximize the longer term profitability of those brands. Here you want to look at Brand Growth rates and Margin percentages. And for each box, there is a recommended action. For instance if you are a high growth brand with lower margins you want to find a way to take the power associated with the growth and look to increase prices where possible either through a price increase or by trading them up to a premium version of the offering. Conversely, a medium growth brand in the same low margin box might have less brand power to warrant the price increase, so you should be looking at reducing COGs or marketing spend.
You’ll see the same colour combinations, greening meaning invest in growth, yellow is maintain and red means divest. Each of the 9 boxes has a recommendation of how to optimize the P&L for that brand and the overall portfolio.
To read more about Brand Analysis, I’d encourage you read: How to Go Deeper on Analysis
Focus on the growth Brands and they’ll outpace the decline of the weaker brands
To read more on How to Analyze Your Brand, read the presentation below:
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