Knowledge Area Review KAR Brand Portfolio Management What

Knowledge Area Review (KAR) Brand Portfolio Management What to do with an inherited portfolio of brands? September 2014 © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE

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Introduction This document provides a synthesis of available public domain information regarding Brand Portfolio Management. It is intended to provide a comprehensive overview of the current state and issues across the globe. The authors have summarized the information collected in a manner to provide the reader with a logical flow, and have referenced source material in each case. We have also provided insight through rudimentary analysis, representing information that we have collected to show relationships and to improve the value of the raw information collected. Our objective is to support internal dialogue on what actions need to be taken to deal with an inherited portfolio or brands. To do so, we broke the issue down into six component parts: • • • How does an organization approach its brand strategy? What are the advantages and disadvantages of a portfolio of brands? How do you build a portfolio of brands? What are the client considerations to ensure the best set of offers? How do you optimize a portfolio of brands to support strategy? How do organizations ensure that they capture and optimize brand equity? Our research suggests that, barring nomenclature (which can differ by thought-leader), there exist a number of thoughtful positions and a great deal of consensus in the marketplace on the subject of portfolio management, and the implications and action steps to optimize multiple brands whether encountered through growth or serendipity. We have outlined samples herein. © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 3

Brand Portfolio Management Taxonomy For the purposes of this KAR, the below will describe our hierarchy of brands and brand terminology for a portfolio of brands Industry Insurance General/ P&C Insurance Life Banking The Portfolio of Brands Corporate Brand Consumer Goods Pharma XYZ XYZ Brand that identifies the corporation behind the product or service offering Range Brand B Range Brand the ranges over several product classes Range Brand A Product Line Brand the represents a product or product class Product Line Brand O Country USA Canada Japan UK Ireland Product Line Brand P Australia Product Line Brand Q South Africa Source: ICG analysis, Building Strong Brands © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 4

Brand Cases Throughout this document we have drawn examples from a selection of industries globally, representing case studies across different brand architectures Others Financial Services MONOLITHIC ENDORSER SUB-BRAND JOINT FORCES WHITE LABEL CORE HOUSE HYBRID Brand Architecture Source: ICG analysis © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 5

Six main dimensions of world class brand portfolio management For the purposes of this KAR, we have organized our thinking as follows 1 Brand Strategy & Business Model Brands in Portfolios 2 Vision/ Brand role Corporate and SBU strategies Building Overall Brand Value (i. e. , Brand Equity) Structure & Operating Model Architecture Geography Channel (Direct and Indirect) Advantages & Disadvantages Rationalizing the Portfolio Segment Product Dimension Managing a Multi-brand Portfolio Scope & Benefits Heritage Values Navigation/ Confusion Research & Insights Scale benefits Customer Performance Salience Underlap Imagery Judgements Overlap Coherence Cannibalisation Reputation Source: ICG analysis © Internal Consulting Group 2015 Rationale for Portfolio (e. g. , saturation/ shelf space) Brand identity and visual imagery Brand/ Customer Relationship 4 3 5 Optimization KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE Resonance Feelings 6 Brand Equity 6

What to do with an inherited portfolio of brands? – Table of Contents Section Component Description 1 Executive Summary Overview of our research and findings 2 Effectively Managing a Portfolio of Brands Overview of the key components for Portfolio Management 2 a Brand Strategy & Business Model: How does an organization approach its brand strategy? 2 b Brands in Portfolios: What are the advantages and disadvantages of a portfolio of brands? 2 c Architecture: How do you structure a portfolio of brands? 2 d Customer: What are the client considerations to ensure the best set of offers? 2 e Optimization: How do you optimize a portfolio of brands to support strategy? 2 f Brand Equity: How do organizations ensure that they capture and optimize brand equity? 3 © Internal Consulting Group 2015 Knowledge Sources For each different dimension • The key thinking from consulting firms, journals and academia as to what constitutes best practice • Examples of this best practice across different firms and industries Relevant published materials for further reading KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 7

Executive Summary Several issues have given companies a wake-up call as we have entered the new millennium – one of which is the preponderance of brands and the increasingly complex brand portfolio structures in many organizations. In some companies there is an underlying rationale for the brand portfolio in place today, but often there is not, or brands have continued to evolve to encumber the overall brand equity that an otherwise healthy portfolio of brands would generate. These challenges have led many organizations to an overdue focus on their brand portfolios with a view to improved value and performance. Research suggests that the explanation for the gap between realized and potential brand value is less to do with individual brands and much more to do with the lack of a systemic and well-governed means of managing a portfolio of brands as a whole So, what to do with an inherited portfolio of brands? To support dialogue on that question in this document we: • • • Consider perspectives on global best practice guiding principles for brand strategy Describe the rationale for brand portfolios vs single brands, optimal size and how/why they are integrated Overview the types of brand architecture and provide examples of each Examine customer needs and the implication for brands Provide a high level look at optimization strategies, and Discuss how brands are measured, brand equity as a construct and how organizations can know where they stand? Throughout the document, we have provided case examples of brands throughout the world to illustrate types and issues faced by organizations in optimizing their brand portfolios We also provide our view on a synthesis of brand portfolio frameworks and a number of structured knowledge references on the subject of brands in our bibliography Source: ICG analysis © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 8

Definition: What do we mean by Brand Portfolio Management? Brands represent a company’s most valuable intangible assets. Yet the way many companies manage, or, rather, mismanage their portfolio of brands suggests otherwise. Too often, critical decisions about brand portfolios are not made within a context of sound strategic considerations. Along with managing a portfolio of brands comes complexity, boundary challenges, and organizational tensions leading to some brands receiving too many resources and, more importantly, others not receiving enough to fully exploit their markets or domains of competition. To extract more value out of the portfolio, it is important to understand exactly what brand portfolio strategy and its key elements are, and apply guiding principles to manage the portfolio over time. What is “Brand Portfolio Management”? Simply stated, brand portfolio management is an approach toward establishing (future) and managing (current) a portfolio of brands in a coordinated way, such that they maximize returns and build equity in chosen markets Brand portfolio strategies are typically created by establishing a “game board” of a company’s industry composed of dimensions that are most foundational and enduring to that company’s business. When combined with ‘brand footprints’, these dimensions frame relative scopes of brands while showing areas of distinction and overlap. Examples include: customer segments, price points or value tiers, offer types, geographies, channels and value propositions. Source: Mitch Ducker, Full. Surge © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 9

What to do with an inherited portfolio of brands? – Table of Contents Section Component Description 1 Executive Summary Overview of our research and findings 2 Effectively Managing a Portfolio of Brands Overview of the key components for Portfolio Management 2 a Brand Strategy & Business Model: How does an organization approach its brand strategy? 2 b Brands in Portfolios: What are the advantages and disadvantages of a portfolio of brands? 2 c Architecture: How do you structure a portfolio of brands? 2 d Customer: What are the client considerations to ensure the best set of offers? 2 e Optimization: How do you optimize a portfolio of brands to support strategy? 2 f Brand Equity: How do organizations ensure that they capture and optimize brand equity? 3 © Internal Consulting Group 2015 Knowledge Sources For each different dimension • The key thinking from consulting firms, journals and academia as to what constitutes best practice • Examples of this best practice across different firms and industries Relevant published materials for further reading KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 10

What are the key elements of a “Brand Portfolio Strategy”? There are three essential elements that make up a brand portfolio strategy: • Roles of brands, or why each brand exists in the portfolio (e. g. , to penetrate a new market, challenge an incumbent, expand the frame of reference of a parent brand) • Scopes of each brand relative to others (distinction among scopes of brand footprints is preferable, but often blurred as portfolios grow complex) • Relationships among brands in the portfolio, or how each brand should related to the parent, if at all – often referred to as brand architecture (e. g. , close … sub-brand; further … endorsed brand, or separate … stand-alone brand) As these elements are articulated for each brand, “rationalisation” of particularly complex portfolios (often an important activity to maximize resource allocation), becomes more strategic and easier to implement. For brands that do not have clear and distinct roles or scopes, and/or don’t contribute significant financials to the organization, elimination and/or transferring their equity to brands better positioned for the future makes business sense. Brands fail to achieve their value-creating potential where managers pursue strategies that are not oriented to maximizing shareholder value (Doyle) Source: Mitch Ducler, Full. Surge; Doyle 2001 a, p 267) © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 11

Case Study: Intact Financial With a house of four distinct brands, each specializes in a different type of insurance-related service and product INTACT BRAND PORTFOLIO KEY ATTRIBUTES & INSIGHTS • Intact Financial Corporation is a Canadian insurance company; formerly the ING Group subsidiary ING Canada. • Canada's leading provider of property and casualty insurance • Intact's multi-channel distribution operates under four distinct brands, each specializing in a different type of insurance-related service and product Channel Source: secondary research © Internal Consulting Group 2015 - Intact Insurance: Canada's largest home, auto and business insurance company - Broker. Link: one of the largest P&C insurance brokerages in Canada - Belairdirect: operates in Ontario and Quebec; benefits from having a high brand awareness in direct-to-consumer P&C insurance - Grey Power: Provides car and home insurance to people with 25+ years of driving experience, Grey Power distributes directly to consumers in Alberta, Ontario and the Maritimes provinces through call centres and the Internet. It rebranded as GP Car and Home in April 2011 and re-branded as Grey Power in 2012. Product Portfolio KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 12

Case Study: Orange on the other hand, plays in very different industries, using different brands for different market circumstances Source: secondary research © Internal Consulting Group 2015 ORANGE BRAND PORTFOLIO KEY ATTRIBUTES & INSIGHTS • Orange is French multinational telecommunications corporations, formed called France Telecom • It’s a global provider of voice, video, data and internet • Orange owns different businesses in different industries, each one of which is a single brand - Orange: Mobile phone operator - Orange Business Services: world leader providing telecommunication services to multinational companies - Dailymotion: French online video platform - Deezer: music streaming site - Studio 37: co-produces and acquires films - Libon: VOIP and instant messaging app for smartphones - Voila: multiservice portal - Cityvox: network of websites with local content (restaurants, cultural happening, etc. ) KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 13

Guiding principles of a “Brand Portfolio Strategy” Great brands are easy to recognize with clearly defined positioning and value propositions aligned with segment target needs. Strategic objectives align to target segment needs or fulfil a strategic role to inform investment and resource allocation decisions. Strategic roles are identified for each brand within the portfolio and definitive expectations for each role in terms of growth and margin contribution, and identified metrics to measure performance against A A. Define (one of four) strategic objectives for brands B. Maximize the extendibility of brands B C C. Build relevance across value tiers D D. Build and leverage a strong corporate brand where it makes sense E E. Employ a simple and clear brand architecture Source: Mitch Ducler, Full. Surge © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 14

A Define of four strategic objectives for brands (1). 2 Core Brands 1 Strategic Growth What they set out to do? • Generate positive cash flows, are highly profitable, and account for the majority of an organization’s sales What they set out to do? • Target highly lucrative and high growth market segments. An Illustration • Royal Bank of Canada (RBC) is Canada’s largest financial institution, and one of the world’s top 20 largest. However years of internal brand creation combined with numerous acquisitions had led to a broad brand proliferation. The fragmented branding that resulted was holding them back from building a single master brand that could be deployed in Canada, US and other growth markets. • The RBC brand portfolio strategy established a new RBC Financial Group, parenting all business units built around five core customer markets: RBC Royal Bank, RBC Global Asset Management, RBC Insurance, RBC Wealth Management and RBC Capital Markets An Illustration • Porsche never suffered much until early 1990’s, when it almost died. Porsche needed a third model line, something with much broader sales appeal than the Porsche Boxster and Porsche 911, if it hoped to have the wherewithal to continue building more great sports cars. In the 1990’s, two-thirds of Porsche buyers also owned two other vehicles, one likely an SUV, and America, Porsche’s largest market, was in the midst of its love affair with SUV’s. • The Porsche Cayenne was introduced to Europe in late 2001 and went on sale in North America for model-year 2003 Source: Mitch Ducler, Full. Surge © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 15

Case Study: RBC (Royal Bank of Canada) A RBC uses the same core brand everywhere in the world Source: secondary research © Internal Consulting Group 2015 RBC BRAND PORTFOLIO KEY ATTRIBUTES & INSIGHTS • RBC is the largest financial institution in Canada • It uses the RBC brand for all the retail bank operations in 42 countries in the world • In Canada, the bank is branded as RBC Royal Bank in English and RBC Banque Royale in French • RBC Bank (now part of PNC Bank) was the U. S. retail banking subsidiary with 439 branches across six states in the Southeast, which served more than a million customers • RBC also has 127 branches across seventeen countries in the Caribbean • RBC Capital Markets is the worldwide investment and corporate banking subsidiary • RBC Global Asset Management is the wealth management division • RBC also has subsidiaries that have their own brands (e. g. , Blue. Bay – a funds company) KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 16

A Define of four strategic objectives for brands (2). 4 Defensive Brands 3 Channel Specific Brands What they set out to do? • Enhance a company’s position vis-à-vis competition What they set out to do? • Reduce channel conflict while allowing a company to reduce its cost structure An Illustration • The classic example of a defensive or fighter brand is when Virgin Australia entered the Australian market in 2004 and began undercutting Qantas Airlines. • Qantas counter by creating Jetstar, a low-cost brand that offers no-frills service and appeals to cost conscious travellers An Illustration • In the 1990’s, Dow Corning discovered that many customers experienced in silicone application no longer needed Dow’s technical services. As the product matured, the priorities of customers shifted from wanting help with innovation to wanting to keep costs low. This change in what some customers valued consequently decreased profit margins. Dow needed a radically lower cost structure that would allow it to profit solely from selling products. At the time, Dow had no online sales component. • In 2002, Dow created a web -based offering called Xiameter to help enable customers to purchase silicon -based products in bulk, directly off of the Internet Source: Mitch Ducler, Full. Surge © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 17

