“Brand Diffusion” Could Be Costing Your Company Millions of Dollars – What Can Be Done About It?

By Alan Brew

“Surely, it’s a good thing to have a lot of brands.”

This seemingly innocent remark from the head of marketing for a division of a large corporation went to the heart of a severe problem the company was dealing with.

The marketing team in his division, one of many in the client organization, was understandably protective of its perceived duty to develop and market as many brands as possible in pursuit of its revenue targets. That’s what they get measured against and rewarded accordingly. Corporate altruism cuts no ice when it comes to bonus time.

But multiply his philosophy by the number of divisions and business units across the organization and the result was what they euphemistically referred to at corporate level as “brand profusion.”

In reality, it was brand chaos.

It’s a phenomenon that besets many large B2B corporations that grow and expand over the years either by internal product innovation or acquisition. Along with those acquisitions come yet more brands together with legacy corporate names, products with branded features, and arcane divisional nomenclature systems. Eventually, a point of institutional brand sclerosis is reached where the company is so overwhelmed with brands and confusing naming practices that it becomes hard to describe what it does and how it functions. And it comes at a significant and uncalculated cost that can run into millions of dollars.

Microsoft referred to the situation as “the hidden cost of brand diffusion.” By its own calculation, such diffusion was costing millions of dollars and weakening its marketing. The trigger for change was the desire to get more out of its marketing dollars and rationalize its brand portfolio as the company moved toward a SaaS model. But whatever the initial impetus for change, the term “brand architecture” begins to appear on the corporate agenda.

As with many things in the world of branding, there is no formal and universally agreed definition of brand architecture. Definitions vary from agency to agency depending on its core competency.

A design firm, for example, would see it as a design-based exercise. Inevitably, it usually becomes nothing more than an elaborate quest for graphic tidiness. Nothing of substance is achieved. No hard decisions are made. Weak or redundant brands are re-accommodated while brands with potential continue to be stifled and starved of investment.

A strategic approach

A brand architecture program has to begin with a review of the entire brand portfolio if it is to have any long-term strategic and financial value. The objective is the creation of a flexible framework for long-term growth in which decisions about brands can be made on a rational and consistent basis in support of the overall strategic direction of the business.

Such an approach involves four key areas of evaluation:

A rigorous assessment of the individual brands in the portfolio in terms of their effectiveness and potential must be conducted. Additionally, a proper portfolio analysis highlights which brands are best suited to extension, for instance. The more effective and powerful the brands, the stronger the leverage and the impact on the bottom line.

A portfolio evaluation takes place on three levels, each with specific areas of focus:

  1. Is it really a brand or a product?
    Awareness: the target audience must know the brand exists
    Association: there are known functional and emotional expectations that the brand creates among the target audience
    Advocacy/Loyalty: true brands have developed a core group of “champions”
  2. Brand strength – strong or weak?
    Market Presence: a “strong” brand has established a top-3 competitive position
    Differentiation: a “strong” brand must have a unique value proposition
    Elasticity: a strong brand has the ability to credibly extend into a new area
    Marketing Efficiency: a strong brand is not diluted by overlapping with other brands in the portfolio
  3. Strategic importance.
    Alignment with Business Strategy: help support the intended business strategy
    Growth Potential: must be targeted against high-growth categories: If, for example, each brand is funded solely according to its current profit contribution, high-potential brands with modest sales could be starved of the resources they need to reach their full potential.
    Revenue Contribution & Preservation: must not put existing revenue streams in jeopardy
    Marketing Investment: must be planning to invest marketing dollars to continue to build the brand
    Alignment with Future Corporate Brand Positioning: supports “realizing potential” positioning

A brand architecture program also typically involves a review of its nomenclature and naming practices. Acquisitions, for example, often bring with them different brand and product naming conventions that mask brand or product duplication and the elimination of which can result in significant savings and great clarity for buyers.

So, to answer the question posed at the beginning of this article, rarely is it a good thing to have a lot of brands simply to have a lot of brands. Brands are not self-justifying concepts. Every brand requires brand building resources, and R&D funding and marketing spend need to be allocated to areas of best return.

Take a tip from Microsoft — brand clarity in support of corporate strategy will sustain growth, increase marketing effectiveness and could save the company millions of dollars.