Case Study: Virgin group A Virgin has used its strong corporate brand to expand compete across a number of geographies and unrelated industries VIRGIN GROUP BRAND PORTFOLIO Source: secondary research © Internal Consulting Group 2015 KEY ATTRIBUTES & INSIGHTS • A strong corporate brand with set of relater brands across unrelated industries. • Corporate brand values and positioning drives brand entry into new industries • Product description used for sub-brands (e. g. , Virgin Money, Virgin Active, Virgin Airlines) • Corporate brand promise defines each category entered even across industry with the brand archetype personality of a 'Maverick' achieving freedom from the category establishment through nonconformity, the Robin Hood • Differentiation by price is on two tiers - Virgin Red Logos denotes quality mainstream service, Virgin Blue denotes economy value, more recently Silver as premium de-luxe. • Global Branded revenues 15 billion pounds in 2012. KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 18

B Maximize the extendibility of brands • We maximize brand extendibility by selecting those that can extend across multiple dimensions. • This entails fewer, stronger brands leveraged across multiple dimensions, e. g. , Geographies, Industries, Sectors, Applications and Channels, and new growth platforms to achieve synergies, capitalize on economies of scale and penetrate new markets The Response An Illustration – The Situation • Spanish brand Inditex Group has built a multi-brand portfolio, which has allowed them to target various market segments more effectively. • Zara, Inditex’s flagship brand he world’s largest fashion retailer, is all about instant “runway” fashion made accessible to everyone. The brand is consistently delivered by controlling most of the supply chain and the customer experience. • Zara has several basic product lines. Women and men’s clothing are Zara’s most important product line, additionally there are perfume, shoes, belts, and cosmetics lines • Issue: how to continue to grow the breadth of offerings? • Zara is a successful and strong brand , so it was extended to the new product class • In 2003, Zara developed a new extended brand, Zara Home. • The Zara Home brand includes Zara Home Kids collection, offering bedding, nursery accessories, sleepwear, plush toys, etc. • Awareness of the brand name Zara Home is higher as consumers already know Zara, its parent brand • In addition, Zara evokes feelings of familiarity (i. e. positive association) within consumers, which perhaps results in a greater probability of purchasing Zara Home Source: Mitch Ducler, Full. Surge © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 19

C Build relevance across value tiers • Deliberate alignment of individual brands targets segments within each value tier to maximize the company’s reach. • Leverage distinct brands to target all relevant tiers and provide a clear delineation of appropriate benefits (e. g. , Ievels of quality, service, expertise, etc. ) for each offering relative to its value tier positioning • Consistently apply pricing strategy that reflect intended value tiering for relevant brands (i. e. , across industries, applications, sectors, channels, etc • Maintain premium brands at premium price levels and protect against brand dilution An Illustration – The Situation • Guess Inc. operates in a number of different store concepts in an attempt to appeal to a variety of different markets. The Response • The original GUESS retail stores carry a full assortment of full-priced Guess products, including men’s and women’s merchandize and licensed products • Guess factory outlet stores are primarily located in outlet malls and sell an assortment of apparel and licensed products at lower price points • GUESS by MARCIANO stores offering apparel and accessories that are sexy yet sophisticated were introduced in 2004 in an attempt to recapture the company’s glamorous image. The target for these stores is a slightly older customer interested in higher-end clothing and accessories such as ritzy evening dresses and fancy jeans • G by GUESS stores offer Guess products at a lower price point than Guess retail stores in order to target a wider demographic. Products in this line provide a more fun, youthful image, fashion forward, yet not cutting edge fashion • GUESS accessories stores sell GUESS and GUESS by Marchiano labels Source: Mitch Ducler, Full. Surge © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 20

Build and leverage a strong corporate brand where it makes sense Background Illustration • A corporate brand is a valuable resource – one that provides the business with a sustainable, competitive advantage • Leveraging the corporate brand is most effective if the brand is perceived as a valuable strategic and financial asset to key stakeholders • Accordingly, it is the primary point of reference for customers, employees, investors and other stakeholders • While customer segments should be the ultimate arbiter of how much or little product brands should be linked to their parent, building a strong corporate brand with a clear and broad reaching frame of reference can provide equities to other brands in the portfolio • Most companies build their businesses through multiple brands • A brand’s role is determined by its ability to contribute equity to an offering. Understanding brand roles and relationships ultimately guides brand architecture decisions • A corporate brand acts as an “umbrella” for the corporation’s activities and captures its vision, image, values and positioning along with many other aspects • Microsoft (M) lends its brand authority to M Office, M Word, M Excel, M Powerpoint, etc. • Windows, the operating system, is what has made Microsoft the company it is today. With Windows shipping preinstalled in over 90% of all personal computers, Windows is by far the dominant brand the driving force of the company • It also has the most recognizable visual device the company has – the window – so M capitalized on that brand equity by putting its most recognizable visual asset at the top alongside the company name • In other markets, such as gaming and mobile devices, M made the strategic choice to distance Mbox and Surface – or a ‘shadow endorser’ Source: Mitch Ducler, Full. Surge © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 21 D

E Employ a simple and clear brand architecture An Illustration Background • Perhaps the best illustration is BMW • Characterized by a hierarchy of brands with explicit guidelines that define the appropriate • The BMW brand has the 300 series (small) linkages, nomenclature, and visual identity for the 500 series (medium), the 700 series brands in the portfolio (large), the M series (high performance), Z 4 (roadster) and the X 3/X 5 (SUVs) • Utilizing fewer levels in the brand hierarchy to achieve organizational and investment • This form of line extension from the core efficiencies and simplify customer offerings brand involves sub-brands that vary in price, quality, and features and has provided • Offerings are clearly organized to facilitate leverage and clarity to BMW who has customer navigation maintained its tagline “The Ultimate Driving • There is a consistent execution and Machine” for over 35 years application of linkages, nomenclature and visual identity systems for each brand Source: Mitch Ducler, Full. Surge © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 22

What to do with an inherited portfolio of brands? – Table of Contents Section Component Description 1 Executive Summary Overview of our research and findings 2 Effectively Managing a Portfolio of Brands Overview of the key components for Portfolio Management 2 a Brand Strategy & Business Model: How does an organization approach its brand strategy? 2 b Brands in Portfolios: What are the advantages and disadvantages of a portfolio of brands? 2 c Architecture: How do you structure a portfolio of brands? 2 d Customer: What are the client considerations to ensure the best set of offers? 2 e Optimization: How do you optimize a portfolio of brands to support strategy? 2 f Brand Equity: How do organizations ensure that they capture and optimize brand equity? 3 © Internal Consulting Group 2015 Knowledge Sources For each different dimension • The key thinking from consulting firms, journals and academia as to what constitutes best practice • Examples of this best practice across different firms and industries Relevant published materials for further reading KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 23

One Brand or Multiple Brands? Through merger or otherwise, organizations can acquire multiple brands. To optimize, they need to express their brands – or portfolios of brands – into the market in a way that key audiences will find easy to understand except One Brand Multiple Brands Brand Equity Parent brand stronger than acquired brand Acquired brand strong than parent brand Product Diversity Fairly homogeneous; line extension Diverse; new category type Brand Attributes Well aligned with company/ parent brand attributes Complementary or not aligned with company/ parent brand attributes Channel Opportunities Minimal opportunity to increase penetration or share Will increase share or penetration (add channel partners for new brand) Marketing Investment No more than enough to support one brand Enough to support company/ parent brand sub-brand Marketing Management Product management model Brand management model The key is to have a plan, implement it assertively, measure the results and have a firm definition and metric for completion Source: Godfrey Advertising 2009 © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 24

Case Study: 3 M 3 M maintains one brand which endorses every one of its 55, 000 products 3 M BRAND ENDORSING BRANDS KEY ATTRIBUTES & INSIGHTS • Formerly known as Minnesota Mining and Manufacturing company • 30 B in revenues, has 55, 000 products • The main product categories are: - Adhesive - Abrasives - Laminates - Passive fire protection - Dental products - Electronic material - Car care products - Electronic circuits - Optical films • At 3 M, the driver is the sub-brand ( e. g. Post it Note or Scotch tape), not the corporate brand • Similar to Ferrero, every product category is a main sub-brand, endorsed by 3 M Source: secondary research © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 25

Case Study: BNP Paribas As it has acquired new holdings, BNP Paribas has kept local brands and maintained a strong brand to demonstrate global reach and security MONOLITHIC IDENTITY – LOCAL BRAND KEY ATTRIBUTES & INSIGHTS • French bank and financial services company based in Paris. Fourth largest bank in the world • Split into three strategic business units: Retail Banking, Corporate and Investment Banking, Investment Solutions • Has a policy of organic growth through acquisitions of banks with a strong local footprint • Strong EU presence in France, Italy, Belgium and Luxembourg • In US operates Bank of the West and Hawaiian First through the Bancwest holding each which operate with their own local brands • BNP maintains the local brand together with the BNP logo to provide international awareness • Example of sub-brand, where the local name is preserved but joined together with the BNP logo and lettering (see section C – Architecture) Source: secondary research © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 26

Advantages and Disadvantages The literature identifies a number of advantages and disadvantages to the brand portfolio construct including: Advantages Disadvantages Untapped potential – opportunity to move to shared operating platforms leading to increased efficiency Complexity in marketing and branding creating a high cost environment, overlapping investments, etc. Integration opportunities – brands acquired through merger and not been optimized Over-branding – Dividing the attention of the audience by creating or maintaining too many brand names, logos, and messages when one will suffice. Opportunities to leverage core brands and/or enter new markets Reputational impact to the parent brand from performance or other issues of sub-brands, or vice versa (e. g. , quality, service, safety issues, public outcry) Speed to launch a new sub-brand given the reach, popularity of the core brand(s) Market saturation and/or excessive brand extension – i. e. , outside of the influence or power of the core brand Improved knowledge of market can inform the pairing back or “killing” of ill-fitting or unnecessary parts of the product range Losing high margin customers by introducing a disruptive new brand, which is targeted at the same customer need and is associated with your premium brand. Ability to capture larger share of market with complementary or parallel brands/sub-brands Over-zealous combination or loss of identity with “unknown” brand/brand hierarchy; cannibalisation of brand features and attributes, etc. Portfolio approach ensures clear relationships, roles and boundaries for brands and brand management Confused customers Often push up against “marketers” objective to grow (i. e. , need to use non-traditional approaches” Source: ICG analysis © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 27

Opportunity to move to shared operating platforms The normal process of mergers and acquisitions have been given greater impetus in the banking sector as a result of the (recent) financial crisis Banking assets are changing hands as failing institutions are rescued or wound down; divestments and reconfiguration of the banking industry are being imposed by regulatory authorities. As a result, many banking groups are finding themselves, perhaps without a clearly thought-out prior strategy, owning multiple brands. How to manage these brands and how to extract greatest shareholder value from them, is a key issue. Historically, the banking sector has not been especially effective at managing multiple brands within a single group. Other consumer goods and services industries typically have a much more sophisticated brand strategies – in many cases identifying their portfolio of brands as their single most valuable strategic asset. By contrast, banks seem to struggle with multiple brands. They tend to succeed only in certain particular circumstances, and otherwise succumb to the temptation to collapse multiple brands under a single umbrella. There are some specific characteristics of banking which mean that sustaining a multi-brand portfolio faces certain challenges. Nevertheless, there is a great potential for banks to generate significant value from a multi-brand strategy, which is currently largely untapped. Potential can be harvested from a number of approaches that work in other industries, such as: • A balance of a ruthless focus on brand differentiation and performance with common operational platforms and back-office systems • Offering multi-brand propositions that address the same customer needs, with one channel set Source: Multi-branding in the banking sector: untapped potential © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 28

Case Study: FCA (Fiat Chrysler Automobiles) has a “single platform, multiple brands” policy to target different segments, common between all major car manufacturers FCA BRAND PORTFOLIO KEY ATTRIBUTES & INSIGHTS • FCA uses the “Compact Wide” platform to produce cars with four different brands • Only 28% of a car component is “vehicle specific” Alfa Romeo Giulietta Chrysler 200 • The four different brands target different demographics, in different geographies, at very different price point (Giulietta price is more than double of Viaggio, even if they basically share 75% of the components Compact Wide Platform Dodge Dart Fiat Viaggio Source: secondary research © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 29

Brand extension Extending a brand can be dangerous if not matched by a combination of marketing rigour and a regular regime of qualitative market research EXAMPLES OF FAILED BRAND EXTENSIONS • In 1989, lighter manufacturer BIC backed its launch of a perfume with a $20 m ad campaign. The perfume was intended to be a handy accessory, carried around like lipstick or a comb • Red-blooded Harley-Davidson riders were offered to celebrate their birthdays with a cake decorated with a mini replica of their hog. The kits comprised a motorcycle (style may vary), Harley-Davidson logo and, usefully, two bushes • For male riders watching their waistline, Harley produced a cologne, as well as a perfume for their ladies • Pond's, the face-cream manufacturer, had a hard time convincing people that its toothpaste would be palatable • Tailored suits from Levi's, introduced in the 80 s, did not enjoy quite as positive a reception as its jeans KEY INSIGHTS Signs of a bad brand extension idea • Apparent reliance on brand equity despite the complete lack of value that the existing brand brings to the proposed extension • Ignorance of how competitive and cluttered the market being entered is • The inability to distinguish between a logical brand extension and an entirely bonkers one with no possibility of success • Victoria's Secret announced an extension of the brand into athletic wear. The core competences to make great lingerie would seem to support the manufacture of athletic apparel. But the problem is not production, but the usage occasion and differing brand associations between a very private bedroom and public gym Source: “Don’t catch brand extension disease”, Mark Ritson © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 30

Case Study: Disney refocused its brand portfolio by selling Miramax in 2010 BRAND EXTENSION -- DISNEY BRAND POSITIONING KEY ATTRIBUTES & INSIGHTS • Prior to the divestiture of Miramax in 2010, the Disney Group had three different sub-brands focused on three distinct customer segments, with Disney also operating as the lead brand in a house of brands - Disney (G, PG, M 12+), - Miramax (M 15+) - Touchstone (M, R) Age • It also had Pixar and Marvel playing in the same space as Miramax • Disney divested Miramax for $660 M to a real estate businessman, with a library containing more than 700 movies, after struggling 6 months to find an investor • Disney refocused its business strategy on larger, tent-pole movies from its Pixar and Marvel labels under new CEO • By shedding Miramax, the studio moved away from lowerbudget, indie fare toward films based on established franchises G, PG M 12+ M 15+ M, R “Although we are very proud of Miramax's many accomplishments, our current strategy for Walt Disney Studios is to focus on the development of great motion pictures under the Disney, Pixar and Marvel brands. We are delighted that we have found a home for the Miramax brand Miramax's very highly regarded motion picture library. ” Rober Iger, Disney CEO Source: secondary research © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 31

Illustration: Integrating brands When one company acquires another, executives have 10 distinct options for the corporate rebranding. Selecting the right strategy can set forth a compelling vision for the combined entity and send important signals to employees and the outside world. These strategies fall into one of four categories – back the stronger horse, best of both, different in kind and business as usual The 10 strategies offer different solutions for how best to utilize the brands (both names and/or visual identities) of the lead company (the acquirer) and target firm (the acquired) Lead Company Identity Elements Strategies Name Retained Symbol Retained S 5 S 3 39. 6 5. 8 S 10 S 8 2. 9 1. 0 2. 9 3. 4 S 6 S 7 S 4 23. 7 5. 3 Name Retained Symbol Retained S 2 S 9 8. 2 Name Changed 7. 3 Symbol Changed Name Changed Symbol Changed Target Company Identity Elements Source: Ettenson & Knowles, Merging Brands and Branding the Merger, MITSloan Management Review © Internal Consulting Group 2015 S 1: adjust the visual identity of the lead company S 2: lead company adopts the identity of the target firm S 3: lead and target companies share a combined name for a specific transition period, after which the organization adopts the name and symbol of the lead company S 4: new organization adopts the name of the lead company but with a new symbol S 5: new organization combines the visual identities of the lead and target companies S 6: new organization combines the names of the lead and target companies with a new symbol S 7: new organization adopts an identity that combines the name and/or visual elements of the lead and target companies S 8: lead company uses its corporate brand as a “silent partner” or endorser of the target’s visual identity S 9: new organization adopts both the new name and symbol S 10: post-merger, the lead and target companies continue to exist independently KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE Backing the stronger horse The best of both Difference in kind Legend 32 Business as usual

Opportunities to integrate brands Bucking conventional wisdom, some emerging multinationals are preserving the identity of companies they’ve taken over – HBR calls it “Partnering” Five Key Differences Who should partner? Partnering differs from traditional post-merger integration in five important ways Some companies are more suited than others to the handsoff approach Integration Partnering Structure Absorb acquired company Keep acquired company separate Activities Integrate core and supporting activities Selectively coordinate a few key activities Top Executives Replace Retain Autonomy None, or very limited Near total Speed of Integration Rapid Gradual Integration Partnering What kind of resources does the acquired company have? The same or similar resources Complementary, superior, or unique resources such as brands or technologies What will create value after the takeover? Reduction of costs by combining assets and activities, or gaining economies of scale Growth in revenues by entering new markets or new products, and sharing best practices What kind of company is the acquirer? Hierarchical, with a low tolerance for ambiguity; a desire to teach; an emphasis on getting results Collaborative, with a high tolerance for ambiguity; a willingness to learn; a long-term partner Partnering entails keeping an acquisition structurally separate and maintaining its own identity and organization. The acquirer then treats the acquired organization as it would a partner in a strategic alliance. (Examples: AV Birla Group, the Mahindra Group, and the Tata Group of India; the Ulker Group in Turkey; Neusoft in China; and Am. Bev in Brazil) Source: Don’t integrate your acquisitions, partner with them; Harvard Business Review December 2009 © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 33

Too many brands – some points to watch for on the road to consolidation Frequently branding consultants are asked to take part in major consolidation processes. In most cases, they are called in after agreements have been signed announced to the market because branding is rarely deployed as a key tool at the negotiating table from the outset. While companies do understand that their brands are more than just names or logos, many are not sure how their brands can actually become live business assets capable of generating identification, differentiation and value. Ultimately, the important point in these multi-brand situations is to decide what brands to retain, what to join, what to drop, and what has to be created starting from scratch. Assuming that an understanding of synergies and complementarities will at the very least mean examining the name, symbol, visual identity, culture and communication of those involved, it is easy to see that an effort like this can be complex. There are ten key points to watch for on the road to consolidation: 1. When business strategy has yet to be defined 2. In a rush, a corporate name becomes a brand name 3. When the role of stock ownership is ignored in brand building 4. Capital market a key target for branding 5. Internal resistance must be crushed 6. When a brand is bought from a founder 7. Corporate citizenship is part of the package too 8. Brazilian brands go shopping around 9. When it’s time to deconsolidate, reorganize brands 10. When verbal and visual identities build a bridge between rational and emotional Source: Branding a key force in merge & acquisition deals, Interbrand © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 34

What to do with an inherited portfolio of brands? – Table of Contents Section Component Description 1 Executive Summary Overview of our research and findings 2 Effectively Managing a Portfolio of Brands Overview of the key components for Portfolio Management 2 a Brand Strategy & Business Model: How does an organization approach its brand strategy? 2 b Brands in Portfolios: What are the advantages and disadvantages of a portfolio of brands? 2 c Architecture: How do you structure a portfolio of brands? 2 d Customer: What are the client considerations to ensure the best set of offers? 2 e Optimization: How do you optimize a portfolio of brands to support strategy? 2 f Brand Equity: How do organizations ensure that they capture and optimize brand equity? 3 © Internal Consulting Group 2015 Knowledge Sources For each different dimension • The key thinking from consulting firms, journals and academia as to what constitutes best practice • Examples of this best practice across different firms and industries Relevant published materials for further reading KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 35

Goals of a ‘Brand System’ The goals of a Brand System are qualitatively different from the goals of individual brand identities. • Exploit brand commonalities to generate synergy. A set of brands may be related by brand name (Weight Watchers or Kraft) or a partial name (such as Hewlett-Packard Jet series), yet have different identities because different products or markets are involved. The challenge is to exploit commonalities in order to generate synergy in the form of enhanced brand impact or reduced execution. • Reduce brand identity damage. Differences between brand identities in different contexts or roles have the potential to undercut a brand. The challenge is to manage the system to avoid such undesirable outcomes. • Achieve clarity of product offering. A system goal should be to reduce confusion and achieve clarity among the product offerings. • Facilitate change and adaptation. All brands need to adapt and change in response to external forces. A system can help manage the process, so that needed changes can occur in a timely and effective manner. • Allocate resources. Each brand role requires resources. Too often a brand investment decision is based on an insular analysis of the brand-related business, and therefore neglects the impact a brand can have on the other brands in the system and fails to adequately consider future brand roles. Source: D. A Aaker Managing Brand Systems, pg 241, Building Better Brands, The Free Press, 1996. © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 36

Illustration: Brand Architecture & Brand System Brands within a System usually fall into a natural hierarchy called a ‘Brand Architecture’ Position in the Hierarchy Definition Examples Brand Architecture Type Monolithic, Master, Endorser, Partner Monolithic Endorser Master Corporate Brand that identifies the corporation behind the product or service offering General Motors Nestle HP Range Brand the ranges over several product classes Chevrolet (e. g. Vans, trucks, cars) Carnation (e. g. Instant breakfast, infant formula, evaporated mil) HP Jet Brand (e. g. Desk. Jet, Laser. Jet, Office. Jet, Design. Jet) Product Line Brand the represents a product or product class Chevrolet Lumina Carnation Instant Breakfast Laser. Jet IV Sub-Brand that distinguishes a part of the product line Chevrolet Lumina Sports Coupe Carnation Breakfast Swiss Chocolate Laser. Jet IV SE Branded Feature/ Component/ Service A design feature that enables a brand to excel if sub-brand lacks distinctiveness Mr. Goodwrench Service Systems Nutra. Sweet Resolution Enhancement D. A Aaker Managing Brand Systems, pg 242, Building Better Brands, The Free Press, 1996. © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 37

The brand relationship spectrum Many company/ brand structures have become increasingly complex. Boston University outlines 5 portfolio strategy variations, the prevalence of each, along with the level of leverage and prominence (perceptual) and the specific entity that drives customer behaviour (physical) that can be derived from each. Corporate Brand Driver Role (Perceptual dimension) Strong Brand Portfolio Strategy Variation Branded House (Monolithic) – 28% e. g. , Boeing, Fedex, IBM, Tiffany & Co. , Starbucks, UPS Corporate Brand Visibility/ Prominence (Physical dimension) High Branded House (Sub-brand) – 10% e. g. , Apple Bausch & Lomb, Intel, Analog Devices, Microsoft Branded House (Endorsed Branding) – 6% e. g. , 3 M, Intuit, Astra. Zeneca, Genzyme Weak House of Brands – 12% e. g. , Darden Restaurants, Fortune Brands, Proctor & Gamble, Yum! Brands Low Hybrid Strategy – 44% Combination of above branding strategies e. g. , Black & Decker, Sysco, Heinz, Kimberley Clark Corporation, Limited Inc. , Campbell Soup, Gillette Corporation, Hershey Food Corporation Source: Hsu, Fournier and Srinivasan: Brand Portfolio Strategy Effects on Firm Value and Risks, Boston University School of Management © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 38

Brand Architecture Models ICG analysis suggests that the two traditional models , i. e. , Monolithic Master Brand Core House have evolved into seven variations due to an increasingly complex marketplace BRANDED HOUSE VARIATIONS A MONOLITHIC MASTER BRAND One single brand across segments and industries B SUB BRAND Main brand retains or shares the purchase driver role. Sub-brands stretch and modify brand into a different category, segment or business unit. C ENDORSER Sub brand is the driver of brand preference. Corporate brand provides support and credibility to the driver brand’s claims. G HYBRID Architecture composite of two or more portfolio approaches. Typically as a result of inorganic growth but can also be organic by geography or sector. . HOUSE OF BRANDS VARIATIONS D JOINT FORCES Two companies form a new brand with a special purpose E WHITE LABEL Multiple brands not related owned by the same company F CORE HOUSE Different brands targeting different customers according to an architecture lens Sources: ICG analysis, ‘Brand Portfolio Strategy Effects on Firm Value and Risks, L. HSU, S. Fournier and S. Srinivasen, Boston University School of Management, July 2010. Building Strong Brands, D. A. Aaker , The Free Press, 1996 © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 39

Case Study: Samsung (A) Branded House – Monolithic Master Brand Samsung is one of the best examples of Master Brand architecture, spanning a wide range of different industries and geographies SAMSUNG LOGOS IN DIFFERENT INDUSTRIES KEY ATTRIBUTES & INSIGHTS • A corporate brand across categories primarily in technology • Same brand spans across extremely different industries and geographies • Monolithic because it is a single corporate master brand valued at $39, 610 billion, ranked 8 th on Interbrand Global Brands Ranking (M. Duckler, www. fullsurge. com. ) • It is a 'brand led business' (The Brand Gym, D. Taylor) as confirmed by the CMO "The brand ideal informs everything we do. . . new technologies will come and go, the Samsung brand is the only asset that will ever live on beyond our products. " • Samsung is a main player in very disparate industries - Electronics (largest player) - Heavy Industries (2 nd largest ship builder in the world); Engineer (13 th largest) - Construction - Life Insurance; Marine Insurance - Theme parks - IT consulting; Defence and video surveillance Source: secondary research © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 40

(B) Branded House – Sub-Brand Case Study: TD Bank As an example of sub-brand, the TD (Toronto Dominion Bank Group) maintains the same logo in every service offered globally LINES OF BUSINESS KEY ATTRIBUTES & INSIGHTS • Canadian multinational banking and financial services corporation • Created in 1955 as a merger of Bank of Toronto and Dominion Bank • Operates in Canada with the “TD Canada Trust”, and in the USA as “TD Bank” • TD has a global commercial bank that operates under the brand “TD Commercial Banking” • TD offers different services, as well as insurance, wholesale banking, investment and wealth management, vehicle financing • In every operation TD runs, it maintains the overbrand TD logo, with the specific name of the service provided Source: secondary research © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 41

(C) Branded House – Endorser Brand Case Study: Ferrero is a good example of a endorser brand with each ‘certified’ by Ferrero ENDORSER BRAND KEY ATTRIBUTES & INSIGHTS • Italian manufacturer of chocolate and other confectionery products • In 2009, Reputation’s institute survey ranked Ferrero as the most reputable company in the world • Privately owned, includes 38 trading companies, 18 factories and 21, 500 employees • Very secretive company, never held a press conference • Products are made with machine designed by the in-house engineering department • Ferrero has four main products categories: - Nutella - Tic Tac - Chocolates (Mon Cheri, Rocher, Raffaello, etc) - Kinder – a product line offering chocolates and confectionery products targeting kids • Each product category has a different subbrand endorsed by Ferrero Source: secondary research © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 42

(D) House of Brands – Joint Forces Case Study: Redi. ATM represents Joint Forces Architecture with Cuscal and NAB in creating one of the largest Australian ATM networks under one common brand COMMON BRAND KEY ATTRIBUTES & INSIGHTS • Cuscal, a b 2 b provider of wholesale and transactional banking services, developed the redi. ATM sub-network in response to the introduction in direct charging in March 2009 • Cuscal and NAB agreed to join forces to create a leading ATM network in in 2009 • NAB's 1, 700 ATM were combined with the newly born, Cuscal managed 1, 400 redi. ATM sub-network • Cuscal partnered together with NAB to reach the critical mass to push the redi. ATM national • redi. ATM is partnered with more than 100 participating retail financial institutions • One of the largest Australian’s ATM network • All NAB-owned ATMs carry the NAB logo and all ATMs within the combined network display the redi. ATM logo • The redi. ATM network provides customers of each partner financial institution, subject to their own institutions charges use of any redi. ATM without being charged a direct fee Source: secondary research © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 43

Case Study: Philip Morris International (E) House of Brands – White Label An example of White Label architecture, where each cigarette brand operates independently in the market, but produced by the core company WHITE LABEL KEY ATTRIBUTES & INSIGHTS • Previously named Philip Morris Companies Inc • Philip Morris Companies rebranded itself as Altria in 2003, in an attempt to divert its image from an additive carcinogens seller • In 2007 Altria spun off Philip Morris International to give it more “freedom” to pursue growth in emerging markets outside the constraints of a US corporate ownership • Philip Morris International sells multiples brands around the world • It has a dual approach – some strong international brands (e. g. , Marlboro) and some local ones (e. g. , Gauloises) • The brands are completely disconnected from each other, each one of them with a different geographic and demographic target • Philip Morris as a brand is just one of the global ones, and does not endorsed any other brand it owns Source: secondary research © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 44

Case Study: HBOS (F) House of Brands – Core House An example of a House of Brands, HBOS built a ladder of mortgage brands based on customer risk and affluence HBOS mortgage credit ladder Target customer segments Benefits of credit “ladder”/ credit “repair” § Affluent borrowers § Broker/Internet/telephone channel § Users of the offset product § Mitigated prime brand risk while capitalising on the nonconforming market growth § Branch and Broker channels § Core Prime borrowers § Multiple brands enabled “true” segmentation implementation throughout the organisation (e. g. product marketing, sales process, front line staff) Non-conforming lender acquisitions § BOS was the preferred very near prime brand for brokers § Non-conforming – Small business – investment mortgage – High LTV – Slight historical credit blemish § Ability to migrate customer up or down the credit “ladder” depending on circumstance changes (i. e. divorce) § Credit “repair” model provided incentives for “good” payment behaviour through a move to a lower interest rate brand while increasing customer retention § Very high risk customers who cannot borrow through conventional lenders Source: secondary research © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 45

Case Study: Cadbury (G) Hybrid Brand Architecture Cadbury is a good example of a Hybrid Architecture using different architecture approaches according to the target market and geography DIFFERENT CADBURY BRANDS KEY ATTRIBUTES & INSIGHTS • British multinational confectionery company, second largest with 11 B GBP in revenues • Cadbury has a mix of brand endorsement, architected house and monolithic architectures • It has a different approach depending from the product line and the geography • Incorporates more than one system for a specific strategic rationale • Cadbury has a strong corporate brand, a leading sub-brand 'Dairy Milk Block' whose imagery is the corporate brand identity and this segment is structured like an umbrella brand • Yet in other segments, like confectionery, Cadbury is just an endorser brand, much less so than Ferrero • Flake, Crunchie, Time Out etc have distinct propositions and branding with 'Cadbury' far less prominent • Cadbury is also a great example of flexibility of branding across geographies Source: secondary research © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 46

Impact and Hallmarks of Brand Architecture Brand awareness suffers without a quality brand architecture. The hallmarks of good brand architecture are simplicity, scalability and commitment. The Hallmarks of Good Brand Architecture The Top Three Issues Over-branding – Dividing the attention of the audience by creating or maintaining too many brand names, logos, and messages when one will suffice. Mis-branding – Confusing customers by applying an existing brand to a new product with a very different audience. Cannibalization – Losing high margin customers by introducing a disruptive new brand, which is targeted at the same customer need and is associated with your premium brand. Simplicity – It is easy for the customer and your team to understand. Scalability – The way that you unify or introduce brands leaves you room to grow, rather then painting you into a corner down the road. Commitment – As with all successful branding efforts, the team must be committed to the architecture and must not break your brand architecture rules for vanity Source: http: //distility. com/building-brand/what-is-brand-architecture/ © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 47

What to do with an inherited portfolio of brands? – Table of Contents Section Component Description 1 Executive Summary Overview of our research and findings 2 Effectively Managing a Portfolio of Brands Overview of the key components for Portfolio Management 2 a Brand Strategy & Business Model: How does an organization approach its brand strategy? 2 b Brands in Portfolios: What are the advantages and disadvantages of a portfolio of brands? 2 c Architecture: How do you structure a portfolio of brands? 2 d Customer: What are the client considerations to ensure the best set of offers? 2 e Optimization: How do you optimize a portfolio of brands to support strategy? 2 f Brand Equity: How do organizations ensure that they capture and optimize brand equity? 3 © Internal Consulting Group 2015 Knowledge Sources For each different dimension • The key thinking from consulting firms, journals and academia as to what constitutes best practice • Examples of this best practice across different firms and industries Relevant published materials for further reading KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 48

Functions of the Brand for the Consumer According to Kepferer (1997), brands serve eight functions. “The value of the brand comes from its ability to gain an exclusive, positive and prominent meaning in the minds of a large number of consumers” Function Purpose Consumer Benefit Identification Address mechanical and concern the essences of the brand (i. e. , to function as a recognized symbol in order to facilitate choice and to gain time To be clearly seen, to make sense of the offer, to quickly identify the sought-after products Reducing the perceived risk To be sure of finding the same quality no matter where or when you buy the product or service Practicality Guarantee To allow savings of time and energy through identical repurchasing and loyalty Optimization To be sure of buying the best product in its category, the best performer for a particular purpose Characterization To have confirmation of your self-image or the image that you present to others Continuity Concern the pleasure side of the brain. Satisfaction brought through familiarity and intimacy with the brand that you have been consuming for years Hedonistic Satisfaction linked to the attractiveness of the brand, to its logo, to its communication Ethical Satisfaction linked to the responsible behaviour of the brand in its relationship towards society Source: Francisco Guzman (Esade), A brand building literature review © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 49

The brand idea The “brand idea” describes the essence of what you provide to the marketplace in simple terms Attributes and Features: Separate your product or service features into categories, then focus on those attributes that are most desirable and/or that provide differentiation. Functional Benefits: Identify the tangible benefits that consumers will experience by using your product or service, i. e. , ROI, cost savings, time savings, enhanced productivity, whiter teeth, etc. Emotional Benefits: Identify the intangible benefits that consumers will experience, ie: Happiness, confidence, more time, peace of mind, more attention, etc… Brand Personality: Identify the human characteristics of your brand. Your brand personality will dictate how consumers respond to your brand on an emotional level, for example sincerity, competence, or irreverence, just to name a few. Brand Idea: The essence of your brand, distilled down as succinctly as your product or service will allow, this is the idea that you want your customers to think of every time they hear or see your brand. Starting with the foundation of your attributes and features , roll each level into the next creating a synergistic relationship between each level of the pyramid until it ends with the true essence of your brand. Source: http: //www. noesismarketing. com © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 50

Case Study: Great West Lifeco GWL is an example of a number of brands acquired over time, which are operated as distinct brands, with differentiation in their brand idea and target clients EXAMPLE: CORE HOUSE/HOUSE OF BRANDS KEY ATTRIBUTES & INSIGHTS • Insurance centred financial holding company that operates in USA, Canada, EU and Asia • It has 5 wholly owned, regionally focused subsidiaries • The company grew internationally through acquisitions over the years • Decided to maintain local brands to preserve the inherited awareness and customer base • Similar to Sun. Corp, it uses its holding name in his home market (Great West brand) • Has completely disconnected brands gained through acquisitions of different companies - Great West Life and Annuity Insurance Company: provides life insurance in the USA, together with retirement benefits and annuities - Great West Life Assurance Company: operates in Canada and owns Canada Life - Canada Life: provides Life Insurance in Canada, Ireland, UK, Germany, Isle of Man - London Life: provides Life Insurance in Canada - Putnam Investment: money manager for mutual funds and institutional assets in the US - Irish Life: Ireland’s leading life and pensions company Source: secondary research © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 51

Shifting Demand: The ultimate point of a Brand is not to create emotional appeal or generate buzz. The point is to shift customer demand Well managed brands shift demand in three ways, by: • Commanding a higher price (i. e. , too high a price will dampen demand reduce revenues) • Generating more volume (i. e. , the stronger the brand, the further out you can push the intersection of volume and price in order to maximise revenues and profits • Using some of both Bain & Company’s analysis of 21 product categories quantifies the power of brands • For example, in the MP 3 category, the leading player captured 2. 9 times the market share of the second-ranked competitor as a function of its brand alone (holding price and other product features equal) • Put another way, the leading brand was so strong that the company could double its price and still have a market share equivalent to the second brand • We found a similar dynamic in most industries Source: Bain & Company, Brand Strategy that shifts demand: less buzz, more economics © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 52

Illustration: Calculating how much brand can shift demand Brands shift demand to companies that manage them well MEASURING BRAND STRENGTH FOR 21 PRODUCT CATEGORY KEY ATTRIBUTES & INSIGHTS • The table shows the relative strength of 21 pairs of brands determined through discrete choice studies that Bain conducted over the past decade. • A brand’s equity—its power to shift demand —can be measured through discrete choice modeling, a technique for revealing the relative strength that brands have when customers make choices among competing products or services. • Discrete choice analysis presents customers with trade-offs in product features, price and other attributes, then asks them to make choices. • One key measure is “choice share, ” which measures the power of each category’s top and second-ranked brand to shift demand, holding price and product features equal. Source: Bain & Company, Brand Strategy that shifts demand: less buzz, more economics © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 53

How a brand makes its way in the world A customer-led perspective on the purpose of a brand leads managers to spend their time asking questions such as “do customers believe what we say? ”, “what occasions make them think of our brand? ” and “how should we deliver on our promise to them? ” Effective brand strategy depends on managing three stages of interaction with customers to shift demand at a fourth and final stage. 1. The first stage involves defining the brand’s meaning – or how it should live in the minds of customers – and the signals chosen to convey that meaning 1 2. The second – the brand signals then get transmitted to customers, employees, investors, and other stakeholders 2 3. Thirdly – the signals can be amplified for better or distorted for worse by people along the way, so companies continuously need to monitor and adjust their transmissions 3 4. And finally – the sum of these interactions determines how the brand is received in the customer’s mind and how it stimulates buying behaviour 4 Source: Bain & Company, Brand Strategy that shifts demand: less buzz, more economics © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 54

1 Define the brand’s meaning and signals The first stage involves defining the brand’s meaning – or how it should live in the minds of customers – and the signals chosen to convey that meaning The brand’s meaning consists of a core promise to a defined set of customers. Elements of the promise include which customer segments one is trying to reach, how the product is differentiated and how it addresses the target customer priorities A brand can be well known yet not wholly effective in shifting demand if its meaning remains fuzzy in the customer’s mind (e. g. , Sony which has tried to be all things to all people has in the past lost share to organization’s like Samsung who have a much crisper message they convey well-defined benefits that address customers’ needs and stand out clearly from the competition Managers need to re-examine their brand’s meaning whenever they try to penetrate a new customer segment, whether that involves moving up or down-market, reaching younger or older people or moving from business customers to consumers. Just as a theatrical script needs actors and a set to bring the words to life, brand meaning needs to be translated into specific signals, consisting of logos, taglines, mascots, events and other devices Signals provide a short-cut to help customers navigate a world of choices Source: Bain & Company, Brand Strategy that shifts demand: less buzz, more economics © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 55

2 Manage transmission of the brand signals The second – the brand signals then get transmitted to customers, employees, investors, and other stakeholders To communicate brand meaning to everyone who matters, most companies think first of explicit marketing through advertising and in recent years through social networks. But transmission should extend beyond traditional marketing to include all the points where he customer touches the product and company, from installation to frontline customer service to packaging to website navigation. Such implicit marketing, conveyed through every interaction the customer has with the brand, can be equally powerful. While most managers acknowledge that the customer’s overall experience with the brand does matter, execution often falls short because a great experience requires coordination of many moving parts owned by different branches of the organization That is why the brand promise must be clear and bright at all levels and in all parts of the organization. Incentives for front line employees and managers should be aligned with that brand promise, so that their behaviour delivers on promises. Brand signals need to reach the right customer segment with the right message at the right moment Source: Bain & Company, Brand Strategy that shifts demand: less buzz, more economics © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 56

3 Amplify the signals and battle distortion Thirdly – the signals can be amplified for better or distorted for worse by people along the way, so companies continuously need to monitor and adjust their transmissions Repairing harm done by distortion after the fact can take a major effort. Conversely, on the upside, brand amplification can translate into a significant share gain in customer spending. Leading brand managers put in place a disciplined process to encourage amplification and mitigate distortion and cross-talk: • They plan by incorporating opportunities to amplify the brand message into traditional marketing and public relations as well as social media tactics • They listen by regularly soliciting feedback from customers. Some companies are developing a comprehensive capability of listening to a broader group as well as using “social analytic” software tools • Pragmatic managers act by responding to detractors of the brand quickly and genuinely, empowering employees to solve customers’ problems. They also act quickly to encourage brand promoters, by showing appreciation for positive word of mouth Source: Bain & Company, Brand Strategy that shifts demand: less buzz, more economics © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 57

4 Closely manage customer reception and response And finally – the sum of these interactions determines how the brand is received in the customer’s mind and how it stimulates buying behaviour Ultimately, the brand lives in the mind of the consumer. Knowing how the brand is perceived enables companies to make midcourse adjustments in an offering or a campaign, so that the brand gets better aligned with business objectives As managers look to shift demand though brand equity, they should cover all the dimensions of reception. Awareness: The best known dimension whether a particular brand comes to mind when the customer is thinking about the product category Congruence: A closely related dimension that concerns the ability of customers to describe that brand accurately Credibility: Third aspect of reception, as customers should trust and believe the brand promise. It often takes time to build, especially in high-stakes areas such as health or finance Salience: Finally, pursued by astute brand managers – they always given consumers a reason to buy, either in the course of promoting general awareness, during a specific call to action at a point of purchase, or by making the brand more visible as consumers shop For more information on brand equity see Section F: Brand Equity Source: Bain & Company, Brand Strategy that shifts demand: less buzz, more economics © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 58

Case Study: ANZ New Zealand National Bank A two–stage merging process driven by a clear corporate strategic vision of the future resulted in one of the most successful mergers of brands of this size without a loss of customers. INTACT BRAND PORTFOLIO KEY ATTRIBUTES & INSIGHTS • ANZ Banking Group is the largest company in New Zealand. SUB-BRANDS MAINTAINED BRANDS MERGED • Nine years after ANZ Banking group bought the National Bank from Britain's’ Lloyds TSB for A$4. 915 billion (plus a dividend of NZ $575 million paid from National Bank’s retained earnings), a two-stage process over 24 months effectively unified the two banks under ANZ Brand. • Cost of merger $382 million. The bank reduced retail and business banking products from 160 in 2010 to 75. Annual results 2013 included a 750 basis points year on year reduction in ANZ NZ’s cost to income ratio to 43. 1%. • Maintained market share of 40% in 2013/14 without losing customers. • Stage 1 - December 2010 to October 2012 ANZ moved onto National Bank’s core systemics IT banking platform and customer data. • Stage 2 - Full brand merger of The National Bank into ANZ. • One. Path has stopped being a commercial company brand, e-trade is also disappearing. Source: Craig Sims, ‘Lessons from a Merger’, ANZ Bluenote Digital Publication, https: //bluenotes. anz. com/posts/2014/03/lessons-from-a-merger/ © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 59

Lessons from a Merger (1) ANZ NZ CIO Craig Sims outlines 10 things that contributed to the success of the ANZ-National Bank merger The 10 success factors What Craig had to say? 1. Align the merger to the strategic direction of the company “It’s an opportunity to transform the business with a completely new set of brand values and performance culture. During execution, assess and reassess to ensure alignment” 2. Build a team of experts “Our team had plenty of experience and ensured everyone knew their role” 3. Use tried-and-true approaches to limit risk “When we brought the banks together on to one IT system we chose a contractor with plenty of experience [and] added people with large technology project experience” 4. Use strong project methodologies “Without strong project governance, you don’t know when you’re in trouble” 5. Know what success looks like “In complex projects it’s essential each step is done well and provides a strong foundation for the next. We used key decision point process and success criteria - if we didn’t meet success criteria at each stage, we didn’t go on to the next one. This also helped us understand what had to be done and what was merely nice to do. A tight rein on scope helped with focus, resources and, ultimately, executing the change. ” https: //bluenotes. anz. com/posts/2014/03/lessons-from-a-merger/ © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 60

Lessons from a Merger (2) …. 10 things that contributed to the success of the ANZ-National Bank merger The 10 success factors What Craig had to say? 6. Keep stakeholders in the picture “Any brand change creates uncertainty. In the weeks post-merger we made thousands of phone calls and sent out tens of thousands of individual letters to customers and stakeholders explaining our aims and any changes that might affect them. Many customers were sad at the loss of the National Bank brand but stayed with us. ” 7. Frontline people are the best ambassadors “Banking is all about relationships - customers trust the person they deal with at the branch every day. We ensured our staff knew our vision for a single brand. ” 8. Keep communications simple and consistent “Whether with customers or staff, a compelling story is vital. Clear communications and simple, consistent and inspiring messaging help people look beyond uncertainty and get excited about what’s ahead. High visible leadership is crucial to demonstrate a commitment to the values and direction of the new entity. ” 9. Have a post-implementation plan. “When we began planning for the transition, we recognised that a formal post-transformation programme would be necessary to ensure the changed processes and systems worked properly and were familiar to staff and customers. ” 10. Bake in a culture of change. “Financial services is changing faster than ever… The merger engendered a culture [of continuing] change focussed on simplified product offerings, better customer service and achieving cost efficiencies” https: //bluenotes. anz. com/posts/2014/03/lessons-from-a-merger/ © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 61

What to do with an inherited portfolio of brands? – Table of Contents Section Component Description 1 Executive Summary Overview of our research and findings 2 Effectively Managing a Portfolio of Brands Overview of the key components for Portfolio Management 2 a Brand Strategy & Business Model: How does an organization approach its brand strategy? 2 b Brands in Portfolios: What are the advantages and disadvantages of a portfolio of brands? 2 c Architecture: How do you structure a portfolio of brands? 2 d Customer: What are the client considerations to ensure the best set of offers? 2 e Optimization: How do you optimize a portfolio of brands to support strategy? 2 f Brand Equity: How do organizations ensure that they capture and optimize brand equity? 3 © Internal Consulting Group 2015 Knowledge Sources For each different dimension • The key thinking from consulting firms, journals and academia as to what constitutes best practice • Examples of this best practice across different firms and industries Relevant published materials for further reading KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 62

Optimizing your brand portfolio Marakon research suggests that the explanation for the gap between realized and potential brand value is less to do with individual brands and much more to do with the lack of a systemic and well-governed means of managing a portfolio of brands as a whole There are four fundamental principles that can unlock significant additional intrinsic value for brand portfolios: 1. Ensure clear and continuous line of sight into brand portfolio performance and potential 2. Leverage truly distinctive consumer insights into winning portfolios with clear brand roles 3. Establish a governance model that reinforces clear accountabilities for managing the brand portfolio 4. Allocate resources across your portfolio of brands in as ‘strategic’ a manner as you would across your portfolio of businesses Source: Marakon, Stop leaving money on the table: Get more value from your brand portfolio, May 2012 © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 63

Case Study: Apple As Apple has expanded its product lines, it has used one logo, one colour palette, one font and one layout for all of its sub-brands SUB-BRAND KEY ATTRIBUTES & INSIGHTS • Compared to Microsoft, Apple has a far more stream-lined sub-brand architecture • Benefits from a smaller portfolio of products, more focused base of target customers, and careful naming strategies • Apple even incorporates certain subbrand architecture traits by only having only one logo, one colour palette, one font, and one layout style • However, the Apple brand architecture differs from the sub brand architecture by having unique trademarked names for its offerings, for example “i. Pod”, “i. Pad”, “Mac. Book” and “i. Tunes”. • Further, while Apple eschews unique word mark designs, its sub-brands always feature distinctive icons that serve as sub-brand logos. Source: secondary research © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 64

Case Study: Hearthbrand Using an Endorser Architecture, Unilever launched the “Hearthbrand” to increase international brand awareness and promote cross synergies HEARTHBRAND AROUND THE WORLD KEY ATTRIBUTES & INSIGHTS • Unilever is the world’s biggest ice-cream manufacturer, with annual turnover of EUR 5 B • The bulk of the company’s ice-cream business falls under its “Hearthbrand” brand umbrella • The Hearthbrand was launched in 1998 as an effort to increase international brand awareness and promote cross-border synergies in manufacturing and marketing (“centralisation”) • Present in more than 40 countries • Each country retained the local brand name so as to keep the familiarity built over the years • Prior to the heart logo, each country could choose its own logo • The most common one consisted of a blue circle with the local brand's name over a background of red and white stripes • Second most common old logo, used by Wall's in the UK and other countries, was a yellow logo with Wall's in blue text • Unilever generally manufactures the same icecream with the same names, with rare occasions of regional availability, under different brands Source: secondary research © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 65

Brand Focus Several factors have given companies a wake-up call as we start the new millennium, to an overdue focusing on brand portfolios Mergers and acquisitions Cost of media support Duplication and crossover Competition authorities force sell-off Expensive, brand-building mixes can be afforded on fewer brands BRAND FOCUS DRIVER Stock-market pressure Retail power Build bigger brands to have more bargaining power Protect share of shelf space Pressure to see better return on investment Peer group pressure from other companies “Instead of fragmenting resources we are able to invest in significant brand development and big-hit innovation for one or two. We are already seeing the consequences in the performance of our leading brands” Niall Fitzgerald, Chairman, Unilever Source: David Taylor, The Brand Gym, Workout Three, Doing Fewer Things Better, JW and Sons 2003 © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 66

Do fewer things better Having too many brands fragments financial and human resources, spreading them too thinly. Winning teams drive profitable growth by being ruthless about identifying and then backing those brands with the best potential to create growth. They focus budgets, energy and commitment and so boost return on brand investment. The key to developing the right portfolio is balancing how many brands you need to achieve your business ambitions against how many brands you can afford to feed with the available budget Fragmentation is bad, focus is good • Several issues have given companies a wake-up call as we have entered the new millennium – one of which is the preponderance of brands in many organizations. While in some companies there is an underlying rationale for the brand portfolio in place today, but often there is not, or it has continued to evolve to encumber the overall brand equity that a healthy portfolio of brands would generate. This has led many organizations to an overdue focus on their brand portfolios with a view to improved performance. The benefits of brand focus go beyond mere cost reduction • Benefits include the stimulation of innovation and creativity. It is good to be one of the focus brands in a portfolio, but if the ‘tail’ of weaker brands is being cut, then growth has to come from one place, and that is you The essence of the challenge in optimizing a portfolio of brands (i. e. , the trade off between number and profitability) is how many brands to you need vs. how many brands can you feed? Source: David Taylor, The Brand Gym, Workout Three, Doing Fewer Things Better, , pg 241, JW and Sons 2003 © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 67

Case Study: the Orange France Story France telecom did a brand rationalisation exercise – from three to one BRAND RATIONALISATION KEY INSIGHTS • In 2001 France Telecom replaced three mobile network “product brand” with a single one • Previous client target was: - Itineris : subscriptions - Ola: pay as you go - Mobilcarte: pay as you go for youth • France Telecom believed the brand had strong enough functional and emotional values to have a large footprint covering a range of product areas • The move was driven by the desire to have a single, global mobile brand with nothing in the original portfolio up to this challenge • Massive and expensive task: $30 M campaign, 18 different letters to each subscriber ADVANTAGES OF A FOCUSSED PORTFOLIO • Only one true brand to be built and maintained • Cheaper to invest in creating and enhancing the emotional values Source: David Taylor, The Brand Gym, Workout Three, Doing Fewer Things Better, pg 50 JW and Sons 2003 © Internal Consulting Group 2015 • Evident synergies: France Telecom spent $140 M in marketing in 2000, so a 10% reduction would justify the rebranding KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 68

What type of portfolio? At the core of the optimization process is choosing the type of portfolio that suits the organization and its objectives Criteria Mono-brand Sub-brand Multi-brand Example: BMW Gillette P&G’s Pantene, Wash & Go and Head & Shoulders Brand positioning Consistent across platforms Small differences in competition, reasons to believe, benefits Essence, values and core promise consistent Differences in personality and price positioning Different by brand platform Selling line, brand properties (e. g. , mnemonics, visual equities) Common across platforms (“ultimate driving machine”) Common across platforms (The “best a man can get”) Different by brand Investment support Brand campaign used to promote specific platforms Sub-brand campaigns used with unifying family feel and tone Major, dedicated support for each purchase brand Role of brand support for each platform Promote awareness of the specific product Create specific value proposition that tells one chapter of an overall brand story Build distinctive personality and proposition Benefits Savings in design, commercial production, brand management All communication builds one brand Some savings in design, commercial production, brand management Target different segments while Issues Compromises communication of each platform Dilution of brand image Risk of sub-brands being treated like stand-alone brands, getting too much support and not building core brand Needs major investment foe each platform Can fragment resources Source: David Taylor, The Brand Gym, Workout Three, Doing Fewer Things Better, JW and Sons 2003 © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 69

Looking at the bigger picture in a systemic fashion – Need and Feed Rather than jump straight into a debate about which brands deserve more or less support, leading organizations approach the challenge by first identifying growth opportunities in the marketplace and then considering which of the company’s brand assets could be used to attack these Brand Portfolio Process Growth opportunities Brand/ product assets Company philosophy Cost of support How many brands to we NEED? Trade Off Brand investment plans Total marketing budget How many brands can we FEED? Portfolio strategy and brand vision Growth plan Brand stretch Brand migration New brand creation Source: David Taylor, The Brand Gym, Workout Three, Doing Fewer Things Better, JW and Sons 2003 © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 70

Need – Growth Opportunities Before you can start to answer the questions of how many brands you need, the opportunities for growth have to be identified. To do so, requires the market to be defined and mapped out Defining the market: • an important consideration in the mapping process is to define the market as broadly as possible. For example, when segmenting the laundry products category, the major players treat cleaning and care as two separate markets and then debate how many brands to have in each. • an alternative approach would be to consider these markets as one and challenge whether all the brands are in fact necessary • The broader the market, the more challenging the questions and the bigger the potential savings from rationalization will be Mapping the market: • Requires a number of dimensions of segmentation to be considered – e. g. , the 6 P’s – i. e. , products, purpose, periods, people and price (see following page) • Look at the different dimensions and understand how they impact your brand – e. g. , customer types and their needs • Using the segmentation variables and some common-sense, to understand how choice is made • Often an organization can ‘anchor’ on one or more key dimensions and types – e. g. , key is people and a specific focus on middle aged men Source: David Taylor, The Brand Gym, Workout Three, Doing Fewer Things Better, JW and Sons 2003 © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 71

Need – Brand Assets The next part of the analysis phase uses a filtering process to identify those brands that can be the pillars of the portfolio and those that should received reduced support or even be killed Analysing Brand Assets Name and symbol Has distinctive name, typeface, colour and symbol Known Has a high level of awareness (e. g. , over 70% on a prompted basis) BRAND (ASSET) FILTERS Trusted Head and heart Has an earned reputation on key measures driving preference Has emotional connection not just functional meaning • Break the definition of brand down to a series of filters to objectively assess the portfolio • Use the 6 Ps or another framework to highlight the footprint of the brand (e. g. , those areas of the market where the brand has a strong presence) • Use this information to measure brand awareness, usage and brand imagery • What is the brand’s potential to stretch its footprint and cover new market opportunities? Source: David Taylor, The Brand Gym, Workout Three, Doing Fewer Things Better, JW and Sons 2003 © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 72

Need – Product Assets In addition to understanding the brands in the portfolio, you may also need to assess the potential of different products in the range • The Brand Iceberg (Products 1 -8) • 1 2 Visible • 3 4 Waterline 5 • • Hidden 6 • 7 8 Analysing Product Assets For some mono-brand portfolios, this is obviously a key issue A brand’s product or service offer can be thought of as an iceberg made up of multiple layers of products or services (e. g. , current account, savings, pensions) Often buyers are only aware of the tip of the brand iceberg Lowering the ‘water-line’ can be expensive, so the key is to decide how many or how few products need to be promoted Product assets need to be critiqued to understand their current strength and future potential Establish a core product, and with that in place determine what needs to be added next, then next to see which products have a clear role in the portfolio vs those where the investment needs to be discontinued altogether, or in between Source: David Taylor, The Brand Gym, Workout Three, Doing Fewer Things Better, JW and Sons 2003 © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 73

Case Study: Case New Holland, an US industrial equipment manufacturer, rationalised the existing brands to reduce cannibalisation BRAND OPTIMISATION Original Brand KEY ATTRIBUTES & INSIGHTS Resulting Brand • Case New Holland, an US industrial equipment manufacturer, rationalised the existing brands to reduce cannibalisation • Case New Holland was formed as a result of a merger in 1999 • As a result, the company was reorganised in two main business segments: agricultural equipment and heavy moving machinery • The result of this merger was a huge number of different brands, many of which were redundant and targeting the same customers • For each segment (agriculture and hearth moving machinery) only two brands were saved, with a specific regional and segment focus • New Holland Construction is the leading brand in Europe and LATAM, while Case is the main one in North America • New Holland Agriculture is the brand targeting small to medium agricultural machinery, while Case IH targets the big machinery Source: secondary research © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 74

Need – Company Philosophy The final factor that may influence the question of how many brands are needed is company philosophy. i. e. , whatever the objective and financial arguments, companies may have different points of view about the best portfolio strategy At this point, the team needs to see how the existing brand portfolio performs against the key dimensions that drive choice. This is accomplished by bringing together the analysis of growth opportunities and brand assets to identify three sorts of issues: Overlap • Where several brands are going after the same needs or consumers. In this case some hard questions should be asked about whether the stronger brand couldn’t take on the products or services currently marketed under the other, weaker brands Underlap • Where none of the brands is fully effective and competition is winning business. The first reaction should be to extend the strongest brand to take up these opportunities. While functional stretch can be facilitated easily in this manner, sometimes where a new set of emotional values are needed, a new brand may be the answer. Future Opportunities • There is a necessity to think about the future about new or emerging needs in the market. Many innovations come from identifying these needs and creating an answer to them before the competition This phase should lead to the answer to the question” how many brands do we need? Source: Workout Three, Doing Fewer Things Better © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 75

Case Study: Yahoo As an example, recently Yahoo has moved from a monolithic approach to a hybrid white labelling one, more in line with the competitors A TRANSITIONING MODEL KEY ATTRIBUTES & INSIGHTS • Yahoo is an American multinational providing different services in the web portal industry • Until recently held a strong single brand strategy across categories • Similar to Virgin it used product description for sub-brands • Since the new CEO, Marissa Mayer, took the helm of the company in 2012, Yahoo acquired several companies • Mrs Mayer is a former top executive at Google, that is known to use a white labelling approach in acquisitions to preserve existing brand awareness (i. e. Android, Yelp, etc. ) • Under Mrs Mayer guidance, Yahoo now uses a similar approach – from monolithic to a white labelling, like in the Tumblr example – to preserve the brand value that the acquired company has Source: secondary research © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 76

How may brands can you feed? The question of how many brands a company can afford often seems to be even harder to answer than how many it needs. Companies (with talented teams) consistently overestimate how may brands they can effectively support. Simple math – in four steps – can help to avoid the same mistake 1 2 Cost of Support • Pin down the cost of supporting a brand in a given market (i. e. , total marketing cost including promotions) • Investment levels typically fall into the following: • Build aggressively: growing share and supporting major new innovations • Build: growing volume in line with or just ahead of market growth • Maintain: protecting volume but accepting some decline • Manage for profit: emphasis is on profit generation (sometimes called milking) Brand Investment Plans • Work out the planned level of support for each of the brand by asking brand team to select the level of support planned • Expect answers that are skewed toward ‘build’ vs maintain as this is normal • The right answer for the portfolio will require strong leadership and a clear focus no the profitable growth of the total portfolio at the top of the agenda 3 Total Marketing Budget • Establish a total marketing budget for the portfolio • In most cases, there will be a provisional number for this in the three to five year plans that companies are normally required to undertake • This figure can be used as a starting point for an iterative exercise, with the figure being challenged if the team can show that is can deliver more profit with increased budget Budget sense check – how many can we feed? 4 • With the three data points, a simple sense check can be completed • First, get a total figure for support and compare to total budget • Address any shortfall (expected) with a bias towards allocation to the stronger brands, vs cross the board reductions • Finally, consider the economics of the market itself using total margin available, the size of the overall market, etc as criteria Source: David Taylor, The Brand Gym, Workout Three, Doing Fewer Things Better, JW and Sons 2003 © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 77

Case Study: Volkswagen implemented cross-brand shared platforms and components to target different segments but retain cost and industrial synergies VOLKSWAGEN UNIVERSE KEY ATTRIBUTES & INSIGHTS • Volkswagen is the third largest motor vehicle producer in the world • As many other automotive players, it shares common platforms and components across different brands • Up to 85% of a car components are shared between different models, even if the price could be up to 3 X different Price • Similar industrial synergies are achieved in the commercial vehicles segment • Every brand is a stand alone one, targeting very different demographics and price ranges • Volkswagen is one of the few automotive producers to share marketing synergies between its mainstream sport brand, Audi, and sport motorbike brand, Ducati. A similar combination is BMW Commercial Vehicles Passenger Vehicles Source: secondary research © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 78

Diagnosing the issue and sizing the prize Consider the following questions: 1. Do you have multiple brands addressing very similar consumer needs and (needs-based) segments in key markets? 2. Do consumers appear confused and regularly switch between what they consider similar brands in your portfolio? 3. Do you have a large % of brands in your portfolio which are structurally losing share in their respective markets or categories? 4. Has the number of brands in your portfolio increased significantly in recent years without moving the needle in terms of overall (profitable) growth? 5. Do you have many brands in your portfolio which are losing money or marginally contributing? 6. Do your channel partners see several of your brands as directly competing with each other and therefore only placing part of your portfolio on their shelves? 7. Is your marketing spend too fragmented across brands and ineffective? Are your competitors outspending you in key categories? If you recognize any combination of the above issues, you are no doubt leaving money on the table in how you are managing your brand portfolio! Source: Marakon, Stop leaving money on the table: Get more value from your brand portfolio, May 2012 © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 79

What to do with an inherited portfolio of brands? – Table of Contents Section Component Description 1 Executive Summary Overview of our research and findings 2 Effectively Managing a Portfolio of Brands Overview of the key components for Portfolio Management 2 a Brand Strategy & Business Model: How does an organization approach its brand strategy? 2 b Brands in Portfolios: What are the advantages and disadvantages of a portfolio of brands? 2 c Architecture: How do you structure a portfolio of brands? 2 d Customer: What are the client considerations to ensure the best set of offers? 2 e Optimization: How do you optimize a portfolio of brands to support strategy? 2 f Brand Equity: How do organizations ensure that they capture and optimize brand equity? 3 © Internal Consulting Group 2015 Knowledge Sources For each different dimension • The key thinking from consulting firms, journals and academia as to what constitutes best practice • Examples of this best practice across different firms and industries Relevant published materials for further reading KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 80

Brand Equity Building a strong brand is the goal of many organizations. The overriding objective of a brand or a portfolio of brands is to build and optimize value through improvements in brand equity Brand equity is the set of brand assets and liabilities linked to the brand – its name and symbols – that add value to, or subtract value from, a product or service (Aaker 2009) Building a strong brand with significant equity is seen as providing a host of possible benefits to a firm, including greater customer loyalty and less vulnerability to competitive marketing actions and marketing crises, larger margins as well as more favorable customer response to price increases and decreases, greater trade or intermediary cooperation and support, increased marketing communication effectiveness, and licensing and brand-extension opportunities There a number of models that have been developed that describe brand equity. Two are: • Aaker’s ‘Brand Equity Model’ – identifies five brand equity components: (1) brand loyalty, (2) brand awareness, (3) perceived quality, (4) brand associations and (5) proprietary assets • Kevin Lane Keller’s ‘Brand Equity Pyramid’– identifies four steps: (1) brand identity, (2) brand meaning, (3) brand responses, (4) brand relationships; and six building blocks. The basic premise of the model is that the power of a brand lies in what customers have learned, felt, and heard about a brand over time. In other words, the power of a brand resides in the minds of customers Source: ICG analysis, Keller, Aaker © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 81

Keller’s Customer-Based Brand Equity model Building a strong brand can be thought of in terms of a sequence of steps, in which each step is contingent upon the successful completion of the previous step. All steps involve accomplishing certain objectives with customers, both existing and potential Ladder Step Consumer Brand Resonance Consumer Judgments Brand Performance Brand Imagery Brand Salience Objectives Relationships: • What about you and me? • Intense, active relationships Responses: • What about you? • Positive, accessible responses 2 Meaning: • What are you? • Strong, favorable. & unique brand associations 1 Identity: • Who are you? • Deep, broad brand awareness 4 Consumer Feelings Fundamental questions 3 Source: Kevin Lane Keller, Building Customer-Based Brand Equity; A Blueprint for Creating Strong Brands. ICG analysis © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 82

Step 1 – Who are you? Brand Identity – Salience The first step is to ensure identification of the brand with customers and an association of the brand in customers’ minds with a specific product class or customer need Creating Brand Salience Leads to Improved Brand Awareness Key What is the depth and breadth of awareness? What it is? • Involves linking the brand – Forms the foundational building block brand name, logo, symbol, and in developing brand equity and so forth – to certain associations provides three important functions: in memory 1. Influences the formation and • In particular, building brand strength of brand associations awareness involves making sure that make up brand image and that customers understand the gives the brand meaning product or service category in 2. Creates a high level of brand which the brand competes salience in terms of category • Also means ensuring that identification and needs satisfied customers know which of their is of crucial importance during needs the brand is designed to possible purchase or satisfy – through these products consumption opportunities • What basic functions does the 3. Helps customers with low brand provide for customers? involvement 1 with a product category to make choices • How easily and how often is the brand evoked under various situations or circumstances? • To what extent is brand top-of-mind and easily recalled or recognized? • What types of cues or reminders are necessary? Sample Questions How do we improve awareness? Impact on Brand Equity How do we measure success? • Distinguished in terms of two key dimensions – depth and breadth • Depth refers to how easily customers can recall or recognize the brand. • Breadth of brand awareness refers to the range of purchase and consumption situations in which the brand comes to mind • A highly salient brand is one that possesses both depth and breadth, so that customers always make sufficient purchases as well as think of the brand in a variety of settings in which the brand could be employed or consumed • Where do customers think of the brand? • How easily and how often do they think of he brand? Source: Kevin Lane Keller, Building Customer-Based Brand Equity; A Blueprint for Creating Strong Brands Note (1): “low involvement” occurs when customers lack either (1) purchase motivation – i. e. , do not care about the product or service; (2) purchase ability – do not know anything else about the brands in the category or lack the expertise to judge quality even if they know some things © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 83

Case Study: Brand Identity Mc. Donald’s, which does about $26 billion of business in seventy-nine countries, has one of the most successful global brands. Their focus has been on value, in part because customers are value conscious and in part because it must compete with the aggressive value approach of Pepsi. Co's Taco Bell Core Identity Value Proposition Value offering: provides value as defined by the product, special offers and the buying experience given the price Food quality: consistently hot, good-tasting at any Mc. Donald’s in the world Service: fast, accurate, friendly and hassle free Cleanliness: the operations are always spotless on both sides of the counter User: families and kids are a focus, but serves a wide clientele Functional Benefits: good tasting hamburgers, fries and drinks that provide value; extras such as playgrounds, prizes, premiums and games Emotional benefits: kids – fun via excitement of birthday parties, relationship with Ronald Mc. Donald and other characters, and feeling of special family times; adults – warmth via a link to family events and experiences reinforced by Mc. Donald’s emotional advertising Extended Identity • Convenience: the most convenient quick-service restaurant – it is located close to where people live, work and gather; features efficient, time-saving service; and serves easy-to-eat food • Product scope: fast food, hamburgers, children’s entertainment • Subbrands: Big Mac, Egg Mc. Muffin, Happy Meals, Extra Value Meals and others • Corporate Citizenship: Ronald Mc. Donald Children’s Charities, Ronald Mc. Donald House • Brand Personality: family oriented, all-American, genuine, wholesome, cheerful, fun • Relationship: The family/fun associations are inclusive, and Mc. Donald’s is part of he good times • Logo: Golden arches • Characters: Ronald Mc. Donald's dollars and toys Source: D. A Aaker Managing Brand Systems, Building Better Brands, The Free Press, 1996. © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 84

Case Study: Brand Identity Nike has been a dramatic success in the world of sports and fashion. Like many strong brands, it has identities that differ by segment: The identity for the fitness segment (including cross trainers, joggers and hikers) is different than the identity for those in competitive sports like tennis and basketball. In fact, Nike identity is modified for sub-brands such as the Force basketball shoe or the Court Challenge tennis shoe Value Proposition Core Identity Product thrust: sports and fitness User profile: Top athletes, plus all those interested in fitness and health Performance: Performance shoes based on technological superiority Enhancing lives: Enhancing peoples’ lives through athletics Functional Benefits: high technology shoe that will improve performance and provide comfort Emotional benefits: the exhilaration of athletic performance excellence; feeling engaged, active and healthy Self-expressive symbolic benefits: self-expression is generated by using a shoe with a strong personality associated with a visible athlete Extended Identity • Brand personality: exciting, provocative, spirited, cool, innovative, and aggressive; into health and fitness and the pursuit of excellence • Basis for relationship: Hanging out with a rugged, macho person who goes for the best in clothing, shoes and everything else • Subbrands: Air Jordan and many others • Logo: “Swoosh” symbol • Slogan: “Just do it” • Organizational associations: connected to and supportive of athletes and their sports; innovative • Endorsers: Top athletes, including Michael Jordan, Andre Agassi, Deion Sanders Charles Barkley and John Mc. Enroe • Heritage: Developed track shoes in Oregon Source: Aaker D. , Building Stronger Brands © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 85

Step 2 – What are you? Brand Meaning – Performance The second step is to firmly establish the brand meaning in the minds of customers by strategically linking a host of tangible and intangible brand associations Performance What is Brand Meaning? Key How do we define the concept of brand meaning? How do we design and deliver a product that fully satisfies consumer functional needs and wants? What it is? • Creating brand meaning involves establishing a brand image – what the brand is characterized by and should stand for in the minds of customers • Although a myriad of different types of branch associations are possible, brand meaning can broadly be distinguished in terms for functional, performance-related considerations versus abstract, imageryrelated considerations • Brand associations can be formed directly – from a customer’s own experiences and contact with the brand – or indirectly – though the depiction of the brand in advertising or by some other source of information Fully satisfy consumer needs and wants regardless whether the product is a tangible good, service or organization To create brand loyalty and resonance, consumers’ experiences with the product must at least meet, if not actually surpass, their expectations There are five types of performance (functional) needs 1. Primary characteristics and secondary features 2. Product reliability, durability and serviceability 3. Service effectiveness, efficiency and empathy 4. Style and design 5. Price Impact on Brand Equity How do we measure success? Regardless of the type, brand associations can be characterized and profiled according to three important dimensions 1. Strength – How strongly is the brand identified with brand association? 2. Favorability – How important or valuable is the brand association to customers? 3. Uniqueness – How distinctively is the brand identified with the brand association? Source: Kevin Lane Keller, Building Customer-Based Brand Equity; A Blueprint for Creating Strong Brands © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 86

Step 2 – What are you? (2) Brand Meaning – Performance The second step is to firmly establish the brand meaning in the minds of customers by strategically linking a host of tangible and intangible brand associations There are five important attributes and benefits that underlie performance … and each is reflected in customer associations Primary characteristics and secondary features Beliefs about levels of primary characteristics and features Product reliability, durability and serviceability Consistency of performance, economic life of product, ease of support Service effectiveness, efficiency and empathy Completeness of satisfaction, manner of delivery and exhibited trust and caring Style and design Typically how a product looks and feels, perhaps even smells Price Relationship to a tier or level in its category Source: Kevin Lane Keller, Building Customer-Based Brand Equity; A Blueprint for Creating Strong Brands © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 87

Step 2 – What are you? (3) Brand Meaning – Imagery The second step is to firmly establish the brand meaning in the minds of customers by strategically linking a host of tangible and intangible brand associations What is Brand Meaning? Imagery Impact on Brand Equity Key How do we define the concept of brand imagery? What kinds of intangibles can be linked to a brand? How do we measure success? What it is? • Brand imagery deals with the extrinsic properties of the product or service, including the ways in which the brand attempts to meet customers’ psychological or social needs • Brand imagery is how people think about a brand abstractly rather than what they think the brand actually does • Imagery refers to more intangible aspects of the brand Many different kinds of intangibles can be linked to a brand, but four categories can be highlighted 1. 2. 3. 4. User Profiles Purchase and usage situations Personality and values History, heritage and experience Regardless of the type, brand associations can be characterized and profiled according to three important dimensions 1. Strength – How strongly is the brand identified with brand association? 2. Favorability – How important or valuable is the brand association to customers? 3. Uniqueness – How distinctively is the brand identified with the brand association? Source: Kevin Lane Keller, Building Customer-Based Brand Equity; A Blueprint for Creating Strong Brands © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 88

Step 2 – What are you? (4) Brand Meaning – Imagery The second step is to firmly establish the brand meaning in the minds of customers by strategically linking a host of tangible and intangible brand associations Four different types of intangibles can be linked to a brand … and each is reflected in customer associations User profiles Involve the type of person or organization that uses a brand. The imagery may result in a profile or mental image by customers of actual users or more aspirational, idealized users. Associations of a typical or idealized brand user may be based on descriptive demographic factors or more abstract psychographic factors Purchase and usage situations Involves the conditions under which the brand could or should be bought and used. Typical purchase decisions may be based on (1) type of channel, (2) specific store, and (3) ease of purchase and associated rewards. Usage associations include (1) time of day, week, etc when used, (2) place where it is used, (3) type of activity for which it is used Personality and values Brands may also take on personality traits and values. Dimensions of brand personality include (1) sincerity, (2) excitement, (3) competence, (4) sophistication, and (5) ruggedness History, heritage and experiences Brands may take on associations with their past and with certain noteworthy events in the brand history. These types of associations may involve distinctly personal experiences and episodes or be related to past behaviours and experiences of friends, family or others Source: Kevin Lane Keller, Building Customer-Based Brand Equity; A Blueprint for Creating Strong Brands © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 89

Brand Responses – Judgment Step 3 – What about you? The third step is to elicit the proper customer responses to this brand identity and brand meaning. Such brand responses refer to how customers respond to the brand, its marketing activities and other sources of information Types of Brand Judgment Description Brand Judgment: Customers make all types of judgments with respect to a brand, but in terms of creating a strong brand, four types of summary brand judgments are particularly important Brand responses can be distinguished according the brand judgments and brand feelings – i. e. , whether they arise more from the “head” (i. e. , judgments) or from the “heart”, (i. e. , feelings) • Brand Judgments focus on customers personal opinions and evaluations with regard to the brand involve how customers put together all he different performance and imagery associations for the brand to form opinions 1. Brand Quality Most important attitudes relate to the perceived quality of the brand, then value and satisfaction are also important 2. Brand credibility Customers form judgments with respect to the company or organization behind the brand. This type refers to the extent to which the brand as a whole is seen as credible in terms of three dimensions – perceived expertise, trustworthiness and likability 3. Brand consideration More than mere awareness of the brand in the set of brands, depends in part on how personally relevant customers find the brand – i. e. , the extent to which customers view the brand as being appropriate and meaningful for themselves 4. Brand superiority The extent to which customers view the brand as unique and better than other brands – i. e. , do customers believe that the brand offers advantages that other brands do not? Superiority is absolutely critical in terms of building intense and active relationships with customers Source: Kevin Lane Keller, Building Customer-Based Brand Equity; A Blueprint for Creating Strong Brands © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 90

Step 3 – What about you? (2) Brand Responses – Feelings The third step is to elicit the proper customer responses to this brand identity and brand meaning. Such brand responses refer to how customers respond to the brand, its marketing activities and other sources of information Types of Brand Feelings Description Brand Feelings: what feelings are evoked by the marketing program for the brand or other means? These feelings can be mild or intense, positive or negative, etc. Brand responses can be distinguished according the brand judgments and brand feelings – i. e. , whether they arise more from the “head” (i. e. , judgments) or from the “heart”, (i. e. , feelings) • Brand Feelings focus on customers’ emotional responses and reactions with respect to the brand -- the social currency evoked by the brand 1. Warmth The extent to which the brand makes consumers feel a sense of calm or peacefulness These are experiential and immediate, 2. Fun Feelings of fun are also upbeat types of feelings. Consumers may feel amused, lighthearted, joyous, playful, cheerful, and so on 3. Excitement The extent to which the brand makes consumers feel that they are energized, and are experiencing something special 4. Security When the brand produces a feeling of safety, comfort and self-assurance in the customer who associates the brand with the elimination of worries or concerns 5. Social approval When the brand results in consumers feeling positively about the reactions of others to them – i. e. , when others look favorably on their appearance, behaviour and so forth 6. Self-respect When the brand makes consumers feel better about themselves Impact: Brand consideration will depend in large part on the extent to which strong and favorable brand associations can be created as part of the brand image Source: Kevin Lane Keller, Building Customer-Based Brand Equity; A Blueprint for Creating Strong Brands © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 91

Step 4 – What about you and me? Brand Relationships – Resonance The fourth and final step is to convert brand response to create an intense, active loyalty relationship between customers and the brand Types of Brand Resonance Description Brand Resonance: the nature of the relationship that the customer has with the brand the extent to which they feel that they are ‘in sync’ with the brand • Brand Resonance is characterized in terms of intensity or the depth of the psychological bond that customers have with the brand as well as the level of activity engendered by this loyalty. 1. Behavioural loyalty Repeat purchases and the amount, or share, of category volume attributed to the brand – how often do customers purchase the brand how much do they buy? 2. Attitudinal attachment To create resonance, a strong personal attachment is necessary. Customers must go beyond simply having a positive attitude 3. Sense of community Identification with the brand community may reflect an important social phenomenon whereby customers feel a kinship or affiliation with other people associated with the brand. 4. Active engagement Perhaps the strongest affirmation of brand loyalty occurs when customers are willing to invest time, energy, money, or other resources into the brand beyond those expended during purchase or consumption of the brand (e. g. , clubs, websites, chat rooms, etc In this case, customers themselves become branch evangelists and ambassadors Impact: Intensity, which refers to the strength of the attitudinal attachment and sense of community. Activity, which refers to how frequently the consumer buys and uses the brand as well as engages in other activities not related to purchase and consumption. Source: Kevin Lane Keller, Building Customer-Based Brand Equity; A Blueprint for Creating Strong Brands © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 92

Alternative Framework: Aaker’s Brand Equity Model • • Brand loyalty Brand Equity Reduced marketing costs Trade leverage Attracting new customers Time to respond to competitive threats Brand awareness • Anchor to which other associations can be attached • Familiarity-liking • Signal of substance/ commitment • Brand to be considered Perceived quality • • • Reason to buy Differentiate/ position Price Channel member interest Extensions • Help process/ retrieve information • Differentiate/position • Reason to buy • Create positive attitude/ feelings • Extensions Brand associations Other proprietary assets • Competitive advantage Provides value to customer by enhancing customer’s: • Interpretation/ processing of information • Confidence in the purchase decision • Use satisfaction Provides value to firm by enhancing: • Efficiency and effectiveness of marketing programs • Brand loyalty • Prices/ margins • Brand extensions • Trade leverage • Competitive advantage Source: D. A. Acker, Aaker’s Brand Equity model, European Institute for Brand Management © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 93

Finally, … Effectiveness, Priority and Performance? Based on an Australian Marketing Institute brand scorecard, organizations can complete a rudimentary evaluation of their effectiveness as portfolio brand managers Dimensions Priority Score Performance Score Stage 1: Rank each priority on a scale from 1 to 10 (with 1 the most important, and 10 the least important for success Stage 2: Score each item in terms of your brand’s current performan ce (see scale below) A. The Managers in charge of the brand portfolio are fully client oriented B. The Managers rely on a recurring combination of qualitative and quantitative data C. A segmentation-based on behaviour and covering the whole market D. A clear targeting in which non-consumer targets are also identified E. Tight positioning which passes for the 3 C’s tests (Clear, customer centric, consistent) F. Avoiding the use of price promotions G. Disruptive execution H. Tight brand portfolio I. Brands use tracking data to assess health and direct strategy Source: AMI; Mark Ritson, MIT/Sloan Score: 1 – non-existent, 2 – very poor, 3 – poor, 4 – OK, 5 – good, 6 – very good, 7 – exceptional) © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE Stage 3: Plot on Matrix 94

Effectiveness, Priority and Performance (2) Based on an Australian Marketing Institute brand scorecard, organizations can complete a rudimentary evaluation of their effectiveness as portfolio brand managers Potential Action Stage 3: Plot Results (illustrative) 1 Prioritization Focus Zone: H 2 3 D FOCUS ZONE For each section, take appropriate action – example: MAINTENANCE ZONE These are dimensions that require your primary focus – i. e. , 75% (e. g. , H: Tight Brand Portfolio) • Review strategic objectives, portfolio make-up and gaps C 4 A E 5 6 Maintenance Zone: These dimensions require time, but not to exceed 20% (e. g. , E: Tight Positioning) • Periodic review to ensure alignment F G 7 I 8 B 9 10 IGNORE 1 2 3 J 4 5 Performance 6 7 Ignore: While ignoring entirely might be difficult, these dimensions should not exceed 5% of your attention (e. g. , B: Qual and Quant) • Validate periodically, ask probing questions and test outcomes Source: AMI; Mark Ritson, MIT/Sloan Score: 1 – non-existent, 2 – very poor, 3 – poor, 4 – OK, 5 – good, 6 – very good, 7 – exceptional) © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 95

What to do with an inherited portfolio of brands? – Table of Contents Section Component Description 1 Executive Summary Overview of our research and findings 2 Effectively Managing a Portfolio of Brands Overview of the key components for Portfolio Management 2 a Brand Strategy & Business Model: How does an organization approach its brand strategy? 2 b Brands in Portfolios: What are the advantages and disadvantages of a portfolio of brands? 2 c Architecture: How do you structure a portfolio of brands? 2 d Customer: What are the client considerations to ensure the best set of offers? 2 e Optimization: How do you optimize a portfolio of brands to support strategy? 2 f Brand Equity: How do organizations ensure that they capture and optimize brand equity? 3 © Internal Consulting Group 2015 Knowledge Sources For each different dimension • The key thinking from consulting firms, journals and academia as to what constitutes best practice • Examples of this best practice across different firms and industries Relevant published materials for further reading KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 96

Structured knowledge references Reference Marketing Excellence in a Globalizing World Fueling Growth Through Word of Mouth © Internal Consulting Group 2015 Source Relevance BCG, 2014 More than $1 trillion a year is spent on marketing globally and the total is escalating. BCG supply insight into the little-analyzed evolution in the steady increase in marketing spend in rapidly developing economies (RDEs); the spend in RDEs now exceeds the amount spent on digital media globally. The authors point out the hidden costs and risks associated with measuring the return on marketing investment in RDEs. Difficulties include lack of data, poor quality customer insights, opaque cost accounting measures, and high staff turnover, all of which hinder data tracking and analysis. BCG, 2014 This article focuses on BCG’s new Brand Advocacy Index. Brand advocacy is a leading indicator in revenue growth, with brand advocacy through word- of-mouth communications – from trusted online and real-world sources – having a greater impact on sales than any other source of information. The BCG survey of 32, 000 consumers in Europe and the U. S shows the growing relevancy of brand advocacy in every industry. The article explores the difference between product and service industries and highlights the importance of a consistent customer experience. The authors offer three primary actions that brands can take to prioritize critical areas of brand strategy and customer experience as part of a business transformation journey. KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 97

Structured knowledge references Reference Social Media: Influence at Scale The 2013 Value Creators Rankings © Internal Consulting Group 2015 Source Relevance Accenture, 2013 Ordinary people have become powerful influencers. According to Berger and Lyengar, an average consumer talks about 12 different brands on an average day over various channels, and these social transmissions can have a significant impact on what people buy. Companies can take advantage of social media and Internet technologies to extend their product or service influence. Companies should establish key metrics (brand awareness, sales revenues, loyalty measures and influence mechanisms) and use the collected data to calculate how metrics are affected by social media. Using these metrics, companies can optimize their campaigns. BCG, 2013 BCG’s annual attempt at a ‘Good to Great’-style analysis. Start at the appendix with Exhibit 1 and 2, which reveal that banking and insurance have underperformed relative to the majority of other industries. Exhibit 2 points to sustained margin compression as the most likely culprit. The broader report is part advertorial, part North American anecdote-style management text. The highlight is the multiples analysis – it empirically identifies factors that drive a company’s valuation (see Page 21). KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 98

Structured knowledge references Reference Intimately Engaged: A Lifelong Commitment to Meeting Customer Needs © Internal Consulting Group 2015 Source Relevance Accenture, 2013 Can your company meet and exceed the increasing expectations of this newly sophisticated wave of customers that emerged in the marketplace? If not, as Accenture explains, it is time to change and connect with these demanding customers that can affect your company’s future growth. After a short introduction on the necessity of a meaningful relationship, Accenture presents four important customer-focused steps that help companies meet the requirements of this “new customer-led marketplace”. Every step comprises a simplistic real life example from well-known corporations, together with some action points that can be implemented by the companies. 1. Adapt to customers’ dynamic and unforeseen needs. 2. Establish a trust-based relationship with customers. 3. Leverage the customers’ entire network. 4. Align business strategy with customers’ values. Accenture closures the article stating that every department in a customer centric organization needs to be committed to delivering an excellent customer experience. It also goes a step further and presents its own customer- centric operating model framework that aims to deepen the commitment, place customers as an intrinsic part of the business, and answer their non-stop demands and future needs. It doesn’t take much to see the “sell” embedded in the latter part, but otherwise a short, insightful read with practical application. KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 99

Structured knowledge references Reference The Truth About Customer Experience © Internal Consulting Group 2015 Source Relevance Mc. Kinsey, 2013 In a time when positive touch points are crucial to a good CRM policy and employees’ rewards, Mc. Kinsey and Company present a great article showing the distorted picture that touch points can create, and then announces the necessity to focus instead on the end-to-end customer journey. By using real industry examples throughout, Mc. Kinsey correctly points out that a simple focus on perfecting customer touch points is not enough, since customers can be happy with a single touch point and unhappy with the cumulative experience. The solution presented is to look at the entire journey. The article states that companies need to incorporate the customer journeys into their operating models in four ways: identify key journeys from a top down and bottom up evaluation; understand the journeys’ current performance; redesign the experience and engage the front line with the use of cross-functional teams and inside-out ideas; and provoke cultural change and continuous improvements that sustain the initiatives. The article concludes with advice to create appropriate and tailored metrics based on the overall journey and the accountable employees. As a side text (for the sceptics), Mc. Kinsey uses hard data to explain the impact that a better journey has on competitive advantage and overall growth. KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 100

Structured knowledge references Reference Source Relevance Brand Finance Australian Top 30 Brand Finance, 2012 Brand Finance is the world’s leading brand valuation and strategy consultancy. They advise strongly branded organisations on how to maximise their value through the effective management of their brands and intangible assets. This paper examines the work of Michalek et al. (2011) and Tsafarakis, Marinakis and Matsatsinis (2011), published in this issue of the International Journal of Research in Marketing, within a strategic framework. This framework allows a consideration of how the powerful tools that the two papers propose can be harnessed within the overall direction and activity of the firm. Conceptual framework for studying the interaction of demand, supply and the market environment in product line optimization © Internal Consulting Group 2015 John Roberts, 2011 On reviewing these two papers, one could concentrate on the algorithms and heuristics that make the complex problem of product line optimization tractable. Such an analysis would be valuable. Instead I concentrate on the strategic environment in which the optimization decision takes place to allow a consideration of applications and extensions within a managerial context. I do that by suggesting a framework for product line decisions after a brief overview of both articles. That enables me to examine managerial issues that arise in implementing such an approach in practice, many of which are addressed in the two papers. For those issues not addressed in the papers, I propose a set of research questions which would be valuable to managers. KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 101

Structured knowledge references Reference Brand-Centric Transformation © Internal Consulting Group 2015 Source Relevance BCG, 2011 Google, Apple, Nike, Louis Vuitton…just a few of the names on any list of top global brands. These companies demonstrate without question that a brand can drive tangible financial impact and increase value for employees, customers, and shareholders. Of course, the inverse is also true: poorly crafted brand-building efforts can waste precious dollars from marketing budgets already stretched thin. With so much at stake, brand-building cannot be left to chance— or to creative advertising alone. The critical strategic-investment decisions required to shape and strengthen the brand must be tackled as such: debated by the most senior executives, grounded in data-driven insights, and embedded throughout the organization. Too often, however, brand transformation efforts falter because they lack the rigor and discipline that are applied to other business initiatives. KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 102

Structured knowledge references Reference Brand Portfolio Strategy: Creating Relevance, Differentiation, Energy, Leverage, and Clarity © Internal Consulting Group 2015 Source Relevance David A. Aaker, 2004 In this long-awaited book from the world's premier brand expert and author of the seminal work Building Strong Brands, David Aaker shows managers how to construct a brand portfolio strategy that will support a company's business strategy and create relevance, differentiation, energy, leverage, and clarity. Building on case studies of world-class brands such as Dell, Disney, Microsoft, Sony, Dove, Intel, Citi. Group, and Power. Bar, Aaker demonstrates how powerful, cohesive brand strategies have enabled managers to revitalize brands, support business growth, and create discipline in confused, bloated portfolios of master brands, subbrands, endorser brands, co-brands, and brand extensions. Renowned brand guru Aaker demonstrates that assuring that each brand in the portfolio has a clear role and actively reinforces and supports the other portfolio brands will profoundly affect the firm's profitability. Brand Portfolio Strategy is required reading not only for brand managers but for all managers with bottom-line responsibility to their shareholders. KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 103

Relevant Articles and Additional Knowledge References Source Data BCG 2013 Distribution 2020: The Next Big Journey for Retail Banks PWC 2013 Top Insurance Industry Issues in 2013 BCG 2013 Sales Force Effectiveness Getting Full Value from Sales Channels Deloitte 2013 Innovation in Insurance: The Path to Progress EY 2013 Building the Bank of 2030 and Beyond Twente University Sep 2013 A framework for brand positioning strategies Bain 2012 Brand strategy that shifts demand: Less buzz, more economics Mark Ritson 2012 Why Apple is keeping an eye on TV brand Brand Finance May 2012 Brand Finance Australian top 30 Admap Feb 2011 Brand housing: Best practice for brand architecture Lagos Business School Jan 2011 Title Building a powerful entrepreneurial brand: the role of critical success factors and its impact on competitive advantage Boston University July 2010 Brand Portfolio Strategy Effects on Firm Value and Risks KPMG 2010 Side by side: Managing multiple brands in banking Dave Taylor, David Nichols 2010 The Brand Gym: A Practical Workout to Gain and Retain Brand Leadership, 2 nd Edition © Internal Consulting Group 2015 KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 104

Relevant Articles and Additional Knowledge References Source Data KPMG March 2010 Rising optimism: The next stage for financial services Simmons School of Management Jan 2010 Saving Face by Making Meaning: Consumers’ Self-Serving Response to Brand Extensions Westpac Group December 2009 The Westpac Group: Merger and Transformation Update Commonwealth May 2008 Westpac and St George Bank Terms of the opening bid Mark Ritson 2007 Don’t catch brand extension disease Mannheim University Feb 2007 Brand Efficiency and Brand Relevance – Introducing and Linking both Concepts Richard Ettenson and Jonathan Knowles 2006 Merging the Brands and Branding the Merger Mc. Kinsey 2004 Making Brand portfolios work Can. West Interactive Jul 2004 Marketing after a merger: the goal of delivering a better product should dictate what brand is used – and how Journal of Strategic Marketing 2001 Building Value-Based Branding Strategies Marketing Science Institute 2001 Building customer-based brand equity” a blueprint for creating strong brands © Internal Consulting Group 2015 Title KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 105

Relevant Articles and Additional Knowledge References Source Data Reply N. A. Multi-Brand CRM at Volkswagen Financial Services AG Mitch Duckler, Full. Surge Partner N. A. Brand Architecture—A Strategic Approach Toward Optimizing a Brand Portfolio N. A. The brand identity system Interbrand N. A. Branding a key factor for merge & acquisitions deals Godfrey N. A. Brand Strategies for B-to-B Mergers and Acquisitions Brand Establishment N. A. Brand Architecture: House of brands or branded house. Man, have things changed © Internal Consulting Group 2015 Title KAR 014 – Brand Portfolio Management COMMERCIAL IN CONFIDENCE 106

Internal Consulting Group Email enquiries@internalconsulting. com or visit our website at www. internalconsulting. com This document was prepared by Gerry Purcell (gerry. purcell@internalconsulting. com) a Practice Leader in our Toronto Office and Giorgio Baracchi (giorgio. baracchi@internalconsulting. com) an affiliate in our Sydney office. They were assisted by ICG’s Financial Services Practice Leader, David Moloney, and our ICG expert panel Jenny Granger and Lee Tonitto both drawn from ICG’s affiliate pool. UNBUNDLED CONSULTING • PROJECT SUPPORT • CAPABILITY BUILDING • PROFESSIONAL ASSOCIATION